Вы находитесь на странице: 1из 4

Alfred Hahn v CA & Bayerishe Werke Aktiengesellschaft

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

organized and existing under the laws of the Republic of


Singapore. It is not licensed to do business in the Philippines
and is not so engaged, and is suing on an alleged isolated
transaction for which it has capacity to sue (what is prohibited
by the Corporation code is foreign corporations which conduct
regular business in the Philippines, access to courts without
the fulfilment by such corporations of the necessary requisites
to be subjected to our government regulation and authority)
On various dates, Delfin Enriquez Jr doing business under the
name Delrene EB Controls Centre ordered and received from
Eriks various elemnts used in sealing pumps, valves, pipes
and control equipment which were delivered via airfreight. The
transfers of goods were perfected in Singapore with a 90-day
credit term.
Later on, Eriks demanded from Enriquez Jr the satisfaction if
its obligation with respect to the goods. However, Enriquez Jr
failed to satisfy said obligation.
This prompted Eriks to file a civil case for collection against
Enriquez Jr for $ 41,939.63 or its equivalent in Philippine
currency, plus interest. Enriquez Jr responded with a motion to
dismiss the case on the ground that the corporation (Eriks) had
no capacity to sue. The trial court dismissed the complaint. On
appeal, the CA affirmed the decision of the trial court. HTP.
ISSUE: WON THE TRANSACTIONS INVOLVED ARE
ISOLATED TRANSACTIONS AND THUS DOES NOT FALL
UNDER THE PROHIBITION FOR FOREIGN
CORPORATIONS TO ACCESS PHILIPPINE COURTS EVEN
WITHOUT THE APPROPRIATE LICENSE.
HELD: NO. SAID TRANSACTIONS ARE CONTINUING AND
HENCE ERIKS AS A NON-RESIDENT CORPORATION
WITHOUT A LICENSE IS PROHIBITED FROM ACCESSING
PHILIPPINE COURTS AND SUE ENRIQUEZ JR.
The Corporation Code provides:
Sec. 133. Doing business without a license. - No foreign
corporation transacting business in the Philippines without
a license, or its successors or assigns, shall be permitted to
maintain or intervene in any action, suit or proceeding in any
court or administrative agency of the Philippines; but such
corporation may be sued or proceeded against before
Philippine courts or administrative tribunals on any valid cause
of action recognized under Philippine laws. (69a)
However, the Corporation code does not provide for the
definition of transacting business with respect to foreign
corporation. Such definition however may be found and applied
in FIA 1991 or RA 7042 which provides:
Sec. 3(d) and any other act or acts that imply a continuity of
commercial dealings or arrangements, and contemplate to that
extent the performance of acts or works, or the exercise of
some of the functions normally incident to, and in progressive
prosecution of, commercial gain or of the purpose and object of
the business organization.
In this case, it can be gleaned that from the four-month period
of transactions between Eriks and Enriquez Jr, that it was a
continuing business relationship which constitutes doing
business without a license. The sheer number of transactions
(18 times) is a clear and unmistakable intention on the part of
Eriks to continue the body of its business in the Philippines.
Furthermore, the sale by Eriks of the items covered by the
receipts is part and parcel of its main product line which was
actually carried out in progressive prosecution of commercial
gain and the pursuit of the purpose and object of its business.
Finally, its grant and extension of 90 day credit terms to
Enriquez Jr for every purchased made shows an intention to
continue transacting with Enriquez Jr, since in the usual course
of commercial transactions, credit is extended only to
customers in good standing or those on whom there is an
intention to maintain long-term relationship. Thus, it cannot be
allowed to sue in Philippine Courts on the ground that it lacks
the appropriate license to conduct regular business here in the

Philippines. By securing a license, the foreign entity would be


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

cause of action entirely independent of any business


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

expressly states that the phrase doing business excludes the


appointment by a foreign corporation of a local distributor
domiciled in the Philippines which transacts business in its own
name and for its own account.
The phrase doing business is clearly defined in Section 3(d) of
R.A. No. 7042 (Foreign Investments Act of 1991), to wit:
That the phrase doing business shall not be deemed to include
X X X nor appointing a representative or distributor domiciled
in the Philippines which transacts business in its own name
and for its own account
This definition is supplemented by its Implementing Rules and
Regulations, Rule I, Section 1(f) which elaborates on the
meaning of the same phrase:
The following acts shall not be deemed doing business in the
Philippines:
3. Appointing a representative or distributor domiciled in the
Philippines which transacts business in the representative's or
distributor's own name and account;
If the distributor is an independent entity which buys and
distributes products, other than those of the foreign
corporation, for its own name and its own account, the latter
cannot be considered to be doing business in the Philippines.
In the case at bench, it is undisputed that DISI was founded in
1979 and is independently owned and managed by the
spouses Leandro and Josephine Bantug. In addition to
Steelcase products, DISI also distributed products of other
companies including carpet tiles, relocatable walls and theater
settings.
The dealership agreement between Steelcase and DISI had
been described by the owner himself as:
xxx basically a buy and sell arrangement whereby we would
inform Steelcase of the volume of the products needed for a
particular project and Steelcase would, in turn, give special
quotations or discounts after considering the value of the entire
package. In making the bid of the project, we would then add
out profit margin over Steelcases prices. After the approval of
the bid by the client, we would thereafter place the orders to
Steelcase. The latter, upon our payment, would then ship the
goods to the Philippines, with us shouldering the freight
charges and taxes. [Emphasis supplied]
From the preceding facts, the only reasonable conclusion that
can be reached is that DISI was an independent contractor,
distributing various products of Steelcase and of other
companies, acting in its own name and for its own account.
All things considered, it has been sufficiently demonstrated that
DISI was an independent contractor which sold Steelcase
products in its own name and for its own account. As a result,
Steelcase cannot be considered to be doing business in the
Philippines by its act of appointing a distributor as it falls under
one of the exceptions under R.A. No. 7042.
SECOND ISSUE
If indeed Steelcase had been doing business in the Philippines
without a license, DISI would nonetheless be estopped from
challenging the formers legal capacity to sue.
Unquestionably, entering into a dealership agreement with
Steelcase charged DISI with the knowledge that Steelcase was
not licensed to engage in business activities in the Philippines.
This Court has carefully combed the records and found no
proof that, from the inception of the dealership agreement in
1986 until September 1998, DISI even brought to Steelcases
attention that it was improperly doing business in the
Philippines without a license. It was only towards the latter part
of 1998 that DISI deemed it necessary to inform Steelcase of
the impropriety of the conduct of its business without the
requisite Philippine license. It should, however, be noted that
DISI only raised the issue of the absence of a license with
Steelcase after it was informed that it owed the latter

US$600,000.00 for the sale and delivery of its products under


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

majority owner of PTIC shares, of the bidding results and gave


First Pacific until 1 February 2007 to exercise its right of first
refusal in accordance with PTICs Articles of Incorporation. First
Pacific announced its intention to match Parallaxs bid.
On 31 January 2007, the House of Representatives (HR)
Committee on Good Government conducted a public hearing
on the particulars of the then impending sale of the 111,415
PTIC shares. First Pacifics intended acquisition of the
governments 111,415 PTIC shares resulting in First Pacifics
100% ownership of PTIC will not violate the 40 percent
constitutional limit on foreign ownership of a public utility since
PTIC holds only 13.847 percent of the total outstanding
common shares of PLDT.
On 28 February 2007, petitioner filed the instant petition for
prohibition, injunction, declaratory relief, and declaration of
nullity of sale of the 111,415 PTIC shares. Petitioner claims,
among others, that the sale of the 111,415 PTIC shares would
result in an increase in First Pacifics common shareholdings in
PLDT from 30.7 percent to 37 percent, and this, combined with
Japanese NTT DoCoMos common shareholdings in PLDT,
would result to a total foreign common shareholdings in PLDT
of 51.56 percent which is over the 40 percent constitutional
limit.
ISSUE: The Court shall confine the resolution of the
instant controversy solely on the threshold and purely
legal issue of whether the term capital in Section 11,
Article XII of the Constitution refers to the total common
shares only or to the total outstanding capital stock
(combined total of common and non-voting preferred
shares) of PLDT, a public utility.
HELD: Common shares only
Section 11, Article XII (National Economy and Patrimony) of
the 1987 Constitution mandates the Filipinization of public
utilities, to wit:
Section 11. No franchise, certificate, or any other form of
authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to corporations
or associations organized under the laws of the Philippines, at
least sixty per centum of whose capital is owned by such
citizens
The provision is [an express] recognition of the sensitive and
vital position of public utilities both in the national economy and
for national security.

Any citizen or juridical entity desiring to operate a public utility


must therefore meet the minimum nationality requirement
prescribed in Section 11, Article XII of the Constitution. Hence,
for a corporation to be granted authority to operate a public
utility, at least 60 percent of its capital must be owned by
Filipino citizens.
The crux of the controversy is the definition of the term capital.
Does the term capital in Section 11, Article XII of the
Constitution refer to common shares or to the total outstanding
capital stock (combined total of common and non-voting
preferred shares)?
Considering that common shares have voting rights which
translate to control, as opposed to preferred shares which
usually have no voting rights, the term capital in Section 11,
Article XII of the Constitution refers only to common shares.
However, if the preferred shares also have the right to vote in
the election of directors, then the term capital shall include
such preferred shares because the right to participate in the
control or management of the corporation is exercised through
the right to vote in the election of directors. In short, the term
capital in Section 11, Article XII of the Constitution refers only
to shares of stock that can vote in the election of directors.
This interpretation is consistent with the intent of the framers of
the Constitution to place in the hands of Filipino citizens the
control and management of public utilities. As revealed in the
deliberations of the Constitutional Commission, capital refers to
the voting stock or controlling interest of a corporation.
WHEREFORE, we PARTLY GRANT the petition and rule that
the term capital in Section 11, Article XII of the 1987
Constitution refers only to shares of stock entitled to vote in the
election of directors, and thus in the present case only to
common shares, and not to the total outstanding capital stock
(common and non-voting preferred shares). Respondent
Chairperson of the Securities and Exchange Commission is
DIRECTED to apply this definition of the term capital in
determining the extent of allowable foreign ownership in
respondent Philippine Long Distance Telephone Company, and
if there is a violation of Section 11, Article XII of the
Constitution, to impose the appropriate sanctions under the
law.