State Investment House Inc. vs.

CA
GR No. 101163 January 11, 1993

Bellosillo, J.:

Facts:
Nora Moulic issued to Corazon Victoriano, as security for pieces of jewellery to
be sold on commission, two postdated checks in the amount of fifty thousand each.
Thereafter, Victoriano negotiated the checks to State Investment House, Inc. When
Moulic failed to sell the jewellry, she returned it to Victoriano before the maturity of the
checks. However, the checks cannot be retrieved as they have been negotiated. Before
the maturity date Moulic withdrew her funds from the bank contesting that she incurred
no obligation on the checks because the jewellery was never sold and the checks are
negotiated without her knowledge and consent. Upon presentment of for payment, the
checks were dishonoured for insufficiency of funds.

Issues:
1. Whether or not State Investment House inc. was a holder of the check in due course
2. Whether or not Moulic can set up against the petitioner the defense that there was
failure or absence of consideration

Held:

Yes, Section 52 of the NIL provides what constitutes a holder in due course. The
evidence shows that: on the faces of the post dated checks were complete and regular;
that State Investment House Inc. bought the checks from Victoriano before the due
dates; that it was taken in good faith and for value; and there was no knowledge with
regard that the checks were issued as security and not for value. A prima facie
presumption exists that a holder of a negotiable instrument is a holder in due course.
Moulic failed to prove the contrary.
No, Moulic can only invoke this defense against the petitioner if it was a privy to the
purpose for which they were issued and therefore is not a holder in due course.

No, Section 119 of NIL provides how an instruments be discharged. Moulic can only
invoke paragraphs c and d as possible grounds for the discharge of the instruments.
Since Moulic failed to get back the possession of the checks as provided by paragraph
c, intentional cancellation of instrument is impossible. As provided by paragraph d, the
acts which will discharge a simple contract of payment of money will discharge the
instrument. Correlating Article 1231 of the Civil Code which enumerates the modes of
extinguishing obligation, none of those modes outlined therein is applicable in the
instant case. Thus, Moulic may not unilaterally discharge herself from her liability by
mere expediency of withdrawing her funds from the drawee bank. She is thus liable as
she has no legal basis to excuse herself from liability on her check to a holder in due
course. Moreover, the fact that the petitioner failed to give notice of dishonor is of no
moment. The need for such notice is not absolute; there are exceptions provided by Sec
114 of NIL.
CARGILL, INC. vs. INTRASTRATA ASSURANCE CORPORATION
G.R. No. 168266
Ponente: CARPIO, J.
Facts: Cargill, Inc. is a corporation organized and existing under the laws of the State of
Delaware, United States of America. Cargill and Northern Mindanao Corporation
executed a contract dated 16 August1989 whereby NMC agreed to sell to Cargill 20,000
to 24,000 metric tons of molasses, to be delivered from 1 January to 30 June 1990 at
the price of $44 per metric ton. The contract provides that Cargill would open a Letter of
Credit with the Bank of Philippine Islands. Under the red clause of the Letter of Credit,
NMC was permitted to draw up to$500,000 representing the minimum price of the
contract upon presentation of some documents. The contract was amended three times.
The performance bond was intended to guarantee NMCs performance to deliver the
molasses during the prescribed shipment periods according to the terms of the
amended contract. In compliance with the terms of the third amendment of the contract,
Intra Strata Assurance Corporation issued on 10 October 1990 a performance bond in
the sum of P11,287,500 to guarantee NMCs delivery of the 10,500 tons of molasses,
and a surety bond in the sum of P9,978,125 to guarantee the repayment of the down
payment, as provided in the contract. NMC was only able to deliver 219.551 metric tons
of molasses out of the agreed 10,500metric tons. Thus, Cargill sent demand letters to
respondent claiming payment under the performance and surety bonds. However, ISAC
refused to pay. On appeal, the Court of Appeals reversed the trial courts decision and
dismissed the complaint on the ground that Cargill does not have the capacity to file the
suit since it isa foreign corporation doing business in the Philippines without the
requisite license. The Court of Appeals held that Cargill’s purchases of molasses were
in pursuance of its basic business and not just mere isolated and incidental
transactions.
Issue: Whether or not Cargill has legal capacity to sue in the Philippines.
Ruling: No, Cargill has no legal capacity to sue before Philippine courts.
Under Article 123 of the Corporation Code, a foreign corporation must first obtain a
license and a certificate from the appropriate government agency before it can transact
business in the Philippines. Where a foreign corporation does business in the
Philippines without the proper license, it cannot maintain any action or proceeding
before Philippine courts as provided under Section 133 of the Corporation Code: Sec.
133. Doing business without a license that 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, suitor 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.
Avon Insurance PLC., et al. v. CA (G.R. No. 97642)
Facts:

Respondent Yupangco Cotton Mills engaged to secure with Worldwide Security and
Insurance Co. several of its properties which were then covered by reinsurance treaties
between Worldwide Security and several foreign reinsurance companies, including
herein petitioners. These reinsurance agreements had been made through an
international broker acting for Worldwide Security. While the policies are in effect,
Yupangco’s properties were razed in fire giving rise to their indemnification. Worldwide
acknowledged a remaining balance and assigned to Yupangco all reinsurance proceeds
still collectible from all the reinsurance companies. Thus, as assignee and original
insured, Yupangco instituted a collection suit against petitioners. Petitioners averred
that they are foreign corporations not doing business in the Philippines therefore cannot
be subject to the jurisdiction of its courts. CA found for Yupangco.

Issue:

Whether or not petitioners are foreign corporations doing business in the Philippines?

Ruling: NO. To qualify the petitioners’ business of reinsurance within the Philippine

forum, resort must be made to the established principles in determining what is meant
by “doing business in the Philippines.” The term ordinarily implies a continuity of
commercial dealings and arrangements, and contemplates, to that extent, the
performance of acts or works or the exercise of the functions normally incident to and in
progressive prosecution of the purpose and object of its organization. As it is, private
respondent has made no allegation or demonstration of the existence of petitioners’
domestic agent, but avers simply that they are doing business not only abroad but in the
Philippines as well. It does not appear at all that the petitioners had performed any act
which would give the general public the impression that it had been engaging, or
intends to engage in its ordinary and usual business undertakings in the country.

The reinsurance treaties between the petitioners and Worldwide Surety and Insurance
were made through an international insurance broker, and not through any entity or
means remotely connected with the Philippines. Moreover, there is authority to the
effect that a reinsurance company is not doing business in a certain state merely
because the property or lives which are insured by the original insurer company are
located in that state. The reason for this is that a contract of reinsurance is generally a
separate and distinct arrangement from the original contract of insurance, whose
contracted risk is insured in the reinsurance agreement. Hence, the original insured has
generally no interest in the contract of reinsurance. Indeed, if a foreign corporation does
not do business here, there would be no reason for it to be subject to the State’s
regulation. As we observed, in so far as the State is concerned, such foreign
corporation has no legal existence. Therefore, to subject such corporation to the courts’
jurisdiction would violate the essence of sovereignty.

Steelcase, Inc. v. Design International Selections, Inc.

Facts: Steelcase is a foreign corporation existing under the laws of Michigan, USA, and
engaged in the manufacture of office furniture with dealers worldwide. Respondent is a
corporation existing under Philippine Laws and engaged in the furniture business,
including the distribution of furniture. Sometime in 1986 or 1987, 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 against DISI. Despite a showing that DISI transacted with
the local customers in its own name and for its own account, it was of the opinion that
any doubt in the factual environment should be resolved in favor of a pronouncement
that a foreign corporation was doing business in the Philippines, considering the twelve-
year period that DISI had been distributing Steelcase products in the Philippines. 
Steelcase moved for reconsideration but it was denied by the RTC. Steelcase elevated
the case to the CA which affirmed the Decision of the RTC. 

Issue: Whether or not Steelcase is doing business in the Philippines without a license ?

Ruling: The rule that an unlicensed foreign corporations doing business in the

Philippine do not have the capacity to sue before the local courts is well-established. the
appointment of a distributor in the Philippines is not sufficient to constitute “doing
business” unless it is under the full control of the foreign corporation. On the other hand,
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. It should be kept in mind that the
determination of whether a foreign corporation is doing business in the Philippines must
be judged in light of the attendant circumstances. 

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. While it is essential to uphold the
sound public policy behind the rule that denies unlicensed foreign corporations doing
business in the Philippines access to our courts, it must never be used to frustrate the
ends of justice by becoming an all-encompassing shield to protect unscrupulous
domestic enterprises from foreign entities seeking redress in our country.
TUNA PROCESSING, INC vs. PHILIPPINE KINGFORD, INC., Respondent.

Ponente: Peres, J.

FACTS:
Philippine Kingford, Inc. is a corporation duly organized and existing under the laws of
the Philippines while Tuna Processing, Inc. (TPI) is a foreign corporation not licensed to
do business in the Philippines. Due to circumstances not mentioned in the case,
Kingford withdrew from petitioner TPI and correspondingly, reneged on their obligations.
Petitioner submitted the dispute for arbitration before the International Centre for
Dispute Resolution in the State of California, United States and won the case against
respondent. To enforce the award, petitioner TPI filed a Petition for Confirmation,
Recognition, and Enforcement of Foreign Arbitral Award before the RTC of Makati City.
The RTC dismissed the petition on the ground that the petitioner lacked legal capacity
to sue in the Philippines.

Issue: Whether or not a foreign corporation not licensed to do business in the

Philippines, but which collects royalties from entities in the Philippines, sue here to
enforce a foreign arbitral award?

Ruling: Yes
The Alternative Dispute Resolution Act of 2004 shall apply in this case as the Act, as its
title - An Act to Institutionalize the Use of an Alternative Dispute Resolution System in
the Philippines and to Establish the Office for Alternative Dispute Resolution, and for
Other Purposes would suggest, is a law especially enacted to actively promote party
autonomy in the resolution of disputes or the freedom of the party to make their own
arrangements to resolve their disputes. It specifically provides exclusive grounds
available to the party opposing an application for recognition and enforcement of the
arbitral award. The Corporation Code is the general law providing for the formation,
organization and regulation of private corporations. As between a general and special
law, the latter shall prevail generalia specialibus non derogant.
Global Business Holdings vs. Surecomp Software
Gr. No. 173463
Facts:
Respondent Surecomp Software, a foreign corporation entered into a software license
agreement with Asian Bank Corporation , a domestic corporation for the use of its IMEX
Software System (System) in the bank's computer system for a period of twenty years.
ABC merged with petitioner Global Business Holdings, Inc. with Global as the surviving
corporation. When Global took over it found the System unworkable for its operations,
and informed Surecomp of its decision to discontinue with the agreement and to stop
further payments thereon. Consequently, for failure of Global to pay its obligations
under the agreement despite demands, Surecomp filed a complaint for breach of
contract with damages before the Regional Trial Court. Surecomp alleged that it is a
foreign corporation not doing business in the Philippines and is suing on an isolated
transaction. Notwithstanding the delivery of the product and the services provided,
Global failed to pay and comply with its obligations under the agreement.
Global filed a motion to dismiss based on two grounds:
(1) that Surecomp had no capacity to sue because it was doing business in the
Philippines without a license; and
(2) that the claim on which the action was founded was unenforceable under the
Intellectual Property Code of the Philippines.
On the first ground, Global argued that the contract entered into was not an isolated
transaction since the contract was for a period of 20 years. Furthermore, Global
stressed that it could not be held accountable for any breach as the agreement was
entered into between Surecomp and ABC. It had not, in any manner, taken part in the
negotiation and execution of the agreement but merely took over the operations of ABC
as a result of the merger. On the second ground, Global averred that the agreement,
being a technology transfer arrangement, failed to comply with Sections 87 and 88 of
the Intellectual Property Code of the Philippines.
Issues:
(1) Whether or not a special civil action for certiorari is the proper remedy for a denial of
a motion to dismiss; and
(2) Whether or not Global is estopped from questioning Surecomp's capacity to sue?
Ruling:
Yes, As a rule, unlicensed foreign non-resident corporations doing business in the
Philippines cannot file suits in the Philippines. Section 133 of the Corporation Code. In
order to subject a foreign corporation doing business in the country to the jurisdiction of
our courts, it must acquire a license from the Securities and Exchange Commission and
appoint an agent for service of process. Without such license, it cannot institute a suit in
the Philippines.
Global is estopped from challenging Surecomp's capacity to sue. A foreign corporation
doing business in the Philippines without license may sue in Philippine courts a Filipino
citizen or a Philippine entity that had contracted with and benefited from it. A party is
estopped from challenging the personality of a corporation after having acknowledged
the same by entering into a contract with it. The principle is 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.
Due to Global's merger with ABC and because it is the surviving corporation, it is as if it
was the one which entered into contract with Surecomp. In the merger of two existing
corporations, one of the corporations survives and continues the business, while the
other is dissolved, and all its rights, properties, and liabilities are acquired by the
surviving corporation under the terms of the merger or consolidation, Global assumed
all the liabilities and obligations of ABC as if it had incurred such liabilities or obligations
itself.
Agilent Technologies Singrapore LTD. Vs. Integrated Silicon Technology
Philippines Corporation et. Al.

Gr. No. 154618

FACTS:
Petitioner Agilent is a foreign corporation, which, by its own admission, is not licensed
to do business in the Philippines. Respondent Integrated Silicon is a private domestic
corporation, 100% foreign owned, which is engaged in the business of manufacturing
and assembling electronics components. The juridical relation among the various
parties in this case can be traced to a 5-year Value Added Assembly Services
Agreement, between Integrated Silicon and HP-Singapore. Under the terms of the
VAASA, Integrated Silicon was to locally manufacture and assemble fiber optics for
export to HP-Singapore. HP-Singapore, for its part, was to consign raw materials to
Integrated Silicon. The VAASA had a five-year term with a provision for annual renewal
by mutual written consent. Later, with the consent of Integrated Silicon, 
Later, Integrated Silicon filed a complaint for “Specific Performance and Damages”
against Agilent and its officers. It alleged that Agilent breached the parties’ oral
agreement to extend the VAASA. Agilent filed a separate complaint against Integrated
Silicon for Specific Performance, Recovery of Possession, and Sum of Money with
Replevin, Preliminary Mandatory Injuction, and Damages. Respondents filed a MTD in
the 2nd case, on the grounds of lack of Agilent’s legal capacity to sue and failure to
state a cause of action. The trial court denied the MTD and granted petitioner Agilent’s
application for a writ of replevin. Without filing a MR, respondents filed a petition for
certiorari with the CA. The CA granted respondents’ petition for certiorari, set aside the
assailed Order of the trial court (denying the MTD) and ordered the dismissal of the 2nd
case. Hence, the instant petition.

ISSUE:
Whether or not an unlicensed foreign corporation not doing business in the Philippines
lacks the legal capacity to file suit?

Ruling: No, A foreign corporation without a license is not ipso facto incapacitated from

bringing an action in Philippine courts. A license is necessary only if a foreign
corporation is “transacting” or “doing business” in the country. 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.

Litton Mills Inc. vs. Court of Appeals.

GR. No, 9498
Facts: Litton entered into an agreement with Empire Sales Philippines Corporation, as
local agent of private respondent Gelhaar Uniform Company, a corporation organized
under the laws of the United States, whereby Litton agreed to supply Gelhaar 7,770
dozens of soccer jerseys. The agreement stipulated that before it could collect from the
bank on the letter of credit, Litton must present an inspection certificate issued by
Gelhaar's agent in the Philippines, Empire Sales, that the goods were in satisfactory
condition. Litton sent four shipments totalling4,770 dozens of the soccer jerseys
between December 2 and December 30, 1983. A fifth shipment, consisting of 2,110
dozens of the jerseys, was inspected by Empire from January 9 to January 19, 1984,
but Empire refused to issue the required certificate of inspection. Alleging that Empire's
refusal to issue a certificate was without valid reason, Litton filed a complaint with the
RTC of Pasig on January 23,1984, for specific performance. Litton also sought the
issuance of a writ of preliminary mandatory injunction to compel Empire to issue the
inspection certificate covering the 2,110 dozen jerseys and the recovery of
compensatory and exemplary damages, costs, attorney's fees and other just and
equitable relief.
The trial court issued the writ on January 25, 1984. The next day, Empire issued the
inspection certificate, so that the cargo was shipped on time. The defendants a "Motion
for Extension of Time To File An Answer/Responsive Pleading. The court admitted the
answer of the defendants. The trial court issued an order denying for lack of merit
Gelhaar's motion to dismiss and to quash the summons. It held that Gelhaar was doing
business in the Philippines, and that the service of summons on Gelhaar was therefore
valid. Gelhaar filed a motion for reconsideration, but its motion was denied. Gelhaar
then filed a special civil action of certiorari with the CA to set aside the orders of the trial
court. The CA ordered the trial court to issue anew summons to be served onEmpire
Sales Philippines Corporation, after the allegation in the complaint thatGelhaar was
doing business in the Philippines had been established. Hence thispetition.
Issue: Whether or Not the RTC acquired jurisdiction over Gelhaar a foreign
corporation?
Ruling: The acts noted above are of such a character as to indicate a purpose to do
business. In accordance with Rule 14, Section 14, service upon Gelhaar could be made
in three ways: (1) by serving upon the agent designated in accordance with law to
accept service of summons; (2) if there is no resident agent, by service on the
government official designated by law to that effect; and (3) by serving on any officer or
agent of said corporation within the Philippines. Here, service was made through
Gelhaar's agent, the Empire Sales Philippines Corp. There was, therefore, a valid
service of summons on Gelhaar,sufficient to confer on the trial court jurisdiction over the
person of Gelhaar.

Lorenzo Shipping Corp vs. Chubb and Sons inc.

G.R. No. 147724
Facts: Mayer Steel Pipe Corp. loaded 581 bundles of ERW black steel pipes on board
the vessel M/V Lorcon IV, owned by Lorenzo Shipping, for shipment to Davao City.
Lorenzo Shipping issued a clean bill of lading designated as Bill of Lading No. T-3for the
account of the consignee, Sumitomo Corp. of San Francisco, California, USA, which in
turn, insured the goods with Chubb and Sons, Inc. M/V Lorcon IV arrived at the Sasa
Wharf in Davao City. Transmarine Carriers received the subject shipment. It discovered
seawater in the hatch of M/V Lorcon IV, and found the steel pipes submerged in it.
Sumitomo then hired the services of a surveyor to inspect the shipment prior to and
subsequent to discharge. The report showed that the subject shipment was no longer in
good condition, as in fact, the pipes were found with rust formation on top and/or at the
sides. After the survey, Gearbulk loaded the shipment on board its vessel M/V San
Mateo Victory, for carriage to the US. All bills of lading it issued were marked “ALL
UNITS HEAVILYRUSTED.” M/V San Mateo Victory arrived at the U.S.A. where it
unloaded the subject steel pipes. The steel pipes were surveyed, and it was discovered
that they are heavily rusted. Due to its condition, Sumitomo rejected the damaged steel
pipes and declared them unfit for the purpose they were intended. It then filed a marine
insurance claim with respondent Chubb and Sons, Inc. which the latter settled in the
amount of US$104,151.00. Chubb and Sons, Inc. filed a complaint for collection of a
sum of money, against Lorenzo Shipping, Gearbulk, and Transmarine. Lorenzo
Shipping denied its liability. The RTC ruled in favor of Chubb and Sons, Inc. It appealed
to the CA, but was denied.
Issue: Whether respondent Chubb and Sons has capacity to sue before the Philippine
court?
Ruling: Yes. Lorenzo Shipping failed to raise the defense that Sumitomo is a foreign
corporation doing business in the Philippines without a license. It is therefore estopped
from litigating the issue on appeal. Secondly, assuming arguendo that Sumitomo cannot
sue in the Philippines, it does not follow that Chubb and Sons, as subrogee, has also no
capacity to sue in our jurisdiction. The rights to which the subrogee succeeds are the
same as, but not greater than, those of the person for whom he is substituted . he
cannot acquire any claim, security, or remedy the subrogor did not have. In other words,
a subrogee cannot succeed to a right not possessed by the subrogor. A subrogee in
effect steps into the shoes of the insured and can recover only if insured likewise could
have recovered. However, when the insurer succeeds to the rights of the insured, he
does so only in relation to the debt.The law does not prohibit foreign corporations from
performing single acts of business. A foreign corporation needs no license to sue before
Philippine courts on an isolated transaction ...Where an insurance company as
subrogee pays the insured of the entire loss it suffered, the insurer-subrogee is the only
real party in interest and must sue in its own name to enforce its right of subrogation.
European Resources and Technologies Inc vs Ingenieuburo Birkhahn
GR No. 159586

Facts: European Resources and Technologies Inc. a corporation organized and

existing under the laws of the Philippine. Ingenieuburo Birkhan is a German corporation
who are respondents in this case and shall be collectively referred to as the “German
Consortium.” The German Consortium tendered and submitted its bid to the Clark
Development Corporation to construct, operate and manage the Integrated Waste
Management Center at the Clark Special Economic Zone. CDC accepted the German
Consortium’s bid and awarded the contract to it. CDC and the German Consortium
executed the Contract for Services which embodies the terms and conditions of their
agreement. The Contract for Services provides that the German Consortium shall be
empowered to enter into a contract or agreement for the use of the integrated waste
management center by corporations, local government units, entities, and persons not
only within the CSEZ but also outside.

Article VIII, Section 7 of the Contract for Services provides that the German Consortium
shall undertake to organize a local corporation as its representative for this project.
Under the MOU, the parties agreed to jointly form a local corporation to which the
German Consortium shall assign its rights under the Contract for Services. Pursuant to
this agreement, petitioner European Resources and Technologies, Inc. was
incorporated ERTI received a letter from BN Consultants Philippines, Inc., signed by Mr.
Holger Holst for and on behalf of the German Consortium,12 stating that the German
Consortium’s contract with DMWAI, LBV&A and ERTI has been terminated or
extinguished.

Issue: Whether or not the German Consortium has the capacity to institute the petition
for injunction?

Ruling: No. A corporation has legal status only within the state or territory in which it
was organized. For this reason, a corporation organized in another country has no
personality to file suits in the Philippines. In order to subject a foreign corporation doing
business in the country to the jurisdiction of our courts, it must acquire a license from
the Securities and Exchange Commission (SEC) and appoint an agent for service of
process. Without such license, it cannot institute a suit in the Philippines.

However, there are exceptions to this rule. In a number of cases, we have declared a
party estopped from challenging or questioning the capacity of an unlicensed foreign
corporation from initiating a suit in our courts. In the case of Communication Materials
and Design, Inc. v. Court of Appeals,a foreign corporation instituted an action before our
courts seeking to enjoin a local corporation, with whom it had a “Representative
Agreement”, from using its corporate name, letter heads, envelopes, sign boards and
business dealings as well as the foreign corporation’s trademark. The case arose when
the foreign corporation discovered that the local corporation has violated certain
contractual commitments as stipulated in their agreement. In said case, we held that a
foreign corporation doing business in the Philippines without license may sue in
Philippine Courts a Philippine citizen or entity that had contracted with and benefited
from it.