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Conflict of Laws on Corporation and other Juridical Entity Due to Growing interdependence of countries in doing trade or business, such

as act of a foreign entity or corporation entering to the market of another country, other than its home, and competing internationally, and other factors, has resulted to questions like what law will apply and what court will have jurisdiction and others. Corporations The conflict lies to foreign corporations. This is because they may be owned by foreign nationals not residing in the Philippines, it is organized under a different law, its assets located abroad, and others. A foreign corporation is one formed, organized or existing under any laws other than those of the Philippines and whose laws allow Filipino citizens and corporations to do business in its own country or state.1 National Law of the Corporation. In the book of De Leon in Conflict of law, he cited 3 theory to determine the nationality of a corporation, to wit: 1) Incorporation principle nationality is place of incorporation 2) Place or center of management principle nationality is the place the officers of the corporation exercises the functions of management and control (usually through board meetings). 3) Exploitation center principle law of the place principally affected by its activities. Under the Philippine law we adhere to the place of incorporation principle as embodies in our corporation code which provides: A foreign corporation is one formed, organized or existing under any laws other than those of the Philippines. It may be inferred from this provision that a corporation is foreign if incorporated under a law other than the Philippines Law. It is necessary to determine the nationality of a corporation because of another point of conflict. Exception to Rule that the nationality of a corporation depends on its place of incorporation. Under Philippine Law, there are 2 instances that despite being incorporated under the Philippine law, such corporation is not treated as a Filipino Corporation. First, for constitutional purposes; exploitation of natural resources (incase a corporation atleast 60% Filipino owned)2, certain area of investment reserve by the congress to Filipino or corporation atleast 60% or higher Filipino owned3, franchise for public utility (Atleast 60% Filipino owned)4.

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Corporation Code, Batas Pambansa blg. 68, sec. 123 Constitution, Article XII, section 2, 1987 3 Constitution, Article XII, Section 10, 1987, 4 Constitution, Article XII, Section 11, 1987

Exception to the exception is a corporation sole. It was held that a Canadian citizen, acting in his capacity as a corporation sole (the Roman Catholic Administrator of Davao) was allowed to acquire a parcel of land in his name. A corporation sole is only an administrator and not the owner of the temporalities in the diocese. Such temporalities are administered for and behalf of the faithful who are Filipino citizens.5 Second, in case of war the veil of the corporation is pierce. The applicable principle is the control test. The determination of its nationality is based on the nationality of the controlling stockholder. Effect of war, generally. All intercourse between citizens of belligerent powers which is inconsistent with a state of war is prohibited by the law of nations. Such prohibition includes all negotiations, commerce, or trading with the enemy; all acts which will increase, or tend to increase, its income or resources; all acts of voluntary submission to it; or receiving its protection; also all acts concerning the transmission of money or goods; and all contracts relating thereto are thereby nullified. The purpose of war is to cripple the power and exhaust the resources of the enemy.6 1) Power and Liabilities, 2) Creation, formation, organization or dissolution of corporations or those which fix the relations, liabilities, responsibilities, or 3)duties of stockholders, members, or officers of corporations to each other or to the corporation The power and liabilities of a corporation being a creature of law is that which is indicated in its articles of incorporation. The county where it is incorporated thus provides for its power and liabilities Our law provides; foreign corporation lawfully doing business in the Philippines shall be bound by all laws, rules and regulations applicable to domestic corporations of the same class, except such only as provide for the creation, formation, organization or dissolution of corporations or those which fix the relations, liabilities, responsibilities, or duties of stockholders, members, or officers of corporations to each other or to the corporation.7 Creation, formation, organization or dissolution of the corporation involves the requirements for setting up a corporation, kinds of stock, issuance of stocks, number of incorporators, directors, etc. Duties of stockholders, members, or officers of corporations to each other or to the corporation involves intra-corporate dispute. Intra-corporate dispute is a controversy: (a) which arises out of intracorporate or partnership relations between and among stockholders, members, or associates; between any or all of them and the corporation, partnership or association of which they are stock holder or members or associates, respectively; and between such corporation, partnership, association and the state insofar as it concerns their individual franchise or right to exist and (b) which is intrinsically connected with the regulation of the corporations, partnership, or association or with those dealing with the internal affairs of such entity.8

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The Roman Catholic Administrator of Davao v. Land Registration Commissioner 102 phil. 596, 1957 FILIPINAS COMPAIA DE SEGUROS v. CHRISTERN, HUENEFELD and CO., INC, G.R. No. L-2294, May 25, 1951 7 Corporation Code, Batas Pambansa blg. 68, sec. 129 8 Conflict of laws 2004 ed., by Ruben Agpalo

In Gray vs Insular Lumber co., M.E. Gray who owns share of a Foreign Corporation (Insular Lunber), a corporation duly organized unfer tha Law of New York U.S.A., ask the court to allow him to inspect the records of the said corporation. During such time the right to inspect corporate records is given only to a stockholder with atleast 3% interest under the Law of USA. He did not prove the requisites, so our Court denied the petition.9 Personality to Sue Old doctrine is that a corporation, being a creature of Law, has no Legal Status beyond the bounds of the sovereignty it was created.10 However this has already been abandoned due to expansion of investment made in many countries. The prevailing rule is that with the consent of a state, a foreign corporation shall be recognized and will be allowed to transact business in any state which gives its consent.11 The Philippines adhere that the corporation may act beyond the bounds of the country where it was incorporated. This can be inferred from the provisions of the corporation code allowing foreign corporation to do business in the Philippines provided they acquire license. If a corporation do not obtain license to do business, according to the corporation code Sec. 133. Doing business without a license. - No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws. A foreign Corporation doing business in the Philippines can be sued here but cannot maintain a suit. However this is subject to exemptions, to wit: 1) Isolated Transaction Doctrine12 -- A corporation not doing business in the Philippines may sue and be sued here. Since the law only disallow corporation doing business to maintain a suit. A corporation is engaged in business in the Philippines when there is continuity of commercial dealings and arrangements, and contemplates to that extent, the performance of an act 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.13 Example: 1) An action arising from a collision which occurred in the philippines14 2) recovery of misdelivered property15

67 phil. 139, 1930 Marshall Wells Co. v. Elser Co., 46 phil 71, 1924 11 Bank of Augusta v. Earle, 38 U.S. (13 pet.) 519, 1839 12 Phil. Columbia Enterprises Co. v. Lantin, 39 scra 376, 1971 13 Mentholatum Co., Inc v. Mangaliman, 72 Phil. 524, 1941 14 FILIPINAS COMPAIA DE SEGUROS v. CHRISTERN, HUENEFELD and CO., INC, G.R. No. L-2294, May 25, 1951 15 THE SWEDISH EAST ASIA CO., LTD. V. MANILA PORT SERVICE AND/OR MANILA RAILROAD COMPANY, G.R. No. L26332, October 26, 1968
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2) Estoppel Doctrine The general rule that in the absence of fraud of person who has contracted or otherwise dealt with an association in such a way as to recognize and in effect admit its legal existence as a corporate body is thereby estopped to deny its corporate existence in any action leading out of or involving such contract or dealing, unless its existence is attacked for causes which have arisen since making the contract or other dealing relied on as an estoppel and this applies to foreign as well as domestic corporations.16. the purpose of the license is subject the corporation to the jurisdiction of the domestic courts. 3) Protect its trade mark, corporate reputation, name, and good will. Section 160 of the intellectual property code17, Right of Foreign Corporation to Sue in Trademark or Service Mark Enforcement Action. - Any foreign national or juridical person who meets the requirements of Section 3 of this Act and does not engage in business in the Philippines may bring a civil or administrative action hereunder for opposition, cancellation, infringement, unfair competition, or false designation of origin and false description, whether or not it is licensed to do business in the Philippines under existing laws. 4) Petition filed is a defensive suit. It has been held that when a A foreign corporation may, by writ of prohibition, seek relief against the wrongful assumption of jurisdiction. And a foreign corporation seeking a writ of prohibition against further maintenance of a suit, on the ground of want of jurisdiction in which jurisdiction is not bound by the ruling of the court in which the suit was brought, on a motion to quash service of summons, that it has jurisdiction.18 5) Stipulation 6) agreements fully transacted outside the philippines19 Another which is related to allowance of suit in the Philippines is the rule on Pari Delicto. When both of the contracting parties are guilty of violation a law, the court will not grant either arelief. In the case of Top-Weld Manufacturing vs ECED, SA20 when both parties violated RA 5455, the court refuses to grant petitioner a relief. The parties are charged with knowledge of the existing law at the time they enter into the contract and at the time it is to become operative. It was incumbent upon TOP-WELD to know whether or not IRTI and ECED were properly authorized to engage in business in the Philippines when they entered into the licensing and distributorship agreements. Validity of Corporate acts and contracts Under the Philippines law, The validity of the corporate acts and contracts is governed by the law of the place of incorporation and law of the place of performance. The act or contract must be authorized by both laws.21
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Chinese Chamber of Commerce vs. Pua Te Ching, 14 Phil. 222; SBMA v. NIVERSAL INTERNATIONAL GROUP OF TAIWAN G.R. No. 131680, September 14, 2000; MERRILL LYNCH FUTURES, INC. vs.HON. COURT OF APPEALS, G.R. No. 97816, July 24, 1992 17 RA 8293 18 Time, inc. v. Reyes, G.R. No. L-28882 May 31, 1971 19 Pac. Veg. Oil Corp. v. Singzon, L-7917, April 29, 1955 20 GR no L-44944, August 9, 1985 21 Conflicts of Law, De leon

Status of the contract entered by a Foreign Corporation doing business in the Philippines without a license A contract is declared void by law, or when it is against public policy, morals, and customs22. It was held that when what is provided is for non-maintenance of suit and not a declaration to avoid a contract entered into by a foreign corporation engaged in business in the Philippines without a license, the of capacity at the time of the execution of the contracts was cured by the subsequent registration23. In such case the SC ruled that a foreign corporation doing business without a license entered into a contract may subsequently enforced such contract if at the time of the suit it obtain a license. In other words, the contract is not void, although it has a defect comparable to an unenforceable contract, but only with regards to the Foreign Corporation. Partnerships A partnership is a contract where two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing profits among themselves. Unlike in foreign corporation, foreign partnership is not rich in Philippine jurisprudence as to the applicable law for conflict of law purposes. It is submitted however that jurisprudence on foreign corporation may apply by analogy to partnership up to some extent. In one case however it was held that under the "isolated transaction rule," only foreign corporations and not just any business organization or entity can avail themselves of the privilege of suing before Philippine courts even without a license. has been simply stated that K.M.K. Gani is "a single proprietorship," while INDRAPAL is "a firm," and both are "doing business in accordance with the laws of Singapore ... ," with specified addresses in Singapore. In cases of this nature, these allegations are not sufficient to clothe a claimant of suspected smuggled goods of juridical personality and existence. The "isolated transaction rule" refers only to foreign corporations. Here the petitioners are not foreign corporations. On the contrary, K.M.K. alleges that it is a "single proprietorship" while INDRAPAL hides under the vague identification as a "firm," although both describe themselves with the phrase "doing business in accordance with the laws of Singapore."24 Existence or non-existence of firms personality, capacity to contract; liability of the firm and partners to third person This is governed by the personal law of the partnership, which refers to the place of its creation,25 subject to the same exception as a corporation which regards to constitutional prohibition and war time purposes. Creation of branches in the Philippines; validity and effect of the branches commercial transaction; the jurisdiction of the courts; and dissolution, winding up, and termination of the branches The governing law is the law of the place where it is created, which is the Philippine law.26

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Civil Code, Art. 1409 The Home Insurance Company v. Eastern shipping lines, G.R. No. L-34382 July 20, 1983 24 Commissioner of customs v. K.M.K. Gami, G.R. No. 73722, February 26, 1990 25 Code of Commerce, Article 15 26 Ibid

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