George Grotjahn vs. CA

G.R. No.
109272 August 10, 1994

GEORG GROTJAHN GMBH & CO., petitioner,
vs. HON. LUCIA VIOLAGO ISNANI, Presiding Judge, Regional Trial Court, Makati, Br. 59; ROMANA R. LANCHINEBRE; and
TEOFILO A. LANCHINEBRE, respondents.
FACTS: Petitioner is a multinational company organized and existing under the laws of the Federal Republic of Germany. On July 6,
1983, petitioner filed an application, dated July 2, 1983, 1 with the Securities and Exchange Commission (SEC) for the establishment of
a regional or area headquarters in the Philippines, pursuant to Presidential Decree No. 218. The application was approved by the
Board of Investments (BOI) on September 6, 1983. Consequently, on September 20, 1983, the SEC issued a Certificate of Registration
and License to petitioner. 2
Private respondent Romana R. Lanchinebre was a sales representative of petitioner . She secured a loan of twenty-five thousand
pesos (P25,000.00) from petitioner. On March 26 and June 10, 1992, she made additional cash advances in the sum of ten thousand
pesos (P10,000.00). Of the total amount, twelve thousand one hundred seventy pesos and thirty-seven centavos (P12,170.37)
remained unpaid. Despite demand, private respondent Romana failed to settle her obligation with petitioner.
Petitioner filed another Complaint for collection of sum of money against private respondents spouses Romana and Teofilo Lanchinebre
which was dismissed by the Regional Trial Court for lack of jurisdiction and for lack of capacity to sue and be sued.
ISSUE: WON Petitioner has no capacity to sue and be sued in the Philippines.
RULING: The trial court erred in holding that petitioner does not have capacity to sue in the Philippines. It is clear that petitioner is a
foreign corporation doing business in the Philippines. Petitioner is covered by the Omnibus Investment Code of 1987. Said law defines
"doing business," as follows: . . . shall include soliciting orders, purchases, service contracts, opening offices, whether called "liaison"
offices or branches; appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in
the Philippines for a period or periods totalling one hundred eighty (180) days or more; participating in the management, supervision or
control of any domestic business firm, entity or corporation in the Philippines, and any other act or acts that imply a continuity of
commercial dealings or arrangements and contemplate to that extent the performance of acts or works, or the exercise of some of the
functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business
organization. 5
There is no general rule or governing principle as to what constitutes "doing" or "engaging in" or "transacting" business in the
Philippines. Each case must be judged in the light of its peculiar circumstances. 6 In the case at bench, petitioner does not engage in
commercial dealings or activities in the country because it is precluded from doing so by P.D. No. 218, under which it was
established. 7 Nonetheless, it has been continuously, since 1983, acting as a supervision, communications and coordination center for
its home office's affiliates in Singapore, and in the process has named its local agent and has employed Philippine nationals like private
respondent Romana Lanchinebre. From this uninterrupted performance by petitioner of acts pursuant to its primary purposes and
functions as a regional/area headquarters for its home office, it is clear that petitioner is doing business in the country. Moreover,
private respondents are estopped from assailing the personality of petitioner. So we held in Merrill Lynch Futures, Inc. vs. Court of
Appeals, 211 SCRA 824, 837 (1992):
The rule is that a party is estopped to challenge the personality of a corporation after having acknowledged the same by entering into a
contract with it. And the "doctrine of estoppel to deny corporate existence applies to foreign as well as to domestic corporations;" "one
who has dealth with a corporation of foreign origin as a corporate entity is estopped to deny its corporate existence and capacity." The
principle "will be applied to prevent a person contracting with a foreign corporation from later taking advantage of its noncompliance
with the statutes chiefly in cases where such person has received the benefits of the contract, . . . (Citations omitted.)
IN VIEW WHEREOF, the instant Petition is GRANTED. The Orders, dated December 21, 1992 and March 8, 1993, in Civil Case No.
92-2486 are REVERSED AND SET ASIDE. The RTC of Makati, Br. 59, is hereby ordered to hear the reinstated case on its merits. No
costs.
SO ORDERED.

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G.R. No.

109272 August 10, 1994

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