Corpo

G.R. No. L-38649 March 26, 1979

FACILITIES MANAGEMENT CORPORATION, J. S. DREYER, and J. V. CATUIRA,petitioners,vs.LEONARDO DE LA ROSA AND THE HONORABLE COURT OF INDUSTRIAL RELATIONS,respondents.

Sycip, Salazar, Feliciano & Associates for petitioners.

Benjamin M. Mendoza for respondent Court.

MAKASIAR,J:Petition for review on certiorari of the decision of the Court of Industrial Relations, dated February 14, 1972, ordering petitioners herein to pay private respondent Leonardo de la Osa his overtime compensation, as wen as his swing shift and graveyard shift premiums at the rate of fifty (50%) per cent of his basic sa (Annex E, p. 31, rollo).

The aforesaid decision was based on a report submitted by the Hearing Examiner, CIR (Dagupan City Branch), the pertinent portions of which are quoted hereinbelow:::

In a petition filed on July 1, 1967, Leonardo dela Osa sought his reinstatement. with full backwages, as well as the recovery of his overtime compensation, swing shift and graveyard shift differentials. Petitioner alleged that he was employed by respondents as follows: (1) painter with an hourly rate of $1.25 from March, 1964 to November, 1964, inclusive; (2) houseboy with an hourly rate of $1.26 from December, 1964 to November, 1965, inclusive; (3) houseboy with an hourly rate of $1.33 from December, 1965 to August, 1966, inclusive; and (4) cashier with an hourly rate of $1.40 from August, 1966 to March 27, 1967, inclusive. He further averred that from December, 1965 to August, 1966, inclusive, he rendered overtime services daily and that this entire period was divided into swing and graveyard shifts to which he was assigned, but he was not paid both overtime and night shift premiums despite his repeated demands from respondents.

Respondents filed on August 7, 1967 their letter- answer without substantially denying the material allegations of the basic petition but interposed the following special defenses, namely: That respondents Facilities Management Corporation and J. S. Dreyer are domiciled in Wake Island which is beyond the territorial jurisdiction of the Philippine Government; that respondent J. V. Catuira, though an employee of respondent corporation presently stationed in Manila, is without power and authority of legal representation; and that the employment contract between petitioner and respondent corporation carries -the approval of the Department of Labor of the Philippines.

Subsequently on May 3, 1968. respondents filed a motion to dismiss the subject petition on the ground that this Court has no Jurisdiction over the instant case, and on May 24, 1968, petitioner interposed an opposition thereto. Said motion was denied by this Court in its Order issued on July 12, 1968 sustaining jurisdiction in accordance with the prevailing doctrine of the Supreme Court in similar cases.

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But before we consider and discuss the foregoing issues, let us first ascertain if this Court could acquire jurisdiction over the case at bar, it having been contended by respondents that they are domiciled in Wake Island which is beyond the territorial jurisdiction of the Philippine Government. To this incidental question, it may be stated that while it is true the site of work is Identified as Wake Island, it is equally true the place of hire is established in Manila (See Section B, Filipino Employment Contract, Exhibit '1'). Moreover, what is important is the fact that the contract of employment between the parties litigant was shown to have been originally executed and subsequently renewed in Manila, as asserted by petitioner and not denied by respondents. Hence, any dispute arising therefrom should necessarily be determined in the place or venue where it was contracted.

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From the evidence on hand, it has been proven beyond doubt that petitioner canvas assigned to and performed work in respondent company at slight time which consisted of two different schedules, namely, swing shift and graveyard shifts, particularly during his tenure as houseboy for the second period and as cashier. Petitioner's testimony to this effect was not contradicted, much less rebutted, by respondents, as revealed by the records. Since petitioner actually rendered night time services as required by respondents, and considering the physical, moral and sociological effects arising from the performance of such nocturnal duties, we think and honestly believe that petitioner should be compensated at least fifty percent (50%) more than his basic wage rate. This night shift premium pay would indeed be at par with the overtime compensation stipulated at one and one-half (1 ) times of the straight time rate.

xxx xxx xxx (pp. 31-36, rollo).

Apropos before this Court were filed three (3) other cases involving the same petitioner, all of which had been finally dispoded of, as follows:

G.R. No Date of Filing Disposition

1. L-37117 July 30, 1973 Petition denied forlack of merit on Sept.13, 1973. Motion forReconsiderationdenied lack ofmerit, Nov. 20,1973.

2. L-38781 June 17,1974 Petition denied forlack of merit on June21,1974.

3. L-39111-12 Sept. 2,1974 Case dismissed on Feb.6, 1976, pursuant tovoluntary manifestation of private respondent Inocente R. Rielthat his claims had allbeen settled to his entiresatisfaction.

Incidentally, in connection with G.R. No. L-39111-12 (No. 3 above), WE found strong evidence that petitioner therein, which is also the petitioner in the case at bar, "twisted the arm" of private respondent, when the latter in his Manifestation dated July 3, 1975, stated:

3. ... Furthermore, since petitioner FMC is a foreign corporation domiciled in California, U.S.A. and has never been engaged in business in the Philippines, nor does it have an agent or an office in this country, there exists no valid reason for me to participate in the continuation and/or prosecution of this case (p. 194, rollo).

as if jurisdiction depends on the will of the parties to a case. At any rate, considering that petitioner paid the claims of private respondent, the case had become moot and academic. Besides, the fact of such payment amounts to an acknowledgment on the part of petitioner of the jurisdiction of the court over it.

WE have also noted that the principal question involved in each of the above-numbered three (3) cases is more or less Identical, to wit: Is the mere act by a non-resident foreign corporation of recruiting Filipino workers for its own use abroad, in law doing business in the Philippines?

In the case at bar, which was filed with this Court on June 3, 1974, petitioners presented,inter alia,the following issue: ... can the CIR validly affirm a judgment against persons domiciled outside and not doing business in the Philippines, and over whom it did not acquire jurisdiction')

While it is true that the issues presented in the decided cases are worded differently from the principal issue raised in the case at bar, the fact remains that they all boil down to one and the same issue, which was aptly formulated and ably resolved by Mr. Justice Ramon C. Fernandez, then with the Court of Appeals and now a member of this Court, in CA-G.R. No. SP-01485-R, later elevated to this Court on appeal by certiorari in Case G.R. No. L-37117 this case, the majority opinion of the Court of Appeals, which was penned by Justice Fernandez and which WE hereby adopt, runs as follows:

The principal issue presented in this special civil action is whether petitioner has been 'doing business in the Philippines' so that the service of summons upon its agent in the Philippines vested the Court of First Instance of Manila with jurisdiction.

From the facts of record, the petitioner may be considered as doing busuness un the Philippines within the the scope of Section 14, Rule 14 of the Rules of the Court which provide:

SEC 14. Service upon private foreign corporations. If the defendant is a foreign corporation or a non-resident joint stock company or association: doing business in the Philippines, service may be made on its resident agent designated in accordance with law for that purpose or, if there be no such agent, on the government official designated by law to that effect, or on any of its officers or agents within the Philippines.

Indeed, the petitioner, in compliance with Act 2486 as implemented by Department of Labor Order No. IV dated May 20, 1968 had to appoint Jaime V. Catuira, 1322 A. Mabini, Ermita, Manila as agent for FMC with authority to execute Employment Contracts and receive, in behalf of that corporation, legal services from and be bound by processes of the Philippine Courts of Justice, for as long as he remains an employee of FMC (Annex 'I', rollo, p. 56). It is a fact that when the summons for the petitioner was served on Jaime V. Catuira he was still in the employ of the FMC.

In his motion to dismiss Annex B', p. 19, Rollo), petitioner admits that Mr. Catuira represented it in this country 'for the purpose of making arrangements for the approval by the Department of Labor of the employment of Filipinos who are recruited by the Company as its own employees for assignment abroad.' In effect, Mr. Catuira was a on officer representing petitioner in the Philippines.

Under the rules and regulations promulgated by the Board of Investments which took effect Feb. 3, 1969, implementing Rep. Act No. 5455, which took effect Sept. 30, 1968, the phrase 'doing business' has been exemption with illustrations, among them being as follows:

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(f) the performance within the Philippines of any act or combination of acts enumerated in section l(l) of the Act shall constitute 'doing business' therein. in particular, 'doing business includes:

(1) Soliciting orders, purchases (sales) or service contracts. Concrete and specific solicitations by a foreign firm, not acting independently of the foreign firm amounting to negotiation or fixing of the terms and conditions of sales or service contracts, regardless of whether the contracts are actually reduced to writing, shall constitute doing business even if the enterprise has no office or fixed place of business in the Philippines. xxx

(2) Appointing a representative or distributor who is dociled in the Philippines, unless said representative or distributor has an independent status, i.e., it transacts business in its name and for its own account, and not in the name or for the account of the principal.

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(4) Opening offices, whether called 'liaison'offices, agencies or branches, unless proved otherwise.

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(10) Any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, or in the progressive prosecution of, commercial gain or of the purpose and objective of the business organization (54 O.G. 53).

Recently decided by this Court again thru Mr. Justice Ramon C. Fernandez which is similar to the case at bar, is G.R. No. L-26809, entitledAetna Casualty & Curety Company, plaintiff- appellant versus Pacific Star Line, the Bradman Co., Inc., Manila Port Service and/orManila Railroad Company, Inc., defendants-appellees." The case is an appeal from the decision of the Court of First Instance of Manila, Branch XVI, in its Civil Case No. 53074, entitledAetna Casualty & Surety Company vs. Pacific Star Lines, The Bradman Co., Inc., Manila Port Service and/or Manila Railroad Company, Inc." dismissing the complaint on the ground that the plaintiff has no legal capacity to bring the suit.

It appears that on February 11, 1963, Smith Bell & Co. (Philippines), Inc. and Aetna Casualty & Surety Co., Inc., as subrogee instituted Civil Case No. 53074 in the Court of First Instance of Manila against Pacific Star Line, The Bradman Co., Inc., Manila Port Service and/or Manila Railroad Company, Inc. to recover the amount of US$2,300.00 representing the value of stolen and damaged cargo plus litigation expenses and exemplary damages in the amounts of P1,000.00 and P2,000.00, respectively, with legal interest thereon from the filing of the suit and costs.

After all the defendants had filed their answer, the defendants Manila Port Service and Manila Railroad Company, Inc. amended their answer to allege that the plaintiff, Aetna Casualty & Surety Company, is a foreign corporation not duly licensed to do business in the Philippines and, therefore, without capacity to sue and be sued.

After the parties submitted a partial stipulation of facts and additional documentary evidence, the case was submitted for decision of the trial court, which dismissed the complaint on the ground that the plaintiff insurance company is subject to the requirements of Sections 68 and 69 of Act 1459, as amended, and for its failure to comply therewith, it has no legal capacity to bring suit in this jurisdiction. Plaintiff appealed to this Court.

The main issue involved in the appeal is whether or not the plaintiff appellant has been doing business in the Philippines, considering the fact that it has no license to transact business in the Philippines as a foreign corporation. WE ruled:

The object of Sections 68 and 69 of the Corporation Law was not to prevent the foreign corporation from performing single acts, but to prevent it from acquiring a domicile for the purpose of business without taking the steps necessary to render it amenable to suit in the local courts. It was never the purpose of the Legislature to exclude a foreign corporation which happens to obtain an isolated order for business from the Philippines, from securing redress in the Philippine courts (Marshall Co. vs. Elser & Co., 46 Phil 70,75).

In Mentholatum Co., Inc., et al vs- M Court rules that-

No general rule or governing principle can be laid down as to what constitutes 'doing' or 'engaging in' or 'transacting' business. Indeed, each case must be judged in the light of its peculiar environmental circumstances. The true test, however, seems to be whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another. (Traction Cos. v. Collectors of Int Revenue [C.C.A Ohio], 223 F. 984, 987). The term implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of, the purpose and object of its organization (Griffin v. Implement Dealers' Mut. Fire Ins. Co., 241 N.W. 75, 77; Pauline Oil & Gas Co. v. Mutual Tank Line Co., 246 P. 851, 852, 118 Okl. III; Automotive Material Co. vs. American Standard Metal Products Corp., 158 N.E. 698, 703, 327 III. 367)'. 72 Phil. 524, 528-529.

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

(d) While plaintiff is a foreign corporation without license to transact business in the Philippines, it does not follow that it has no capacity to bring the present action. Such license is not necessary because it is not engaged in business in the Philippines. In fact, the transaction herein involved is the first business undertaken by plaintiff in the Philippines, although on a previous occasion plaintiff's vessel was chartered by the National Rice and Corn Corporation to carry rice cargo from abroad to the Philippines. These two isolated transactions do not constitute engaging in business in the Philippines within the purview of Sections 68 and 69 of the Corporation Law so as to bar plaintiff from seeking redress in our courts. (Marshall Wens Co. vs. Henry W. Elser & Co. 49 Phil., 70; Pacific Vegetable Oil Corporation vs. Angel O. Singson, G.R. No. L-7917, April 29, 1955)'. 102 Phil., pp. 1, 18.

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

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

Indeed, if a foreign corporation, not engaged in business in the Philippines, is not banned from seeking redress from courts in the Philippines,afortiori, that same corporation cannot claim exemption from being sued in Philippine courts for acts done against a person or persons in the Philippines.

WHEREFORE, THE PETITION IS HEREBY DENIED WITH COSTS AGAINST THE PETITIONERS.

SO ORDERED.

G.R. No. L-34382 July 20, 1983

THE HOME INSURANCE COMPANY,petitioner,vs.EASTERN SHIPPING LINES and/or ANGEL JOSE TRANSPORTATION, INC. and HON. A. MELENCIO-HERRERA, Presiding Judge of the Manila Court of First Instance, Branch XVII,respondents.

G.R. No. L-34383 July 20, 1983

THE HOME INSURANCE COMPANY,petitioner,vs.N. V. NEDLLOYD LIJNEN; COLUMBIAN PHILIPPINES, INC., and/or GUACODS, INC., and HON. A. MELENCIO-HERRERA, Presiding Judge of the Manila Court of First Instance, Branch XVII,respondents.

No. L-34382.

Zapa Law Office for petitioner.

Bito, Misa & Lozada Law Office for respondents.

No. L-34383.

Zapa Law Office for petitioner.

Ross, Salcedo, Del Rosario, Bito & Misa Law office for respondents.

GUTIERREZ, JR.,J.:Questioned in these consolidated petitions for review on certiorari are the decisions of the Court of First Instance of Manila, Branch XVII, dismissing the complaints in Civil Case No. 71923 and in Civil Case No. 71694, on the ground that plaintiff therein, now appellant, had failed to prove its capacity to sue.

There is no dispute over the facts of these cases for recovery of maritime damages. In L-34382, the facts are found in the decision of the respondent court which stated:

On or about January 13, 1967, S. Kajita & Co., on behalf of Atlas Consolidated Mining & Development Corporation, shipped on board the SS "Eastern Jupiter' from Osaka, Japan, 2,361 coils of "Black Hot Rolled Copper Wire Rods." The said VESSEL is owned and operated by defendant Eastern Shipping Lines (CARRIER). The shipment was covered by Bill of Lading No. O-MA-9, with arrival notice to Phelps Dodge Copper Products Corporation of the Philippines (CONSIGNEE) at Manila. The shipment was insured with plaintiff against all risks in the amount of P1,580,105.06 under its Insurance Policy No. AS-73633.

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The coils discharged from the VESSEL numbered 2,361, of which 53 were in bad order. What the CONSIGNEE ultimately received at its warehouse was the same number of 2,361 coils with 73 coils loose and partly cut, and 28 coils entangled, partly cut, and which had to be considered as scrap. Upon weighing at CONSIGNEE's warehouse, the 2,361 coils were found to weight 263,940.85 kilos as against its invoiced weight of 264,534.00 kilos or a net loss/shortage of 593.15 kilos, according to Exhibit "A", or 1,209,56 lbs., according to the claims presented by the consignee against the plaintiff (Exhibit "D-1"), the CARRIER (Exhibit "J-1"), and the TRANSPORTATION COMPANY (Exhibit "K- l").

For the loss/damage suffered by the cargo, plaintiff paid the consignee under its insurance policy the amount of P3,260.44, by virtue of which plaintiff became subrogated to the rights and actions of the CONSIGNEE. Plaintiff made demands for payment against the CARRIER and the TRANSPORTATION COMPANY for reimbursement of the aforesaid amount but each refused to pay the same. ...

The facts of L-34383 are found in the decision of the lower court as follows:

On or about December 22, 1966, the Hansa Transport Kontor shipped from Bremen, Germany, 30 packages of Service Parts of Farm Equipment and Implements on board the VESSEL, SS "NEDER RIJN" owned by the defendant, N. V. Nedlloyd Lijnen, and represented in the Philippines by its local agent, the defendant Columbian Philippines, Inc. (CARRIER). The shipment was covered by Bill of Lading No. 22 for transportation to, and delivery at, Manila, in favor of the consignee, international Harvester Macleod, Inc. (CONSIGNEE). The shipment was insured with plaintiff company under its Cargo Policy No. AS-73735 "with average terms" for P98,567.79.

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The packages discharged from the VESSEL numbered 29, of which seven packages were found to be in bad order. What the CONSIGNEE ultimately received at its warehouse was the same number of 29 packages with 9 packages in bad order. Out of these 9 packages, 1 package was accepted by the CONSIGNEE in good order due to the negligible damages sustained. Upon inspection at the consignee's warehouse, the contents of 3 out of the 8 cases were also found to be complete and intact, leaving 5 cases in bad order. The contents of these 5 packages showed several items missing in the total amount of $131.14; while the contents of the undelivered 1 package were valued at $394.66, or a total of $525.80 or P2,426.98.

For the short-delivery of 1 package and the missing items in 5 other packages, plaintiff paid the CONSIGNEE under its Insurance Cargo Policy the amount of P2,426.98, by virtue of which plaintiff became subrogated to the rights and actions of the CONSIGNEE. Demands were made on defendants CARRIER and CONSIGNEE for reimbursement thereof but they failed and refused to pay the same.

In both cases, the petitioner-appellant made the following averment regarding its capacity to sue:

The plaintiff is a foreign insurance company duly authorized to do business in the Philippines through its agent, Mr. VICTOR H. BELLO, of legal age and with office address at Oledan Building, Ayala Avenue, Makati, Rizal.

In L-34382, the respondent-appellee Eastern Shipping Lines, Inc., filed its answer and alleged that it:

Denies the allegations of Paragraph I which refer to plaintiff's capacity to sue for lack of knowledge or information sufficient to form a belief as to the truth thereof.

Respondent-appellee, Angel Jose Transportation, Inc., in turn filed its answer admitting the allegations of the complaint, regarding the capacity of plaintiff-appellant. The pertinent paragraph of this answer reads as follows:

Angel Jose Admits the jurisdictional averments in paragraphs 1, 2, and 3 of the heading Parties.

In L-34383, the respondents-appellees N. V. Nedlloyd Lijhen, Columbian Philippines, Inc. and Guacods, Inc., filed their answers. They denied the petitioner-appellant's capacity to sue for lack of knowledge or information sufficient to form a belief as to the truth thereof.

As earlier stated, the respondent court dismissed the complaints in the two cases on the same ground, that the plaintiff failed to prove its capacity to sue. The court reasoned as follows:

In the opinion of the Court, if plaintiff had the capacity to sue, the Court should hold that a) defendant Eastern Shipping Lines should pay plaintiff the sum of P1,630.22 with interest at the legal rate from January 5, 1968, the date of the institution of the Complaint, until fully paid; b) defendant Angel Jose Transportation, Inc. should pay plaintiff the sum of P1,630.22 also with interest at the legal rate from January 5, 1968 until fully paid; c) the counterclaim of defendant Angel Jose transportation, Inc. should be ordered dismissed; and d) each defendant to pay one-half of the costs.

The Court is of the opinion that Section 68 of the Corporation Law reflects a policy designed to protect the public interest. Hence, although defendants have not raised the question of plaintiff's compliance with that provision of law, the Court has resolved to take the matter into account.

A suing foreign corporation, like plaintiff, has to plead affirmatively and prove either that the transaction upon which it bases its complaint is an isolated one, or that it is licensed to transact business in this country, failing which, it will be deemed that it has no valid cause of action (Atlantic Mutual Ins. Co. vs. Cebu Stevedoring Co., Inc., 17 SCRA 1037). In view of the number of cases filed by plaintiff before this Court, of which judicial cognizance can be taken, and under the ruling inFar East International Import and Export Corporation vs. Hankai Koayo Co., 6 SCRA 725, it has to be held that plaintiff is doing business in the Philippines. Consequently, it must have a license under Section 68 of the Corporation Law before it can be allowed to sue.

The situation of plaintiff under said Section 68 has been described as follows in Civil Case No. 71923 of this Court, entitled'Home Insurance Co. vs. N. V. Nedlloyd Lijnen, of which judicial cognizance can also be taken:

Exhibit "R",presented by plaintiff is a certified copy of a license, dated July 1, 1967, issued by the Office of the Insurance Commissioner authorizing plaintiff to transact insurance business in this country. By virtue of Section 176 of the Insurance Law, it has to be presumed that a license to transact business under Section 68 of the Corporation Law had previously been issued to plaintiff. No copy thereof, however, was submitted for a reason unknown. The date of that license must not have been much anterior to July 1, 1967. The preponderance of the evidence would therefore call for the finding that the insurance contract involved in this case, which was executed at Makati, Rizal, on February 8, 1967, was contracted before plaintiff was licensed to transact business in the Philippines.

This Court views Section 68 of the Corporation Law as reflective of a basic public policy. Hence, it is of the opinion that, in the eyes of Philippine law, the insurance contract involved in this case must be held void under the provisions of Article 1409 (1) of the Civil Code, and could not be validated by subsequent procurement of the license. That view of the Court finds support in the following citation:

According to many authorities, a constitutional or statutory prohibition against a foreign corporation doing business in the state, unless such corporation has complied with conditions prescribed, is effective to make the contracts of such corporation void, or at least unenforceable, and prevents the maintenance by the corporation of any action on such contracts. Although the usual construction is to the contrary, and to the effect that only the remedy for enforcement is affected thereby, a statute prohibiting a non-complying corporation from suing in the state courts on any contract has been held by some courts to render the contract void and unenforceable by the corporation, even after its has complied with the statute." (36 Am. Jur. 2d 299-300).

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The said Civil Case No. 71923 was dismissed by this Court. As the insurance contract involved herein was executed on January 20, 1967, the instant case should also be dismissed.

We resolved to consolidate the two cases when we gave due course to the petition.

The petitioner raised the following assignments of errors:

First Assignment of Error

THE HONORABLE TRIAL COURT ERRED IN CONSIDERING AS AN ISSUE THE LEGAL EXISTENCE OR CAPACITY OF PLAINTIFF-APPELLANT.

Second Assignment of Error

THE HONORABLE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT ON THE FINDING THAT PLAINTIFF-APPELLANT HAS NO CAPACITY TO SUE.

On the basis of factual and equitable considerations, there is no question that the private respondents should pay the obligations found by the trial court as owing to the petitioner. Only the question of validity of the contracts in relation to lack of capacity to sue stands in the way of the petitioner being given the affirmative relief it seeks. Whether or not the petitioner was engaged in single acts or solitary transactions and not engaged in business is likewise not in issue. The petitioner was engaged in business without a license. The private respondents' obligation to pay under the terms of the contracts has been proved.

When the complaints in these two cases were filed, the petitioner had already secured the necessary license to conduct its insurance business in the Philippines. It could already filed suits.

Petitioner was, therefore, telling the truth when it averred in its complaints that it was a foreign insurance company duly authorized to do business in the Philippines through its agent Mr. Victor H. Bello. However, when the insurance contracts which formed the basis of these cases were executed, the petitioner had not yet secured the necessary licenses and authority. The lower court, therefore, declared that pursuant to the basic public policy reflected in the Corporation Law, the insurance contracts executed before a license was secured must be held null and void. The court ruled that the contracts could not be validated by the subsequent procurement of the license.

The applicable provisions of the old Corporation Law, Act 1459, as amended are:

Sec. 68. No foreign corporation or corporations formed, organized, or existing under any laws other than those of the Philippine Islands shall be permitted to transact business in the Philippine Islands until after it shall have obtained a license for that purpose from the chief of theMercantile Register of the Bureau of Commerce and Industry,(Now Securities and Exchange Commission. See RA 5455) upon order of the Secretary of Finance (Now Monetary Board) in case of banks, savings, and loan banks, trust corporations, and banking institutions of all kinds, and upon order of the Secretary of Commerce andCommunications(Now Secretary of Trade. See 5455, section 4 for other requirements) in case of all other foreign corporations. ...

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Sec. 69. No foreign corporation or corporation formed, organized, or existing under any laws other than those of the Philippine Islands shall be permitted to transact business in the Philippine Islands or maintain by itself or assignee any suit for the recovery of any debt, claim, or demand whatever, unless it shall have the license prescribed in the section immediately preceding. Any officer, director, or agent of the corporation or any person transacting business for any foreign corporation not having the license prescribed shag be punished by imprisonment for not less than six months nor more than two years or by a fine of not less than two hundred pesos nor more than one thousand pesos, or by both such imprisonment and fine, in the discretion of the court.

As early as 1924, this Court ruled in the leading case ofMarshall Wells Co. v. Henry W. Elser & Co.(46 Phil. 70) that the object of Sections 68 and 69 of the Corporation Law wasto subject the foreign corporation doing business in the Philippines to the jurisdiction of our courts.The Marshall Wells Co. decision referred to a litigation over an isolated act for the unpaid balance on a bill of goods but the philosophy behind the law applies to the factual circumstances of these cases. The Court stated:

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Defendant isolates a portion of one sentence of section 69 of the Corporation Law and asks the court to give it a literal meaning Counsel would have the law read thus: "No foreign corporation shall be permitted to maintain by itself or assignee any suit for the recovery of any debt, claim, or demand whatever, unless it shall have the license prescribed in section 68 of the law." Plaintiff, on the contrary, desires for the court to consider the particular point under discussion with reference to all the law, and thereafter to give the law a common sense interpretation.

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

Confronted with the option of giving to the Corporation Law a harsh interpretation, which would disastrously embarrass trade, or of giving to the law a reasonable interpretation, which would markedly help in the development of trade; confronted with the option of barring from the courts foreign litigants with good causes of action or of assuming jurisdiction of their cases; confronted with the option of construing the law to mean that any corporation in the United States, which might want to sell to a person in the Philippines must send some representative to the Islands before the sale, and go through the complicated formulae provided by the Corporation Law with regard to the obtaining of the license, before the sale was made, in order to avoid being swindled by Philippine citizens, or of construing the law to mean that no foreign corporation doing business in the Philippines can maintain any suit until it shall possess the necessary license;-confronted with these options, can anyone doubt what our decision will be? The law simply means that no foreign corporation shall be permitted "to transact business in the Philippine Islands," as this phrase is known in corporation law, unless it shall have the license required by law, and, until it complies with the law, shall not be permitted to maintain any suit in the local courts. A contrary holding would bring the law to the verge of unconstitutionality, a result which should be and can be easily avoided. (Sioux Remedy Co.vs.Cope and Cope,supra;Perkins, Philippine Business Law, p. 264.)

To repeat, the objective of the law was to subject the foreign corporation to the jurisdiction of our courts. The Corporation Law must be given a reasonable, not an unduly harsh, interpretation which does not hamper the development of trade relations and which fosters friendly commercial intercourse among countries.

The objectives enunciated in the 1924 decision are even more relevant today when we view commercial relations in terms of a world economy, when the tendency is to re-examine the political boundaries separating one nation from another insofar as they define business requirements or restrict marketing conditions.

We distinguish between the denial of a right to take remedial action and the penal sanction for non-registration.

Insofar as transacting business without a license is concerned, Section 69 of the Corporation Law imposed a penal sanction-imprisonment for not less than six months nor more than two years or payment of a fine not less than P200.00 nor more than P1,000.00 or both in the discretion of the court. There is a penalty for transacting business without registration.

And insofar as litigation is concerned, the foreign corporation or its assignee may not maintain any suit for the recovery of any debt, claim, or demand whatever. The Corporation Law is silent on whether or not the contract executed by a foreign corporation with no capacity to sue is null and void ab initio.

We are not unaware of the conflicting schools of thought both here and abroad which are divided on whether such contracts are void or merely voidable. Professor Sulpicio Guevarra in his bookCorporation Law(Philippine Jurisprudence Series, U.P. Law Center, pp. 233-234) cites an Illinois decision which holds the contracts void and a Michigan statute and decision declaring them merely voidable:

xxx xxx xxx

Where a contract which is entered into by a foreign corporation without complying with the local requirements of doing business is rendered void either by the express terms of a statute or by statutory construction, a subsequent compliance with the statute by the corporation will not enable it to maintain an action on the contract. (Perkins Mfg. Co. v. Clinton Const. Co., 295 P. 1 [1930]. See also Diamond Glue Co. v. U.S. Glue Co.,suprasee note 18.) But where the statute merely prohibits the maintenance of a suit on such contract (without expressly declaring the contract "void"), it was held that a failure to comply with the statute rendered the contractvoidableand not void, and compliance at any time before suit was sufficient. (Perkins Mfg. Co. v. Clinton Const. Co.,supra.) Notwithstanding the above decision, the Illinois statute provides, among other things that a foreign corporation that fails to comply with the conditions of doing business in that state cannot maintain a suit or action, etc. The court said: 'The contract upon which this suit was brought, having been entered into in this state when appellant was not permitted to transact business in this state, is in violation of the plain provisions of the statute, and is therefore null and void, and no action can be maintained thereon at any time, even if the corporation shall, at some time after the making of the contract, qualify itself to transact business in this state by a compliance with our laws in reference to foreign corporations that desire to engage in business here. (United Lead Co. v. J.M. Ready Elevator Mfg. Co., 222 Ill. 199, 73 N.N. 567 [1906].)

A Michigan statute provides: "No foreign corporation subject to the provisions of this Act, shall maintain any action in this state upon any contract made by it in this state after the taking effect of this Act,untilit shall have fully complied with the requirement of this Act, and procured a certificate to that effect from the Secretary of State," It was held that the above statute does not render contracts of a foreign corporation that fails to comply with the statute void, but they may be enforced only after compliance therewith. (Hastings Industrial Co. v. Moral, 143 Mich. 679,107 N.E. 706 [1906]; Kuennan v. U.S. Fidelity & G. Co., Mich. 122; 123 N.W. 799 [1909]; Despres, Bridges & Noel v. Zierleyn, 163 Mich. 399, 128 N.W. 769 [1910]).

It has also been held that where the law provided that a corporation which has not complied with the statutory requirements "shall not maintain an action until such compliance". "At the commencement of this action the plaintiff had not filed the certified copy with the country clerk of Madera County, but it did file with the officer several months before the defendant filed his amended answer, setting up this defense, as that at the time this defense was pleaded by the defendant the plaintiff had complied with the statute. The defense pleaded by the defendant was therefore unavailable to him to prevent the plaintiff from thereafter maintaining the action. Section 299 does not declare that the plaintiff shall not commence an action in any county unless it has filed a certified copy in the office of the county clerk, but merely declares that it shall notmaintainan action until it has filled it. To maintain an action is not the same as to commence an action, but implies that the action has already beencommenced." (See also Kendrick & Roberts Inc. v. Warren Bros. Co., 110 Md. 47, 72 A. 461 [1909]).

In another case, the court said: "The very fact that the prohibition against maintaining an action in the courts of the state was inserted in the statute ought to be conclusive proof that the legislature did not intend or understand that contracts made without compliance with the law were void. The statute does not fix any time within which foreign corporations shall comply with the Act. If such contracts were void, no suits could be prosecuted on them in any court. ... The primary purpose of our statute is to compel a foreign corporation desiring to do business within the state to submit itself to the jurisdiction of the courts of this state. The statute was not intended to exclude foreign corporations from the state. It does not, in terms, render invalid contracts made in this state by non-complying corporations. The better reason, the wiser and fairer policy, and the greater weight lie with those decisions which hold that where, as here, there is a prohibition with a penalty, with no express or implied declarations respecting the validity of enforceability of contracts made by qualified foreign corporations, the contracts ... are enforceable ... upon compliance with the law." (Peter & Burghard Stone Co. v. Carper, 172 N.E. 319 [1930].)

Our jurisprudence leans towards the later view. Apart from the objectives earlier cited fromMarshall Wells Co. v. Henry W. Elser & Co(supra), it has long been the rule that a foreign corporation actually doing business in the Philippines without license to do so may be sued in our courts. The defendant American corporation inGeneral Corporation of the Philippines v. Union Insurance Society of Canton Ltd et al.(87 Phil. 313) entered into insurance contracts without the necessary license or authority. When summons was served on the agent, the defendant had not yet been registered and authorized to do business. The registration and authority came a little less than two months later. This Court ruled:

Counsel for appellant contends that at the time of the service of summons, the appellant had not yet been authorized to do business. But, as already stated, section 14, Rule 7 of the Rules of Court makes no distinction as to corporations with or without authority to do business in the Philippines. The test is whether a foreign corporation was actually doing business here. Otherwise, a foreign corporation illegally doing business here because of its refusal or neglect to obtain the corresponding license and authority to do business may successfully though unfairly plead such neglect or illegal act so as to avoid service and thereby impugn the jurisdiction of the local courts. It would indeed be anomalous and quite prejudicial, even disastrous, to the citizens in this jurisdiction who in all good faith and in the regular course of business accept and pay for shipments of goods from America, relying for their protection on duly executed foreign marine insurance policies made payable in Manila and duly endorsed and delivered to them, that when they go to court to enforce said policies, the insurer who all along has been engaging in this business of issuing similar marine policies, serenely pleads immunity to local jurisdiction because of its refusal or neglect to obtain the corresponding license to do business here thereby compelling the consignees or purchasers of the goods insured to go to America and sue in its courts for redress.

There is no question that the contracts are enforceable. The requirement of registration affects only the remedy.

Significantly, Batas Pambansa Blg. 68, the Corporation Code of the Philippines has corrected the ambiguity caused by the wording of Section 69 of the old Corporation Law.

Section 133 of the present Corporation Code provides:

SEC. 133.Doing business without a license.-No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shag be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency in the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws.

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

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

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

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

The petitioner averred in its complaints that it is a foreign insurance company, that it is authorized to do business in the Philippines, that its agent is Mr. Victor H. Bello, and that its office address is the Oledan Building at Ayala Avenue, Makati. These are all the averments required by Section 4, Rule 8 of the Rules of Court. The petitioner sufficiently alleged its capacity to sue. The private respondents countered either withan admissionof the plaintiff's jurisdictional averments or with a general denial based on lack of knowledge or information sufficient to form a belief as to the truth of the averments.

We find the general denials inadequate to attack the foreign corporations lack of capacity to sue in the light of its positive averment that it is authorized to do so. Section 4, Rule 8 requires that "a party desiring to raise an issue as to the legal existence of any party or the capacity of any party to sue or be sued in a representative capacity shall do so by specific denial, which shag include such supporting particulars as are particularly within the pleader's knowledge. At the very least, the private respondents should have stated particulars in their answers upon which a specific denial of the petitioner's capacity to sue could have been based or which could have supported its denial for lack of knowledge. And yet, even if the plaintiff's lack of capacity to sue was not properly raised as an issue by the answers, the petitioner introduced documentary evidence that it had the authority to engage in the insurance business at the time it filed the complaints.

WHEREFORE, the petitions are hereby granted. The decisions of the respondent court are reversed and set aside.

In L-34382, respondent Eastern Shipping Lines is ordered to pay the petitioner the sum of P1,630.22 with interest at the legal rate from January 5, 1968 until fully paid and respondent Angel Jose Transportation Inc. is ordered to pay the petitioner the sum of P1,630.22 also with interest at the legal rate from January 5, 1968 until fully paid. Each respondent shall pay one-half of the costs. The counterclaim of Angel Jose Transportation Inc. is dismissed.

In L-34383, respondent N. V. Nedlloyd Lijnen, or its agent Columbian Phil. Inc. is ordered to pay the petitioner the sum of P2,426.98 with interest at the legal rate from February 1, 1968 until fully paid, the sum of P500.00 attorney's fees, and costs, The complaint against Guacods, Inc. is dismissed.

SO ORDERED.

[G.R. No. 118843.February 6, 1997]

ERIKS PTE. LTD.,petitioner,vs. COURT OF APPEALS and DELFIN F. ENRIQUEZ, JR.,respondents.

D E C I S I O N

PANGANIBAN,J.:

Is a foreign corporation which sold its products sixteen times over a five-month period to the same Filipino buyer without first obtaining a license to do business in the Philippines, prohibited from maintaining an action to collect payment therefor in Philippine courts?In other words, is such foreign corporation doing business in the Philippines without the required license and thus barred access to our court system?

This is the main issue presented for resolution in the instant petition for review, which seeks the reversal of the Decision[1]of the Court of Appeals, Seventh Division, promulgated on January 25, 1995, in CA-G.R. CV No. 41275 which affirmed, for want of capacity to sue, the trial courts dismissal of the collection suit instituted by petitioner.

The FactsPetitioner 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, valves and control equipment used for industrial fluid control and PVC pipes and fittings for industrial uses.In its complaint, it alleged that:[2](I)t is a corporation duly organized and existing under the laws of the Republic of Singapore with address at 18 Pasir Panjang Road #09-01, PSA Multi-Storey Complex, Singapore 0511.It is not licensed to do business in the Philippines and i(s) not so engaged and is suing on an isolated transaction for which it has capacity to sue x x x. (par. 1, Complaint; p. 1, Record)

On various dates covering the period January 17 -- August 16, 1989, private respondent Delfin Enriquez, Jr., doing business under the name and style of Delrene EB Controls Center and/or EB Karmine Commercial, ordered and received from petitioner various elements used in sealing pumps, valves, pipes and control equipment, PVC pipes and fittings.The ordered materials were delivered via airfreight under the following invoices:[3]Date17 Jan 89

24 Feb 89

02 Mar 89

03 Mar 89

03 Mar 89

10 Mar 89

21 Mar 89

14 Apr 89

19 Apr 89

16 Aug 89

21 Mar 89

04 Apr 89

14 Apr 89

25 Apr 89

02 May 89

05 May 89

15 May 89

31 May 89InvoiceNo.

27065

27738

27855

27876

27877

28046

28258

28901

29001

31669

28257

28601

28900

29127

29232

29332

29497

29844AWBNo.

618-7496-2941

618-7553-6672

(freight & hand-

ling charges per

Inv. 27738)

618-7553-7501

618-7553-7501

618-7578-3256/

618-7578-3481

618-7578-4634

618-7741-7631

Self-collect

(handcarried by buyer)

618-7578-4634

618-7741-7605

618-7741-7631

618-7741-9720

(By seafreight)

618-7796-3255

(Freight & hand-

ling charges per

Inv. 29127)

618-7796-5646

TotalAmountS$5,010.59

14,402.13

1,164.18

1,394.32

1,641.57

7,854.60

27.72

2,756.53

458.80

1,862.00

--------------------

S$36,392.44

415.50

884.09

1,269.50

883.80

120.00

1,198.40

111.94

--------------------

S$4,989.29

545.70

--------------------

S$545.70

--------------------

S$41,927.43

===========

The transfers of goods were perfected in Singapore, for private respondents account, F.O.B. Singapore, with a 90-day credit term.Subsequently, demands were made by petitioner upon private respondent to settle his account, but the latter failed/refused to do so.

On August 28, 1991, petitioner corporation filed with the Regional Trial Court of Makati, Branch 138,[4]Civil Case No. 91-2373 entitledEriks Pte. Ltd. vs. Delfin Enriquez, Jr.for the recovery of S$41,939.63 or its equivalent in Philippine currency, plus interest thereon and damages.Private respondent responded with a Motion to Dismiss, contending that petitioner corporation had no legal capacity to sue.In an Order dated March 8, 1993,[5]the trial court dismissed the action on the ground that petitioner is a foreign corporation doing business in the Philippines without a license.The dispositive portion of said order reads:[6]WHEREFORE, in view of the foregoing, the motion to dismiss is hereby GRANTED and accordingly, the above-entitled case is hereby DISMISSED.

SO ORDERED.

On appeal, respondent Court affirmed said order as it deemed the series of transactions between petitioner corporation and private respondent not to be an isolated or casual transaction.Thus, respondent Court likewise found petitioner to be without legal capacity to sue, and disposed of the appeal as follows:[7]WHEREFORE, the appealed Order should be, as it is hereby AFFIRMED.The complaint is dismissed.No costs.

SO ORDERED.

Hence, this petition.

The IssueThe main issue in this petition is whether petitioner-corporation may maintain an action in Philippine courts considering that it has no license to do business in the country.The resolution of this issue depends on whether petitioners business with private respondent may be treated as isolated transactions.

Petitioner insists that the series of sales made to private respondent would still constitute isolated transactions despite the number of invoices covering several separate and distinct items sold and shipped over a span of four to five months, and that an affirmation of respondent Courts ruling would result in injustice and unjust enrichment.

Private respondent counters that to declare petitioner as possessing capacity to sue will render nugatory the provisions of the Corporation Code and constitute a gross violation of our laws.Thus, he argues, petitioner is undeserving of legal protection.

The Courts RulingThe petition has no merit.

The Concept of Doing BusinessThe 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 prohibits, not merely absence of the prescribed license, but it also bars a foreign corporation doing business in the Philippines without such license access to our courts.[8]A foreign corporation without such license is notipso factoincapacitated from bringing an action.A license is necessary only if it istransacting or doing businessin the country.

However, there is no definitive rule on what constitutes doing, engaging in, or transacting business.The Corporation Code itself does not define such terms.To fill the gap, the evolution of its statutory definition has produced a rather all-encompassing concept in Republic Act No. 7042[9]in this wise:

SEC. 3.Definitions. -As used in this Act:

xxxxxxxxx

(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 eight(y) (180) days or more; participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; andany 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. (underscoring supplied)

In the durable case ofThe Mentholatum Co. vs. Mangaliman,this Court discoursed on the test to determine whether a foreign company is doing business in the Philippines, thus:[10]x x x The true test, however, seems to be whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another. (Traction Cos. v. Collectors of Int. Revenue [C.C.A., Ohio], 223 F. 984, 987.]The term implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of, the purpose and object of its organization.] (sic) (Griffin v. Implement Dealers Mut. Fire Ins. Co., 241 N.W. 75, 77; Pauline Oil & Gas Co. v. Mutual Tank Line Co., 246 P. 851, 852, 118 Okl. 111; Automotive Material Co. v. American Standard Metal Products Corp., 158 N.E. 698, 703, 327 III. 367.)

The accepted rule in jurisprudence is that each case must be judged in the light of its own environmental circumstances.[11]It should be kept in mind that the purpose of the law is to subject the foreign corporation doing business in the Philippines to the jurisdiction of our courts.It is not to prevent the foreign corporation from performing single or isolated acts, but to bar it from acquiring a domicile for the purpose of business without first taking the steps necessary to render it amenable to suits in the local courts.

The trial court held that petitioner-corporation was doing business without a license, finding that:[12]The invoices and delivery receipts covering the period of (sic) from January 17, 1989 to August 16, 1989 cannot be treated to mean a singular and isolated business transaction that is temporary in character.Granting that there is no distributorship agreement between herein parties, yet by the mere fact that plaintiff, each time that the defendant posts an order delivers the items as evidenced by the several invoices and receipts of various dates only indicates that plaintiff has the intention and desire to repeat the (sic) said transaction in the future in pursuit of its ordinary business.Furthermore, and if the corporation is doing that for which it was created, the amount or volume of the business done is immaterial and a single act of that character may constitute doing business. (See p. 603, Corp. Code, De Leon - 1986 Ed.).

Respondent Court affirmed this finding in its assailed Decision with this explanation:[13]x x x Considering the factual background as laid out above, the transaction cannot be considered as an isolated one.Note that there were 17 orders and deliveries (only sixteen per our count) over a four-month period.The appellee (private respondent) made separate orders at various dates.The transactions did not consist of separate deliveries for one single order.In the case at bar, the transactions entered into by the appellant with the appellee are a series of commercial dealings which would signify an intent on the part of the appellant (petitioner) to do business in the Philippines and could not by any stretch of the imagination be considered an isolated one, thus would fall under the category of doing business.

Even if We were to view, as contended by the appellant, that the transactions which occurred between January to August 1989, constitute a single act or isolated business transaction, this being the ordinary business of appellant corporation, it can be said to be illegally doing or transacting business without a license.x x x Here it can be clearly gleaned from the four-month period of transactions between appellant and appellee that it was a continuing business relationship, which would, without doubt, constitute doing business without a license.For all intents and purposes, appellant corporation is doing or transacting business in the Philippines without a license and that, therefore, in accordance with the specific mandate of Section 144 of the Corporation Code, it has no capacity to sue. (addition ours)

We find no reason to disagree with both lower courts.More than the sheer number of transactions entered into, a clear and unmistakable intention on the part of petitioner to continue the body of its business in the Philippines is more than apparent.As alleged in its complaint, it is engaged in the manufacture and sale of elements used in sealing pumps, valves, and pipes for industrial purposes, valves and control equipment used for industrial fluid control and PVC pipes and fittings for industrial use.Thus, the sale by petitioner of the items covered by the receipts, which are part and parcel of its main product line, was actually carried out in the progressive prosecution of commercial gain and the pursuit of the purpose and object of its business, pure and simple.Further, its grant and extension of 90-day credit terms to private respondent for every purchase made, unarguably shows an intention to continue transacting with private respondent, since in the usual course of commercial transactions, credit is extended only to customers in good standing or to those on whom there is an intention to maintain long-term relationship.This being so, the existence of a distributorship agreement between the parties, as alleged but not proven by private respondent, would, if duly established by competent evidence, be merely corroborative, and failure to sufficiently prove said allegation will not significantly affect the finding of the courts below.Nor our own ruling.It is precisely upon the set of facts above-detailed that we concur with respondent Court that petitioner corporation was doing business in the country.

Equally important is the absence of any fact or circumstance which might tend even remotely to negate such intention to continue the progressive prosecution of petitioners business activities in this country.Had private respondent not turned out to be a bad risk, in all likelihood petitioner would have indefinitely continued its commercial transactions with him, and not surprisingly, in ever increasing volumes.

Thus, we hold that the series of transactions in questioncould not have been isolated or casual transactions.What is determinative of doing business is not really the number or the quantity of the transactions, but more importantly, the intention of an entity to continue the body of its business in the country.The number and quantity are merely evidence of such intention.The phrase isolated transaction has a definite and fixed meaning,i.e.a transaction or series of transactions set apart from the common business of a foreign enterprise in the sense that there is no intention to engage in a progressive pursuit of the purpose and object of the business organization.Whether a foreign corporation is doing business does not necessarily depend upon the frequency of its transactions, but more upon the nature and character of the transactions.[14]Given the facts of this case, we cannot see how petitioners business dealings will fit the category of isolated transactions considering that its intention to continue and pursue the corpus of its business in the country had been clearly established.It has not presented any convincing argument with equally convincing evidence for us to rule otherwise.

Incapacitated to Maintain SuitAccordingly and ineluctably, petitioner must be held to be incapacitated to maintain the actiona quoagainst private respondent.

It was never the intent of the legislature to bar court access to a foreign corporation or entity which happens to obtain an isolated order for business in the Philippines.Neither, did it intend to shield debtors from their legitimate liabilities or obligations.[15]But it cannot allow foreign corporations or entities which conduct regular business any access to courts without the fulfillment by such corporations of the necessary requisites to be subjected to our governments regulation and authority.By securing a license, the foreign entity would be giving assurance that it will abide by the decisions of our courts, even if adverse to it.

Other Remedy Still AvailableBy this judgment, we are not foreclosing petitioners right to collect payment.Res judicatadoes not set in a case dismissed for lack of capacity to sue, because there has been no determination on the merits.[16]Moreover, this Court has ruled that subsequent acquisition of the license will cure the lack of capacity at the time of the execution of the contract.[17]The requirement of a license is not meant to put foreign corporations at a disadvantage.Rather, the doctrine of lack of capacity to sue is based on considerations of sound public policy.[18]Thus, it has been ruled inHome Insurancethat:[19]x x xThe primary purpose of our statute is to compel a foreign corporation desiring to do business within the state to submit itself to the jurisdiction of the courts of this state.The statute was not intended to exclude foreign corporations from the state.x x x xThe better reason, the wiser and fairer policy, and the greater weight lie with those decisions which hold that where, as here, there is a prohibition with a penalty, with no express or implied declarations respecting the validity of enforceability of contracts made by qualified foreign corporations, the contracts x x x are enforceable x x x upon compliance with the law.(Peter & Burghard Stone Co. v. Carper, 172 N.E. 319 [1930].)

While we agree with petitioner that the country needs to develop trade relations and foster friendly commercial relations with other states, we also need to enforce our laws that regulate the conduct of foreigners who desire to do business here.Such strangers must follow our laws and must subject themselves to reasonable regulation by our government.

WHEREFORE, premises considered, the instant petition is herebyDENIEDand the assailed Decision isAFFIRMED.

SO ORDERED.

[G.R. No. 131367.August 31, 2000]HUTCHISON PORTS PHILIPPINES LIMITED,petitioner, vs.SUBIC BAY METROPOLITAN AUTHORITY, INTERNATIONAL CONTAINER TERMINAL SERVICES INC., ROYAL PORT SERVICES INC. and the EXECUTIVE SECRETARY,respondents.D E C I S I O N

YNARES-SANTIAGO,J.:

On February 12, 1996, the Subic Bay Metropolitan Authority (or SBMA) advertised in leading national daily newspapers and in one international publication,[1]an invitation offering to the private sector the opportunity to develop and operate a modern marine container terminal within the Subic Bay Freeport Zone.Out of seven bidders who responded to the published invitation, three were declared by the SBMA as qualified bidders after passing the pre-qualification evaluation conducted by the SBMAs Technical Evaluation Committee (or SBMA-TEC).These are:(1) International Container Terminal Services, Inc. (or ICTSI); (2) a consortium consisting of Royal Port Services, Inc. and HPC Hamburg Port Consulting GMBH (or RPSI); and (3) Hutchison Ports Philippines Limited (or HPPL), representing a consortium composed of HPPL, Guoco Holdings (Phils.), Inc. and Unicol Management Services, Inc.All three qualified bidders were required to submit their respective formal bid package on or before July 1, 1996 by the SBMAs Pre-qualification, Bids and Awards Committee (or SBMA-PBAC).

Thereafter, the services of three (3) international consultants[2]recommended by the World Bank for their expertise were hired by SBMA to evaluate the business plans submitted by each of the bidders, and to ensure that there would be a transparent and comprehensive review of the submitted bids.The SBMA also hired the firm of Davis, Langdon and Seah Philippines, Inc. to assist in the evaluation of the bids and in the negotiation process after the winning bidder is chosen.All the consultants, after such review and evaluation unanimously concluded that HPPLs Business Plan was far superior to that of the two other bidders.[3]However, even before the sealed envelopes containing the bidders proposed royalty fees could be opened at the appointed time and place, RPSI formally protested that ICTSI is legally barred from operating a second port in the Philippines based on Executive Order No. 212 and Department of Transportation and Communication (DOTC) Order 95-863.RPSI thus requested that the financial bid of ICTSI should be set aside.[4]Nevertheless, the opening of the sealed financial bids proceeded under advisement relative to the protest signified by RPSI.The financial bids, more particularly the proposed royalty fee of each bidder, was as follows:

ICTSI ------------US$57.80 TEU

HPPL ------------US$20.50 TEU

RPSI -------------US$15.08 TEU

The SBMA-PBAC decided to suspend the announcement of the winning bid, however, and instead gave ICTSI seven (7) days within which to respond to the letter-protest lodged by RPSI.The HPPL joined in RPSIs protest, stating that ICTSI should be disqualified because it was already operating the Manila International Container Port (or MICP), which would give rise to inevitable conflict of interest between the MICP and the Subic Bay Container Terminal facility.[5]On August 15, 1996, the SBMA-PBAC issued a resolution rejecting the bid of ICTSI because said bid does not comply with the requirements of the tender documents and the laws of the Philippines. The said resolution also declared that:

RESOLVED FURTHER, that thewinning bid be awarded to HUTCHISON PORTS PHILIPPINES LIMITED(HPPL) and thatnegotiations commence immediately with HPPL(HUTCHISON) with a view to concluding an acceptable agreement within 45 days of this date failing which negotiations with RPSI (ROYAL) will commence with a view to concluding an acceptable agreement within 45 days thereafter failing which there will be declared a failure of bids.[6](Underscoring supplied)

The following day, ICTSI filed a letter-appeal with SBMAs Board of Directors requesting the nullification and reversal of the above-quoted resolution rejecting ICTSIs bid while awarding the same to HPPL. But even before the SBMA Board could act on the appeal, ICTSI filed a similar appeal before the Office of the President.[7]On August 30, 1996, then Chief Presidential Legal Counsel (CPLC) Renato L. Cayetano submitted a memorandum to then President Fidel V. Ramos, containing the following recommendations:

We therefore suggest that the President direct SBMA Chairman Gordon to consider option number 4 that is to re-evaluate the financial bids submitted by the parties, taking into consideration all the following factors:

1.Reinstate ICTSIs bid;

2.Disregard all arguments relating to monopoly;

3.The re-evaluation must be limited to the parties financial bids.

3.1Considering that the parties business have been accepted (passed), strictly follow the criteria for bid evaluation provided for in pars. (c) and (d), Part B (1) of the Tender Document.

4.In the re-evaluation, the COA should actively participate to determine which of the financial bids is more advantageous.

5.In addition, all the parties should be given ample opportunity to elucidate or clarify the components/justification for their respective financial bids in order to ensure fair play and transparency in the proceedings.

6.The Presidents authority to review the final award shall remain.[8](Underscoring supplied)

The recommendation of CPLC Cayetano was approved by President Ramos, and a copy of President Ramos handwritten approval was sent to the SBMA Board of Directors.Accordingly, the SBMA Board, with the concurrence of representatives of the Commission on Audit, agreed to focus the reevaluation of the bids in accordance with the evaluation criteria and the detailed components contained in the Tender Document, including all relevant information gleaned from the bidding documents, as well as the reports of the three international experts and the consultancy firm hired by the SBMA.

On September 19, 1996, the SBMA Board issued a Resolution, declaring:

NOW, THEREFORE, IT IS HEREBY RESOLVED that the bid that conforms to the Invitation to Tender, that has a realistic Business Plan offering the greatest financial return to SBMA, the best possible offer and the most advantageous to the government is that of HPPL andHPPL is accordingly selected as the winning bidderand ishereby awarded the concessionfor the operation and development of the Subic Bay Container Terminal.[9](Underscoring supplied)

In a letter dated September 24, 1996, the SBMA Board of Directors submitted to the Office of the President the results of the re-evaluation of the bid proposals, to wit:

SBMA, through the unanimous vote of all the Board Members, excluding the Chairman of the Board who voluntarily inhibited himself from participating in the re-evaluation, selected the HPPL bid as the winning bid, being: the conforming bid with a realistic Business Plan offering the greatest financial return to the SBMA; the best possible offer in the market, and the most advantageous to the government in accordance with the Tender Document.[10]Notwithstanding the SBMA Boards recommendations and action awarding the project to HPPL, then Executive Secretary Ruben Torres submitted a memorandum to the Office of the President recommending that another rebidding be conducted.[11]Consequently, the Office of the President issued a Memorandum directing the SBMA Board of Directors to refrain from signing the Concession Contract with HPPL and to conduct a rebidding of the project.[12]In the meantime, the Resident Ombudsman for the DOTC filed a complaint against members of the SBMA-PBAC before the Office of the Ombudsman for alleged violation of Section 3(e) of Republic Act No. 3019 for awarding the contract to HPPL.On April 16, 1997, the Evaluation and Preliminary Investigation Bureau of the Office of the Ombudsman issued a Resolution absolving the members of the SBMA-PBAC of any liability and dismissing the complaint against them, ruling thus:

After an assiduous study of the respective contentions of both parties, we are inclined to hold, as it is hereby held, that there is no proof on record pinpointing respondents to have acted in excess of their discretion when they awarded the bid to HPPL.Records revealed that respondents, in the exercise of their discretion in determining the financial packages offered by the applicants, were guided by the expert report of Davis, Langdon and Seah (DLS) that fairly evaluated which of the bidders tender the greatest financial return to the government.There is no showing that respondents had abused their prerogatives.As succinctly set forth in the DLS report it stated, among others, that, in assessing the full financial return to SBMA offered by the bidders, it is necessary to consider the following critical matters:

1.Royalty fees

2.Volume of TEUs as affected by:

a.Tariff rates;

b.Marketing strategy;

c.Port facilities; and

d.Efficient reliable services.

With the preceding parameters for the evaluation of bidders business plan, the respondents were fairly guided by, as they aligned their judgment in congruence with, the opinion of the panel of experts and the SBMAs Technical Evaluation Committee to the effect that HPPLs business is superior while that of ICTSIs appeared to be unrealistically high which may eventually hinder the competitiveness of the SBMA port with the rest of the world.Respondents averred that the panel of World Bank experts noted that ICTSIs high tariff rates at U.S. $119.00 per TEU is already higher by 37% through HPPL, which could further increase by 20% in the first two (2) years and by 5% hike thereafter.In short, high tariffs would discourage potential customers which may be translated into low cargo volume that will eventually reduce financial return to SBMA.Respondents asserted that HPPLs business plan offers the greatest financial return which could be equated that over the five years, HPPL offers 1.25 billion pesos while ICTSI offers P0.859 billion, and RPSI offers P.420 billion.Over the first ten years HPPL gives P2.430 billion, ICTSI tenders P2.197 billion and RPSI has P1.632 billion.

Viewed from this perspective alongside with the evidence on record, the undersigned panel does not find respondents to have exceeded their discretion in awarding the bid to HPPL.Consequently, it could not be said that respondents act had placed the government at a grossly disadvantageous plight that could have jeopardized the interest of the Republic of the Philippines.[13]On July 7, 1997, the HPPL, feeling aggrieved by the SBMAs failure and refusal to commence negotiations and to execute the Concession Agreement despite its earlier pronouncements that HPPL was the winning bidder, filed a complaint[14]against SBMA before the Regional Trial Court (RTC) of Olongapo City, Branch 75, for specific performance, mandatory injunction and damages.In due time, ICTSI, RPSI and the Office of the President filed separate Answers-in-Intervention[15]to the complaint opposing the reliefs sought by complainant HPPL.

Complainant HPPL alleged and argued therein that a binding and legally enforceable contract had been established between HPPL and defendant SBMA under Article 1305 of the Civil Code, considering that SBMA had repeatedly declared and confirmed that HPPL was the winning bidder.Having accepted HPPLs offer to operate and develop the proposed container terminal, defendant SBMA is duty-bound to comply with its obligation by commencing negotiations and drawing up a Concession Agreement with plaintiff HPPL.HPPL also pointed out that the bidding procedure followed by the SBMA faithfully complied with existing laws and rules established by SBMA itself; thus, when HPPL was declared the winning bidder it acquired the exclusive right to negotiate with the SBMA.Consequently, plaintiff HPPL posited that SBMA should be: (1) barred from conducting a re-bidding of the proposed project and/or performing any such acts relating thereto; and (2) prohibited from negotiating with any party other than plaintiff HPPL until negotiations between HPPL and SBMA have been concluded or in the event that no acceptable agreement could be arrived at.Plaintiff HPPL also alleged that SBMAs continued refusal to negotiate the Concession Contract is a substantial infringement of its proprietary rights, and caused damage and prejudice to plaintiff HPPL.

Hence, HPPL prayed that:

(1)Upon the filing of this complaint, hearings be scheduled to determine the propriety of plaintiffs mandatory injunction application which seeks to order defendant or any of its appropriate officers or committees to forthwith specify the date as well as to perform any and all such acts (e.g. laying the ground rules for discussion) for the commencement of negotiations with plaintiff with the view to signing at the earliest possible time a Concession Agreement for the development and operation of the Subic Bay Container Terminal.

(2)Thereafter, judgment be rendered in favor of plaintiff and against defendant:

2.1.Making permanent the preliminary mandatory injunction it had issued;

2.2.Ordering defendant to implement the Concession Agreement it had executed with plaintiff in respect of the development and operation of the proposed Subic Bay Container Terminal;

2.3.Ordering defendant to pay for the cost of plaintiffs attorneys fees in the amount of P500,000.00, or as otherwise proven during the trial.

Plaintiff prays for other equitable reliefs.[16]During the pre-trial hearing, one of the issues raised and submitted for resolution was whether or not the Office of the President can set aside the award made by SBMA in favor of plaintiff HPPL and if so, can the Office of the President direct the SBMA to conduct a re-bidding of the proposed project.

While the case before the trial court was pending litigation, on August 4, 1997, the SBMA sent notices to plaintiff HPPL, ICTSI and RPSI requesting them to declare their interest in participating in a rebidding of the proposed project.[17]On October 20, 1997, plaintiff HPPL received a copy of the minutes of the pre-bid conference which stated that the winning bidder would be announced on December 5, 1997.[18]Then on November 4, 1997, plaintiff HPPL learned that the SBMA had accepted the bids of ICTSI and RPSI who were the only bidders who qualified.

In order to enjoin the rebidding while the case was still pending, plaintiff HPPL filed a motion for maintenance of thestatus quo[19]on October 28, 1997.The said motion was denied by the courta quoin an Order dated November 3, 1997, to wit:

Plaintiff maintains that by voluntarily participating in this proceedings, the defendant and the intervenors have unqualifiedly agreed to submit the issue of the propriety, legality and validity of the Office of the Presidents directive that the SBMA effect a rebidding of its concession contract or the operation of the Subic Bay Container Terminal.As such, the status quo must be maintained in order not to thwart the courts ability to resolve the issues presented.Further, the ethics of the profession require that counsel should discontinue any act which tends to render the issues academic.

The Opposition is anchored on lack of jurisdiction since the issuance of a cease-and-desist order would be tantamount to the issuance of a Temporary Restraining Order or a Writ of Injunction which this Court cannot do in light of the provision of Section 21 of R.A. 7227 which states:

Section 21. Injunction and Restraining Order. The implementation of the projects for the conversion into alternative productive uses of the military reservations are urgent and necessary andshall not be restrained or enjoined except by an order issued by the Supreme Court of the Philippines.

During the hearing on October 30, 1997, SBMAs counsel revealed that there is no law or administrative rule or regulation which requires that a bidding be accomplished within a definite time frame.

Truly, the matter of the deferment of the re-bidding on November 4, 1997 rests on the sound discretion of the SBMA.For this Court to issue a cease-and-desist order would be tantamount to an issuance of a Temporary Restraining Order or a Writ of Preliminary Injunction.(Prado v. Veridiano II, G.R. No. 98118, December 6, 1991).The Court notes that the Office of the President has not been heard fully on the issues.Moreover, one of the intervenors is of the view that the issue of jurisdiction must be resolved first, ahead of all the other issues.

WHEREFORE, and viewed from the foregoing considerations, plaintiffs motion is DENIED.

SO ORDERED.[20](Underscoring supplied)

Hence, this petition filed by petitioner (plaintiff below) HPPL against respondents SBMA, ICTSI, RPSI and the Executive Secretary seeking to obtain a prohibitory injunction.The grounds relied upon by petitioner HPPL to justify the filing of the instant petition are summed up as follows:

29.It is respectfully submitted that to allow or for this Honorable Court to otherwise refrain from restraining SBMA, during the pendency of this suit, from committing the aforementioned act(s) which will certainly occur on5 December 1997such action (or inaction) will work an injustice upon petitioner which has validly been announced as the winning bidder for the operation of the Subic Bay Container Terminal.

30.To allow or for this Honorable Court to otherwise refrain from restraining SBMA, during the pendency of this suit, from committing the aforementioned threatened acts would be in violation of petitioners rights in respect of the action it had filed before the RTC of Olongapo City in Civil Case No. 243-O-97, and could render any judgment which may be reached by said Court moot and ineffectual.As stated, the legal issues raised by the parties in that proceedings are of far reaching importance to the national pride and prestige, and they impact on the integrity of government agencies engaged in international bidding of privatization projects.Its resolution on the merits by the trial court below and, thereafter, any further action to be taken by the parties before the appellate courts will certainly benefit respondents and the entire Filipino people.[21]WHEREFORE, petitioner HPPL sought relief praying that:

a)Upon the filing of this petition, the same be given due course and a temporary restraining order and/or writ of preliminary injunction be issuedex parte, restraining SBMA or any of its committees, or other persons acting under its control or direction or upon its instruction, from declaring any winner on5 December 1997or at any other date thereafter, in connection with the rebidding for the privatization of the Subic Bay Container Terminal and/or for any, some or all of the respondents to perform any such act(s) in pursuance thereof, until further orders from this Honorable Court;

b)After appropriate proceedings, judgment be rendered in favor of petitioner and against respondents --

(1)Ordering SBMA to desist from conducting any rebidding or in declaring the winner of any such rebidding in respect of the development and operation of the Subic Bay Container Terminal until the judgment which the RTC of Olongapo City may render in Civil Case No. 243-O-97 is resolved with finality;

(2)Declaring null and void any award which SBMA may announce or issue on 5 December 1997; and

(3)Ordering respondents to pay for the cost of suit.

Petitioner prays for other equitable reliefs.[22]The instant petition seeks the issuance of an injunctive writ for the sole purpose of holding in abeyance the conduct by respondent SBMA of a rebidding of the proposed SBICT project until the case for specific performance is resolved by the trial court.In other words, petitioner HPPL prays that thestatus quobe preserved until the issues raised in the main case are litigated and finally determined.Petitioner was constrained to invoke this Courts exclusive jurisdiction and authority by virtue of the above-quoted Republic Act 7227, Section 21.

On December 3, 1997, this Court granted petitioner HPPLs application for a temporary restraining order enjoining the respondent SBMA or any of its committees, or other persons acting under its control or direction or upon its instruction, from declaring any winner on December 5, 1997 or at any other date thereafter, in connection with the rebidding for the privatization of the Subic Bay Container Terminal and/or for any, some or all of the respondents to perform any such act or acts in pursuance thereof.[23]There is no doubt that since this controversy arose, precious time has been lost and a vital infrastructure project has in essense been mothballed to the detriment of all parties involved, not the least of which is the Philippine Government, through its officials and agencies, who serve the interest of the nation.It is, therefore, imperative that the issues raised herein and in the courta quobe resolved without further delay so as not to exacerbate an already untenable situation.

At the outset, the application for the injunctive writ is only a provisional remedy, a mere adjunct to the main suit.[24]Thus, it is not uncommon that the issues in the main action are closely intertwined, if not identical, to the allegations and counter allegations propounded by the opposing parties in support of their contrary positions concerning the propriety or impropriety of the injunctive writ.While it is not our intention to preempt the trial courts determination of the issues in the main action for specific performance, this Court has a bounden duty to perform; that is, to resolve the matters before this Court in a manner that gives essence to justice, equity and good conscience.

While our pronouncements are for the purpose only of determining whether or not the circumstances warrant the issuance of the writ of injunction, it is inevitable that it may have some impact on the main action pending before the trial court.Nevertheless, without delving into the merits of the main case, our findings herein shall be confined to the necessary issues attendant to the application for an injunctive writ.

For an injunctive writ to be issued, the following requisites must be proven:

First.That the petitioner/applicant must hav