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Antam Consolidated, Inc. vs. Court of Appeals

*
No. L-61523. July 31, 1986.

ANTAM CONSOLIDATED, INC., TAMBUNTING

TRADING CORPORATION and AURORA
CONSOLIDATED SECURITIES and INVESTMENT
CORPORATION, petitioners, vs. THE COURT OF
APPEALS, THE HONORABLE MAXIMIANO C.
ASUNCION (Court of First Instance of Laguna, Branch II
[Sta. Cruz]) and STOKELY VAN CAMP, INC.,
respondents.

Mercantile Law; Corporations; Doing Business; Capacity to

sue; Where the three transactions indicate no intent by foreign
corpora-

_______________

* SECOND DIVISION.

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Antam Consolidated, Inc. vs. Court of Appeals

tion to engage in a continuity of transactions, they do not

constitute doing business in the Philippines; Foreign corporation
not doing business in the Philippines, not required to obtain a
license to do business to have capacity to sue.—From these facts
alone, it can be deduced that in reality, there was only one
agreement between the petitioners and the respondent and that
was the delivery by the former of 500 long tons of crude coconut
oil to the latter, who in turn, must pay the corresponding price for
the same. The three seemingly different transactions were
entered into by the parties only in an effort to fulfill the basic

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agreement and in no way indicate an intent on the part of the

respondent to engage in a continuity of transactions with
petitioners which will categorize it as a foreign corporation doing
business in the Philippines. Thus, the trial court, and the
appellate court did not err in denying the petitioners’ motion to
dismiss not only because the ground thereof does not appear to be
indubitable but because the respondent, being a foreign
corporation not doing business in the Philippines, does not need to
obtain a license to do business in order to have the capacity to
sue.
Same; Same; Same; Same; Common ploy of defaulting local
companies sued by unlicensed foreign companies not engaged in
business in the Philippines to invoke lack of capacity to sue,
recognized; Basis of doctrine of lack of capacity to sue.—We agree
with the respondent that it is a common ploy of defaulting local
companies which are sued by unlicensed foreign companies not
engaged in business in the Philippines to invoke lack of capacity
to sue. The respondent cites decisions from 1907 to 1957
recognizing and rejecting the improper use of this procedural
tactic. (Damfschieffs Rhedered Union v. Cia Trans-atlantica, 8
Phil. 766 [1907]; Marshall-Wells Co. v. Henry W. Elser & Co., 49
Phil. 70 [1924]; Western Equipment Co. v. Reyes, 51 Phil. 115
[1927]; Central Republic Bank v. Bustamante, 71 Phil. 359 [1941];
Pacific Vegetable Oil Co. v. Singson, 96 Phil. 986 [1955];
Eastboard Navigation, Ltd. v. Juan Ysmael and Co., Inc., 102
Phil. 1 [1957]). The doctrine of lack of capacity to sue based on
failure to first acquire a local license is based on considerations of
sound public policy. It was never intended to favor domestic
corporations who enter into solitary transactions with unwary
foreign firms and then repudiate their obligations simply because
the latter are not licensed to do business in this country. The
petitioners in this case are engaged in the exportation of coconut
oil, an export item so vital in our country’s economy. They filed
this petition on the ground that Stoke-ly is an unlicensed foreign
corporation without a bare allegation or showing that their
defenses in the collection case are valid and

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Antam Consolidated, Inc. vs. Court of Appeals

meritorious. We cannot fault the two courts below for acting as

they did.

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Same; Same; Verification; Defect in verification by an attorney

of the allegations in the complaint in support of attachment, cured
by his affidavit that he had verified the allegations from the
records of the heal corporation and the SEC.—Anent the second
issue they raise, the petitioners contend that the trial court
should not have issued the order of attachment and the appellate
court should not have affirmed the same because the verification
in support of the prayer for attachment is insufficient. They state
that the person who made such verification does not personally
know the facts relied upon for the issuance of the attachment
order. Petitioners capitalize on the fact that Renato Calma, the
assistant attorney of Bito, Misa, and Lozada, counsel for
respondent, stated in his verification that “he has read the
foregoing complaint and that according to his information and
belief the allegations therein contained are true and correct.” xxx
We rule that the defect in the original verification was cured
when Renato Calma subsequently executed an affidavit to the
effect that the allegations he made in support of the prayer for
attachment were verified by him from the records of Comphil and
the Securities and Exchange Commission. Moreover, petitioner
had the opportunity to oppose the issuance of the writ.

PETITION for certiorari and prohibition to review the

order of the Regional Trial Court of Laguna.

The facts are stated in the opinion of the Court.

          Siguion Reyna, Montecillo & Ongsiako Law Offices
for petitioners.
     Bito, Misa & Lozada Law Offices for respondents.

GUTIERREZ, JR., J.:

This petition for certiorari and prohibition seeks to set

aside the order of the Regional Trial Court of Laguna
which denied the petitioners’ motion to dismiss on the
ground that the reason relied upon by them does not
appear to be indubitable. Petitioners also seek to set aside
the decision and resolution of the Intermediate Appellate
Court which respectively upheld the order of the trial court
and denied the petitioners’ motion for reconsideration of
the same.

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On April 9, 1981, respondent Stokely Van Camp. Inc.

(Stokely) filed a complaint against Banahaw Milling
Corporation (Banahaw), Antam Consolidated, Inc.,
Tambunting Trading Corporation (Tambunting), Aurora
Consolidated Securities and Investment Corporation, and
United Coconut Oil Mills, Inc. (Unicom) for collection of
sum of money.
In its complaint, Stokely alleged: (1) that it is a
corporation organized and existing under the laws of the
state of Indiana, U.S.A. and has its principal office at 941
North Meridian Street, Indianapolis, Indiana, U.S.A., and
one of its subdivisions “Capital City Product Company”
(Capital City) has its office in Columbus, Ohio, U.S.A.; (2)
that Stokely and Capital City were not engaged in business
in the Philippines prior to the commencement of the suit so
that Stokely is not licensed to do business in this country
and is not required to secure such license; (3) that on
August 21, 1978. Capital City and Coconut Oil
Manufacturing (Phil.) Inc. (Comphil) with the latter acting
through its broker Rothschild Brokerage Company, entered
inco a contract (No. RBS 3655) wherein Comphil undertook
to sell and deliver and Capital City agreed to buy 500 long
tons of crude coconut oil to be delivered in
October/November 1978 at the c.i.f. price of US$0.30/lb. but
Comphil failed to deliver the coconut oil so that Capital
City covered its coconut oil needs in the open market at a
price substantially in excess of the contract and sustained a
loss of US$103,600; that to settle Capital City’s loss under
the contract, the parties entered into a second contract (No.
RBS 3738) on November 3, 1978 wherein Comphil
undertook to buy and Capital City agreed to sell 500 long
tons of coconut crude oil under the same terms and
conditions but at an increased c.i.f. price of US$0.3925/lb.;
(4) that the second contract states that “it is a wash out
against RBS 3655” so that Comphil was supposed to
repurchase the undelivered coconut oil at US$0.3925 from
Capital City by paying the latter the sum of US$103,600.00
which is the same amount of loss that Capital City
sustained under the first contract; that Comphil again
failed to pay said amount, so to settle Capital City’s loss it
entered into a third contract with Comphil on January 24,
1979 wherein the latter undertook to sell and deliver and
Capital City agreed to buy the same quantity of crude
coconut oil to be delivered in April/May 1979 at the c.i.f.
price of

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US$0.3425/lb.; (5) that the latter price was 9.25 cents/lb. or

US$103,600 for 500 long tons below the then current
market price of 43.2 cents/lb. and by delivering said
quantity of coconut oil to Capital City at the discounted
price, Comphil was to have settled its US$103,600 liability
to Capital City; (6) that Comphil failed to deliver the
coconut oil so Capital City notified the former that it was in
default; (7) that Capital City sustained damages in the
amount of US$175,000; and (8) that after repeated
demands from Comphil to pay the said amount, the latter
still refuses to pay the same.
Respondent Stokely further prayed that a writ of
attachment be issued against any and all the properties of
the petitioners in an amount sufficient to satisfy any lien of
judgment that the respondent may obtain in its action. In
support of this provisional remedy and of its cause of action
against the rest of the petitioners other than Comphil,, the
respondent alleged the following: 1) After demands were
made by respondent on Comphil, the Tambuntings ceased
to be directors and officers of Comphil and were replaced by
their five employees, who were managers of Tambunting’s
pawnshops and said employees caused the name of
Comphil to be changed to “Banahaw Milling Corporation”
and authorized one of the Tambuntings, Antonio P.
Tambunting, Jr. who was at that time neither a director
nor officer of Banahaw to sell its oil mill; 2) Unicom has
taken over the entire operations and assets of Banahaw
because the entire and outstanding capital stock of the
latter was sold to the former; 3) All of the issued and
outstanding capital stock of Comphil are owned by the
Tambuntings who were the directors and officers of
Comphil and who were the ones who benefited from the
sale of Banahaw’s assets or shares to Unicom; 4) All of the
petitioners evaded their obligation to respondent by the
devious scheme of using Tambunting employees to replace
the Tambuntings in the management of Banahaw and
disposing of the oil mill of Banahaw or their entire
interests to Unicom; and 5) Respondent has reasonable
cause to believe and does believe that the coconut oil mill,
which is the only substantial asset of Banahaw is about to
be sold or removed so that unless prevented by the Court
there will probably be no assets of Banahaw to satisfy its
claim.
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On April 10, 1981, the trial court ordered the issuance of a

writ of attachment in favor of the respondent upon the
latter’s deposit of a bond in the amount of P1,285,000.00.
On June 3, 1981, the respondent filed a motion for
reconsideration to reduce the attachment bond. Attached to
this motion is an affidavit by the assistant attorney of the
respondent’s counsel stating that he has verified with the
records of Comphil and the Securities and Exchange
Commission (SEC) the facts he alleged in the prayer for the
attachment order.
On June 11, 1981, the petitioners filed a motion to
dismiss the complaint on the ground that the respondent,
being a foreign corporation not licensed to do business in
the Philippines, has no personality to maintain the instant
suit.
After the respondent had filed an opposition to the
motion to dismiss and petitioner has opposed the
attachment and the motion to reduce the attachment bond,
the trial court issued an order, dated August 10, 1981,
reducing the attachment bond to P500,000.00 and denying
the motion to dismiss by petitioners on the ground that the
reason cited therein does not appear to be indubitable.
Petitioners filed a petition for certiorari before the
Intermediate Appellate Court.
On June 14, 1982, the appellate court dismissed the
petition stating that the respondent judge did not commit
any grave abuse of discretion in deferring the petitioners’
motion to dismiss because the said judge is not yet satisfied
that he has the necessary facts which would permit him to
make a judicious resolution. The appellate court further
ruled that in another case entitled United Coconut Oil
Mills, Inc. and Banahaw Milling Corporation v. Hon.
Maximiano C. Asuncion and Stokely Van Camp, Inc. where
the facts and issues raised therein are intrinsically the
same as in the case at bar, it has already denied the
petition for certiorari filed by Unicom and Banahaw for
lack of merit and the same was upheld by the Supreme
Court.
Petitioners filed a motion for reconsideration but the
same was denied. Hence, they filed this instant petition for
certiorari and prohibition with prayer for temporary
restraining order,
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questioning the propriety of the appellate court’s decision

in: a) affirming the deferment of the resolution on
petitioner’ motion to dismiss; and b) denying the motion to
set aside the order of attachment.
With regards to the first question, petitioners maintain
that the appellate court erred in denying their motion to
dismiss since the ground relied upon by them is clear and
indubitable, that is, that the respondent has no personality
to sue Petitioners argue that to maintain the suit filed with
the trial court, the respondent should have secured the
requisite license to do business in the Philippines because,
in fact, it is doing business here. Petitioners anchor their
argument that the respondent is a foreign corporation
doing business in the Philippines on the fact that by the
respondent’s own allegations. It has participated in three
transactions, either as a seller or buyer, which are by their
nature, in the pursuit of the purpose and object for which it
was organized. Petitioners further argue that the test of
whether one is doing business or not is “whether there is
continuity of transactions which are in the pursuance of the
normal business of the corporation” and that the
transactions entered into by respondent undoubtedly fall
within this category.
We reject the petitioners’ arguments.
In the case of Top-Weld Manufacturing, Inc. v. ECED,
S.A. (138 SCRA 118,127-128), we stated:

“There is no general rule or governing principle kid down 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. (Mentholatum Co. v. Mangaliman, 72
Phil. 524). Thus, a foreign corporation with a settling agent in the
Philippines which issues twelve marine policies covering different
shipments to the Philippines (General Corporation of the
Philippines v. Union Insurance Society of Canton, Ltd., 87 Phil.
313) and a foreign corporation which had been collecting
premiums on outstanding policies (Manufacturing Life Insurance
Co., v. Meer, 89 Phil. 351) were regarded as doing business here.
The acts of these corporations should be distinguished from a
single or isolated business transaction or occasional, incidental
and casual transactions which do not come within the meaning of
the law. Where a single act or transac-

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tion, however, is not merely incidental or casual but indicates the

foreign corporation’s intention to do other business in the
Philippines, said single act or transaction constitutes ‘doing’ or
‘engaging in’ or ‘transacting’ business in the Philippines. (Far
East International Import and Export Corporation v. Nankai
Kogyo, Co., 6 SCRA 725).
“In the Mentholatum Co. v. Mangaliman case earlier cited, this
Court held:
x x x      x x x      x x x
“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 workers 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. 111;
Automotive Material Co. v. American Standard Metal Products
Corp., 158 N.E. 698, 703, 327 III. 367.)’”

In the case at bar, the transactions entered into by the

respondent with the petitioners are not a series of
commercial dealings which signify an intent on the part of
the respondent to do business in the Philippines but
constitute an isolated one which does not fall under the
category of “doing business.” The records show that the
only reason why the respondent entered into the second
and third transactions with the petitioners was because it
wanted to recover the loss it sustained from the failure of
the petitioners to deliver the crude coconut oil under the
first transaction and in order to give the latter a chance to
make good on their obligation. Instead of making an
outright demand on the petitioners, the respondent opted
to try to push through with the transaction to recover the
amount of US$103,600.00 it lost. This explains why in the
second transaction, the petitioners were supposed to buy
back the crude coconut oil they should have delivered to the
respondent in an amount which will earn the latter a profit
of US$103,600.00. When this failed the third transaction
was
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entered into by the parties whereby the petitioners were

supposed to sell crude coconut oil to the respondent at a
discounted rate, the total amount of such discount being
US$103,600.00. Unfortunately, the petitioners failed to
deliver again, prompting the respondent to file the suit
below.
From these facts alone, it can be deduced that in reality,
there was only one agreement between the petitioners and
the respondent and that was the delivery by the former of
500 long tons of crude coconut oil to the latter, who in turn,
must pay the corresponding price for the same. The three
seemingly different transactions were entered into by the
parties only in an effort to fulfill the basic agreement and
in no way indicate an intent on the part of the respondent
to engage in a continuity of transactions with, petitioners
which will categorize it as a foreign corporation doing
business in the Philippines. Thus, the trial court, and the
appellate court did not err in denying the petitioners’
motion to dismiss not only because the ground thereof does
not appear to be indubitable but because the respondent,
being a foreign corporation not doing business in the
Philippines, does not need to obtain a license to do business
in order to have the capacity to sue. As we have held in
Eastboard Navigation, Ltd v. Juan Ysmael and Co., Inc.
(102 Phil. 1, 18):

x x x      x x x      x x x
“(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-Wells Co. v. Henry
W. Elser & Co. 49 Phil. 70; Pacific Vegetable Oil Corporation v.
Angel O. Singson, G.R. No. L-7917, April 29, 1955; also cited in
Facilities Management Corporation v. De la Osa, 89 SCRA 131,
138).”

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We agree with the respondent that it is a common ploy of

defaulting local companies which are sued by unlicensed
foreign companies not engaged in business in the
Philippines to invoke lack of capacity to sue. The
respondent cites decisions from 1907 to 1957 recognizing
and rejecting the improper use of this procedural tactic.
(Damfschieffs Rhedered Union v. Cia Trans-atlantica, 8
Phil. 766 [1907]; Marshall-Wells Co. v. Henry W. Elser &
Co., 49 Phil. 70 [1924]; Western Equipment Co. v. Reyes, 51
Phil. 115 [1927]; Central Republic Bank v. Bustamante, 71
Phil. 359 [1941]; Pacific Vegetable Oil Co. v. Singson, 96
Phil. 986 [1955]; Eastboard Navigation, Ltd. v. Juan
Ysmael and Co., Inc., 102 Phil. 1 [1957]). The doctrine of
lack of capacity to sue based on failure to first acquire a
local license is based on considerations of sound public
policy. It was never intended to favor domestic corporations
who enter into solitary transactions with unwary foreign
firms and then repudiate their obligations simply because
the latter are not licensed to do business in this country.
The petitioners in this case are engaged in the exportation
of coconut oil, an export item so vital in our country’s
economy. They filed this petition on the ground that
Stokely is an unlicensed foreign corporation without a bare
allegation or showing that their defenses in the collection
case are valid and meritorious. We cannot fault the two
courts below for acting as they did.
Anent the second issue they raise, the petitioners
contend that the trial court should not have issued the
order of attachment and the appellate court should not
have affirmed the same because the verification in support
of the prayer for attachment is insufficient. They state that
the person who made such verification does not personally
know the facts relied upon for the issuance of the
attachment order. Petitioners capitalize on the fact that
Renato Calma, the assistant attorney of Bito, Misa, and
Lozada, counsel for respondent, stated in his verification
that “he has read the foregoing complaint and that
according to his information and belief the allegations
therein contained are true and correct.”
The above contention deserves scant consideration.
We rule that the defect in the original verification was
cured when Renato Calma subsequently executed an
affidavit to the

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effect that the allegations he made in support of the prayer

for attachment were verified by him from the records of
Comphil and the Securities and Exchange Commission.
Moreover, petitioner had the opportunity to oppose the
issuance of the writ.
As to the merit of the attachment order itself, we find
that the allegations in the respondent’s complaint
satisfactorily justify the issuance of said order.
WHEREFORE, IN VIEW OF THE FOREGOING, the
petition is DISMISSED for lack of merit. The Temporary
Restraining Order dated February 2, 1983 is hereby
DISSOLVED. Costs against the petitioners,
SO ORDERED.

          Feria (Chairman), Fernan, Cruz and Paras, JJ.,

concur. **
     Alampay, J., no part.

Petition dismissed. Temporary restraining order

dissolved.

Note.—There is no general rule or governing principle

laid down 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.
(Mentholatum Co. vs. Mangaliman, 72 Phil. 524). Thus, a
foreign corporation with a setting agent in the Philippines
which issued twelve marine policies covering different
shipments to the Philippines (General Corporation of the
Philippines vs. Union Insurance Society of Canton, Ltd., 87
Phil. 313) and a foreign corporation which had been
collecting premiums on outstanding policies
(Manufacturing Life Insurance Co. vs. Meer, 89 Phil. 351)
were regarded as doing business here. The acts of these
corporations should be distinguished from a single or
isolated business transaction or occasional, incidental and
casual transactions which do not come within the meaning
of the law. Where a single transaction, however, is not
merely incidental or casual but indicates the foreign
corporation’s intention to do other business in the
Philippines, said single act

______________

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** Justice Alampay took no part. Justice Cruz was designated to sit in

the Second Division.

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Philippine National Bank vs. Intermediate Appellate Court

or transaction constitutes “doing” or “engaging in” or

“transacting” business in the Philippines. (Far East
International Import and Export Corporation vs. Nankai
Kogyo, 6 SCRA 725.)

——o0o——

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