Global Business Holdings, Inc. vs. Surecomp Software (G.R. No.173463, Oct.

13,2010)

https://lawphil.net/judjuris/juri2010/oct2010/gr_173463_2010.html

Facts:

Surecomp Software, a foreign corporation based in the Netherlands, and ABC, a domestic corporation in
the Philippines, entered into a software license agreement. Later, ABC merged with Global Business
Holdings, Inc., with Global being the surviving corporation. As part of the merger, Global assumed all of
ABC's liabilities and obligations. Subsequently, Global unilaterally discontinued the software license
agreement with Surecomp and ceased making payments, citing incompatibility as the primary reason. In
response, Surecomp filed a complaint for breach of contract with damages in the Philippine courts.

Issues:

The main issue in this case revolved around Surecomp's capacity to sue in the Philippines. Specifically,
the court needed to determine whether a foreign corporation like Surecomp, doing business in the
Philippines without the required license, had the legal standing to bring a lawsuit in the country's courts.

Rulings:

The court held that Surecomp had the capacity to sue in the Philippines despite its foreign corporate
status and the lack of a required license. The following key legal principles were considered in arriving at
this decision:

1. Estoppel: The court invoked the principle of estoppel. It stated that a party could not challenge the
legal personality of a corporation after having acknowledged that personality through the act of entering
into a contract with the corporation. In this case, Surecomp had a valid and subsisting agreement with
ABC before the merger with Global.

2. Succession: The court considered Global's merger with ABC and noted that, as the surviving
corporation, Global effectively stepped into ABC's shoes concerning its contractual obligations and
liabilities. Therefore, Global was treated as if it were the original contracting party with Surecomp, even
though the merger occurred subsequent to the agreement.

In summary, the court ruled that Surecomp had the capacity to sue in the Philippines because Global, as
the surviving corporation after merging with ABC, inherited the obligations and liabilities of ABC, which
included the software license agreement with Surecomp. Therefore, Surecomp's lawsuit against Global
was deemed permissible, and the case proceeded on the merits.
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. 25 A party is
estopped from challenging the personality of a corporation after having acknowledged the same by
entering into a contract with it.26 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
• Converse Rubber vs. Universal Rubber Products (147 SCRA 154 [1987])

https://lawphil.net/judjuris/juri1987/jan1987/gr_l_27906_1987.html

**Facts:**

In this case, Converse Rubber Corporation (the petitioner) filed an opposition to the application for
trademark registration by Universal Rubber Products, Inc. (the respondent). Universal Rubber Products
sought to register the trademark "UNIVERSAL CONVERSE AND DEVICE" for use on rubber shoes and
slippers. Converse Rubber Corporation objected to this registration, citing two main grounds: first, that
the trademark was confusingly similar to the word "CONVERSE," which is part of Converse Rubber
Corporation's corporate name, potentially leading the public to believe that Universal's products were
made by Converse Rubber Corporation; and second, that the registration of Universal's trademark would
cause significant harm to Converse Rubber Corporation's business reputation and goodwill in the
Philippines.

At the trial, the petitioner presented a witness who had been selling Converse rubber shoes in the
Philippines since 1956 and had knowledge of the petitioner's products. The respondent, on the other
hand, presented its secretary as a witness, who testified that the company had been selling "Universal
Converse" rubber shoes and sandals. The Director of Patents ultimately dismissed the opposition and
approved the trademark registration, stating that Converse Rubber Corporation failed to provide
sufficient proof of the likelihood of confusion.

**Issues:**

The central issue was whether Universal Rubber Products' trademark "UNIVERSAL CONVERSE AND
DEVICE" was confusingly similar to Converse Rubber Corporation's corporate name and trademarks. The
question was whether this similarity could potentially mislead the public into thinking that Universal's
products were associated with Converse Rubber Corporation, thus causing harm to Converse's business
reputation and goodwill.

**Rulings:**

The court set aside the Director of Patents' decision and denied Universal Rubber Products' application
for trademark registration. It held that Universal's use of the word "CONVERSE" was a clear
appropriation of the dominant word in Converse Rubber Corporation's corporate name, which had been
in existence since 1946. This use of the same word without a reasonable explanation raised suspicion of
a fraudulent motive to trade upon Converse's reputation. The court also noted that Converse had
established a business reputation and goodwill in the Philippines, which included significant sales of its
products. The similarity between Universal's trademark and Converse's corporate name and trademarks
created a likelihood of confusion among the purchasing public, even if the products themselves were
different.

Furthermore, the court emphasized that a foreign corporation like Converse Rubber Corporation, which
was not licensed to do business in the Philippines, still had a legal right to protect its reputation,
corporate name, and goodwill in the country. This protection extended even to jurisdictions where it did
not conduct business. The court's decision aligned with the Convention of the Union of Paris for the
Protection of Industrial Property and the Philippine Trademark Law, which recognized and protected
foreign registrants' rights in the absence of registration. Consequently, Universal Rubber Products'
trademark registration was denied.

A corporation is entitled to the cancellation of a mark that is confusingly similar to its corporate name
a foreign corporation has a right to maintain an action in the forum even if it is not licensed to do
business and is not actually doing business on its own therein

a foreign corporation which has never done any business in the Philippines and which is unlicensed
and unregistered to do business here, but is widely and favorably known in the Philippines through
the use therein of its products bearing its corporate and tradename, has a legal right to maintain an
action in the Philippines to restrain the residents and inhabitants thereof from organizing a
corporation therein bearing the same name as the foreign corporation, when it appears that they have
personal knowledge of the existence of such a foreign corporation, and it is apparent that the purpose
of the proposed domestic corporation is to deal and trade in the same goods as those of the foreign
corporation
• Agilent Technologies Singapore (PTE) Ltd. vs. Integrated Silicon Technology Phil. Corp. (427 SCRA
593 [2004])

https://lawphil.net/judjuris/juri2004/apr2004/gr_154618_2004.html

**Facts:** In the case of Agilent Technologies Singapore (Pte) Ltd. v. Integrated Silicon Technology
Philippines Corporation, a foreign corporation, Agilent Technologies Singapore (Pte) Ltd. (Agilent),
entered into a Value Added Assembly Services Agreement (VAASA) with the Philippine-based Integrated
Silicon Technology Philippines Corporation (Integrated Silicon). The VAASA involved the local
manufacturing and assembly of fiber optics for export. However, a dispute arose regarding the alleged
breach of an oral agreement to extend the VAASA, which led to litigation.

**Issues:** The primary issues revolved around corporate law, particularly whether Agilent, being a
foreign corporation unlicensed to do business in the Philippines, had the legal capacity to file a lawsuit in
Philippine courts. Additionally, the court needed to determine if the two cases, Civil Case No. 3110-2001-
C filed by Integrated Silicon and Civil Case No. 3123-2001-C filed by Agilent, constituted litis pendentia or
forum shopping.

**Rulings:** The Supreme Court made significant rulings in this case. It first clarified that an unlicensed
foreign corporation doing business in the Philippines may bring suit in Philippine courts against a
Philippine citizen or entity with which it has contracted, based on the doctrine of estoppel. Additionally,
the Court concluded that Agilent was not "doing business" in the Philippines, and, therefore, had the
legal capacity to sue.

Regarding the issue of litis pendentia and forum shopping, the Court found that there was no litis
pendentia since the two cases involved different causes of action. The rights and reliefs sought by the
parties were distinct, and a judgment in one case would not constitute res judicata in the other.
Furthermore, the Court clarified that forum shopping did not exist in this case, as the elements of litis
pendentia were absent.

In summary, the Supreme Court ruled in favor of Agilent, allowing it to proceed with its case against
Integrated Silicon in the Philippines and rejecting the claims related to corporate law issues such as legal
capacity and litis pendentia.
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.

An unlicensed foreign corporation doing business in the Philippines may bring suit in Philippine
courts against a Philippine citizen or entity who had contracted with and benefited from said
corporation.44 Such a suit is premised on the doctrine of estoppel. A party is estopped from
challenging the personality of a corporation after having acknowledged the same by entering into a
contract with it.

if a FOREIGN CORPORATION DOES BUSINESS IN THE PHILIPPINES WITHOUT A

LICENSE, it CANNOT SUE before the Philippine courts; 47 (2) if a FOREIGN CORPORATION
IS NOT DOING BUSINESS IN THE PHILIPPINES, it NEEDS NO LICENSE TO SUE BEFORE
PHILIPPINE COURTS on an isolated transaction or on a cause of action entirely independent of
any business transaction48; (3) if A FOREIGN CORPORATION DOES BUSINESS IN THE
PHILIPPINES WITHOUT A LICENSE, a Philippine citizen or entity which has contracted with
said corporation may be estopped from challenging the foreign corporation’s corporate
personality in a suit brought before Philippine courts; 49 and (4) if a FOREIGN CORPORATION
DOES BUSINESS IN THE PHILIPPINES WITH THE REQUIRED LICENSE, it CAN SUE before
Philippine courts on any transaction.

"doing", "engaging in", or "transacting" 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
• Mentholatum vs. Mangaliman (72 Phil. 524 [1941]) (Note: Substance Test & Continuity Test)

https://lawphil.net/judjuris/juri1941/jun1941/gr_l-47701_1941.html

**Facts:**

The case revolved around The Mentholatum Co., Inc. (Mentholatum) and its dispute with Anacleto
Mangaliman and others. Mentholatum, a foreign corporation, along with the Philippine-American Drug
Co., Inc., filed a complaint against Anacleto Mangaliman and others for trademark infringement and
unfair competition. They alleged that the defendants were selling a product called "Mentholiman,"
which closely resembled Mentholatum's product "Mentholatum." The complaint stated that
Mentholatum had registered the trademark "Mentholatum" with the Bureau of Commerce and Industry,
and they suffered damages due to the defendants' actions.

The Court of First Instance of Manila ruled in favor of the plaintiffs, ordering the defendants to cease
selling "Mentholiman," provide an account of their sales and profits, and pay damages. Anacleto
Mangaliman was also fined for contempt of court, and his counterclaim was dismissed.

The case was then brought to the Court of Appeals and subsequently to the Supreme Court for review.

**Issues:**

The primary issues in this case included:

1. Whether Mentholatum, a foreign corporation, was transacting business in the Philippines without the
required license.

2. Whether the Philippine-American Drug Co., Inc., could independently maintain the complaint, despite
the alleged violation by Mentholatum.

**Rulings:**

The Supreme Court ruled that Mentholatum, despite being a foreign corporation, was indeed transacting
business in the Philippines without the required license, as it was selling its products in the country
through its agent, the Philippine-American Drug Co., Inc. The Court found that Mentholatum had
essentially continued its business activities in the Philippines, which made it subject to the licensing
requirements of the Corporation Law.

Additionally, the Court held that the Philippine-American Drug Co., Inc., acting as the agent of
Mentholatum, did not have an independent standing in court to maintain the complaint separately. The
agent's role was derived from and representative of the principal corporation, Mentholatum, and thus, it
could not claim an independent standing to pursue the action.

In conclusion, the Supreme Court denied the petition and upheld the decision of the Court of Appeals,
affirming that both Mentholatum and the Philippine-American Drug Co., Inc. did not have the legal
standing to maintain the complaint due to the violation of the licensing requirements for foreign
corporations as specified in the Corporation Law.
No general rule or governing principle can be laid down as to what constitutes "doing" or "engaging
in" or "transacting" business. Indeed, each case must be judged in the light of its peculiar
environmental circumstances. 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

The term 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, and in progressive prosecution of, the purpose and object of its organization
• Cargill, Inc. vs. Intra Strata Assurance Corp. (615 SCRA 304 [2010])

https://lawphil.net/judjuris/juri2010/mar2010/gr_168266_2010.html

**Facts:**

Cargill, Inc. (petitioner) entered into a contract with Northern Mindanao Corporation (NMC) to purchase
molasses. This contract was amended three times, with NMC failing to deliver the agreed quantity of
molasses. In response, petitioner filed a complaint for a sum of money against NMC and Intra Strata
Assurance Corporation (respondent), who issued performance and surety bonds related to the contract.

The trial court ruled in favor of petitioner, ordering respondent to pay a substantial amount plus interest
and attorney's fees. However, the Court of Appeals reversed the decision, arguing that petitioner, a
foreign corporation, did business in the Philippines without the required license, and therefore had no
capacity to sue in local courts.

**Issues:**

1. Whether petitioner was conducting business in the Philippines, affecting its capacity to sue.

2. Whether respondent is estopped from raising the lack of legal capacity to sue.

3. Whether petitioner was challenging the Court of Appeals' findings of fact.

4. Whether the advance payment of $500,000 to NMC was made without proper documents.

**Ruling:**

1. The Supreme Court found that petitioner, as a foreign corporation, was not conducting business in the
Philippines as its transactions with NMC did not constitute "doing business" under the law. The activities
did not involve profit-making, and petitioner did not have an office or agent in the Philippines. The Court
emphasized that the mere act of importing goods from the Philippines does not necessarily imply doing
business in the country.

2. The Court ruled that respondent was not estopped from raising the lack of legal capacity to sue. The
absence of such capacity can be raised at any stage of the proceedings.

3. Petitioner was not challenging the Court of Appeals' findings of fact, as the Court primarily focused on
the question of whether petitioner was doing business in the Philippines, which is a legal issue rather
than a factual one.

4. The Court found that the advance payment of $500,000 to NMC was released according to the
conditions specified in the "red clause" Letter of Credit, and the necessary documents were in order, as
testified by the Head of the International Operations Department of the Bank of Philippine Islands.
Therefore, there was no valid reason for respondent to refuse payment under the bonds.

In conclusion, the Supreme Court ruled in favor of petitioner, asserting that it had the capacity to sue in
the Philippines and was entitled to the payment under the bonds. The Court reversed the Court of
Appeals' decision and reinstated the trial court's judgment in favor of petitioner.
To be doing or "transacting business in the Philippines" for purposes of Section 133 of the
Corporation Code, the foreign corporation must actually transact business in the Philippines, that is,
perform specific business transactions within the Philippine territory on a continuing basis in its own
name and for its own account. Actual transaction of business within the Philippine territory is an
essential requisite for the Philippines to to acquire jurisdiction over a foreign corporation and thus
require the foreign corporation to secure a Philippine business license.

If a foreign corporation does not transact such kind of business in the Philippines, even if it exports
its products to the Philippines, the Philippines has no jurisdiction to require such foreign corporation
to secure a Philippine business license.
• B. Van Zuiden Bros. vs. GTVL Mfg Industries (523 SCRA 233 [2007])

https://lawphil.net/judjuris/juri2007/may2007/gr_147905_2007.html

**Facts:**

B. Van Zuiden Bros., Ltd. (petitioner), a corporation incorporated under the laws of Hong Kong, filed a
complaint for a sum of money against GTVL Manufacturing Industries, Inc. (respondent), a Philippine
corporation. Respondent filed a motion to dismiss, arguing that petitioner had no legal capacity to sue
because it was doing business in the Philippines without the required license.

Petitioner claimed that it was not engaged in business in the Philippines and that the transactions in
question were consummated in Hong Kong. The trial court granted respondent's motion to dismiss, and
the Court of Appeals affirmed this decision.

**Issue:**

Whether petitioner, a foreign corporation, has legal capacity to sue in the Philippines without a license,
given the claim that it was not engaged in business in the Philippines.

**Ruling:**

The Supreme Court held that a foreign corporation doing business in the Philippines without the
required license cannot sue before Philippine courts. However, the determination of whether a foreign
corporation is doing business in the Philippines must be based on the actual performance of specific
commercial acts within Philippine territory on a continuing basis in its own name and for its own
account.

In this case, the Court found that petitioner was not doing business in the Philippines. The series of
transactions between petitioner and respondent occurred outside the Philippines and were
consummated in Hong Kong. Petitioner did not have an office, agent, or distributor in the Philippines,
and there was no evidence of any agreement indicating that petitioner was doing business in the
country.

The Court disagreed with the Court of Appeals' interpretation that the proponents of the transaction
determined whether a foreign corporation was doing business in the Philippines, regardless of where the
transaction took place. This would lead to the unreasonable conclusion that every export transaction
conducted by Philippine exporters could be considered as doing business in the importing countries. The
Court emphasized that the actual performance of business activities within Philippine territory is
essential for jurisdiction to require a foreign corporation to secure a Philippine business license.

Therefore, petitioner, in this case, had legal capacity to sue in the Philippines, and the Court of Appeals'
decision was reversed.
To be doing or "transacting business in the Philippines" for purposes of Section 133 of the
Corporation Code, the foreign corporation must actually transact business in the Philippines, that is,
perform specific business transactions within the Philippine territory on a continuing basis in its own
name and for its own account. Actual transaction of business within the Philippine territory is an
essential requisite for the Philippines to acquire jurisdiction over a foreign corporation and thus
require the foreign corporation to secure a Philippine business license. If a foreign corporation does
not transact such kind of business in the Philippines, even if it exports its products to the Philippines,
the Philippines has no jurisdiction to require such foreign corporation to secure a Philippine business
license.

The importing country does not acquire jurisdiction over the foreign exporter who has not performed
any specific commercial act within the territory of the importing country. Without jurisdiction over the
foreign exporter, the importing country cannot compel the foreign exporter to secure a license to do
business in the importing country.
• Lorenzo Shipping vs. Chubb and Sons, Inc. (431 SCRA 266 [2004])

https://chanrobles.com/scdecisions/jurisprudence2004/jun2004/147724.php

Facts:

Lorenzo Shipping Corporation (Lorenzo Shipping) transported 581 bundles of steel pipes from Manila to
Davao City, intending to deliver them to the United States. Sumitomo Corporation, the consignee,
insured the shipment with Chubb and Sons, Inc., a foreign insurance corporation. Upon arrival in the
United States, the steel pipes were found to be heavily rusted, leading Sumitomo Corporation to file an
insurance claim with Chubb and Sons, Inc., which paid the claim. Subsequently, Chubb and Sons, Inc.
filed a lawsuit in the Philippines against Lorenzo Shipping, seeking to recover the amount it had paid.

Issues:

1. Whether Chubb and Sons, Inc. had the capacity to sue in Philippine courts, given its status as a foreign
corporation not licensed to do business in the Philippines.

2. Whether Lorenzo Shipping was negligent in the care and custody of the cargo, resulting in the damage
to the steel pipes.

Rulings:

The court ruled in favor of Chubb and Sons, Inc., emphasizing the following corporate law principles:

1. Capacity to Sue: The court determined that Chubb and Sons, Inc. had the capacity to sue in Philippine
courts. It was noted that the foreign corporation was not continuously doing business in the Philippines
but had engaged in an isolated transaction through the issuance of an insurance policy to Sumitomo
Corporation. As a result, it was considered eligible to bring a legal action in the Philippines based on this
isolated transaction, and Art. 133 of the Corporation Code, which restricts the capacity of foreign
corporations to sue, did not apply.

2. Negligence of the Carrier: The court held Lorenzo Shipping liable for negligence. It was established
that the steel pipes were in good condition when loaded onto M/V Lorcon IV but arrived heavily rusted
after discharge in Davao City. The presence of rust on the steel pipes was attributed to the failure of the
vessel's tank top, which allowed seawater to enter, submerging the cargo. Since the carrier failed to
maintain the seaworthiness of the vessel, it was found negligent in the care and custody of the cargo.
The court emphasized the principle that carriers bear a presumption of negligence when goods arrive
damaged after a clean bill of lading was issued, and Lorenzo Shipping failed to provide evidence to refute
this presumption.

This case digest highlights the court's application of corporate law principles in determining the capacity
of a foreign corporation to sue in the Philippines and the liability of a domestic corporation for
negligence in the transportation of goods.

What is determinative of "doing business" is not really the number or the quantity of
the transactions, but more importantly, the intention of an entity to continue the body
of its business in the country. The number and quantity are merely evidence of such
intention. The phrase "isolated transaction" has a definite and fixed meaning, i.e. a
transaction or series of transactions set apart from the common business of a foreign
enterprise in the sense that there is no intention to engage in a progressive pursuit of
the purpose and object of the business organization. Whether a foreign corporation is
"doing business" does not necessarily depend upon the frequency of its transactions,
but more upon the nature and character of the transactions
• Signetics Corp. vs. CA (225 SCRA 737 [1993])

https://lawphil.net/judjuris/juri1993/aug1993/gr_105141_1993.html

Facts:

Signetics Corporation (Signetics), a foreign corporation organized under the laws of the United States of
America, entered into a lease contract with Fruehauf Electronics Phils. Inc. (Freuhauf) through its wholly-
owned subsidiary, Signetics Filipinas Corporation (SigFil), for a piece of land in the Philippines. Freuhauf
filed a complaint against Signetics in the Regional Trial Court of Pasig, Metro Manila, alleging claims for
damages, accounting, the return of machinery, equipment, and accessories, as well as the transfer of
title and surrender of possession of the leased properties. Freuhauf asserted that Signetics caused SigFil
to insert specific terms in the lease contract that allegedly allowed the removal of certain assets without
cost to Freuhauf.

Signetics was served summons through TEAM Pacific Corporation, which it claimed was not its agent and
denied that it was doing business in the Philippines at the time the complaint was filed.

Issue:

The main issue in this case was whether the trial court had correctly assumed jurisdiction over Signetics,
a foreign corporation, despite its claim that it was not doing business in the Philippines at the time of the
lawsuit.

Ruling:

The trial court denied Signetics' motion to dismiss, asserting that the mere fact of "doing business" did
not have to be fully established before summons could be validly made and jurisdiction acquired over a
foreign corporation. The court cited the decision in Wang Laboratories, Inc. v. Mendoza, explaining that
as long as a foreign corporation does business in the Philippines, it is amenable to process and
jurisdiction in the local courts, even if it had ceased its business operations.

The Court of Appeals affirmed the trial court's orders, and the Supreme Court, in this resolution, upheld
the appellate court's decision. The court held that the jurisdiction and venue of actions are initially
determined by the allegations in the complaint. The complaint, though vaguely structured, contained
sufficient allegations that Signetics had engaged in business activities in the Philippines through SigFil,
which entered into the lease contract at issue. This established prima facie that Signetics was doing
business in the Philippines.

The petitioner's assertion that "proof" of doing business was required before summons could be served
was not accepted. The court clarified that the fact of doing business must first be established through
appropriate allegations in the complaint, which, in this case, were sufficient to demonstrate Signetics'
business activities in the Philippines. The petitioner's defense, which questioned the jurisdiction of the
court over its person, would require a full examination of the merits of the case, making it unsuitable for
resolution through a mere motion to dismiss.

Additionally, the Court noted that even if Signetics had ceased its business operations in the Philippines,
it could still be held liable for a cause of action that had accrued while it was doing business, but this
matter would need to be addressed through the admission of evidence during trial. Signetics'
apprehensions about submitting to the court's jurisdiction during the trial were unfounded as long as it
did not invoke separate or independent reliefs of its own.

In summary, the court upheld the jurisdiction of the trial court over Signetics based on the allegations in
the complaint, and the case would proceed to address the merits of the claims and defenses.

a foreign corporation, although not engaged in business in the Philippines, may still look up to our
courts for relief; reciprocally, such corporation may likewise be "sued in Philippine courts for acts
done against a person or persons in the Philippines"

If the defendant is a foreign corporation, or a non-resident joint stock company or association, doing
business in the Philippines, service may be made on its resident agent designated in accordance
with law for that purpose, or, if there be no such agent, on the government official designated by law
to that effect, or on any of its officers or agents within the Philippines
• Aguirre II vs. FQB+7, Inc. (688 SCRA 242 [2013])

https://chanrobles.com/cralaw/2013januarydecisions.php?id=14

Facts:

In this case, Vitaliano filed a Complaint in 2004 against Nathaniel D. Bocobo, Priscila D. Bocobo, and
Antonio De Villa, involving an intra-corporate dispute within FQB+7, Inc. The dispute centered around a
perceived usurpation of corporate management powers by the Bocobo family and Antonio De Villa,
allegedly in violation of the corporation's Articles of Incorporation. Vitaliano sought an injunction,
inspection of corporate books, and damages.

Issues:

The primary issues in this case pertain to corporate law and jurisdiction. First, the Court needed to
determine whether the trial court's issuance of the writ of preliminary injunction was justified. This
involved assessing whether Vitaliano had demonstrated an actual and existing right that required
protection through a preliminary injunction. Secondly, the Court had to consider the jurisdiction of the
RTC over the intra-corporate dispute, particularly in light of the corporation's dissolution.

Rulings:

The Court of Appeals (CA) held that the trial court had erred in granting the preliminary injunction. It
found that Vitaliano had not demonstrated an actual and existing right that warranted protection via an
injunction. The CA also noted an inconsistency between the trial court's Order and the writ of
preliminary injunction, but this was not the primary reason for nullification.

Regarding the jurisdiction issue, the CA concluded that the trial court did not have jurisdiction over an
intra-corporate dispute involving a dissolved corporation. It emphasized that the dissolution of the
corporation did not affect the nature of the controversy as intra-corporate. The case was viewed as an
intra-corporate dispute, as it had arisen from intra-corporate relations, and the questions involved
pertained to the rights and obligations under the Corporation Code and the regulation of the
corporation. Despite the dissolution of the corporation, the nature of the case remained an intra-
corporate dispute.

The ruling affirmed the dismissal of the Complaint, acknowledging that the corporation could no longer
continue its business but had the authority to liquidate its assets within the framework of corporate law.
The CA emphasized that the dissolution of the corporation did not extinguish the rights of the parties
involved, who were still considered corporate actors, and it did not change the nature of the controversy
as an intra-corporate dispute. The parties retained their causes of action against each other.

The statutory provision assures an aggrieved party that the corporation's dissolution
will not impair, much less remove, his/her rights or remedies against the corporation,
its stockholders, directors or officers. It also states that corporate dissolution will not
extinguish any liability already incurred by the corporation, its stockholders, directors,
or officers. In short, Section 145 preserves a corporate actor's cause of action and
remedy against another corporate actor. In so doing, Section 145 also preserves the
nature of the controversy between the parties as an intra-corporate dispute.
However, despite such dissolution, the parties involved in the litigation are still
corporate actors. The dissolution does not automatically convert the parties into total
strangers or change their intra-corporate relationships. Neither does it change or
terminate existing causes of action, which arose because of the corporate ties between
the parties. Thus, a cause of action involving an intra-corporate controversy remains
and must be filed as an intra-corporate dispute despite the subsequent dissolution of
the corporation.
lawlibrar
• PVBank Employees Union-N.U.B.E. vs. Vega (360 SCRA 33 [2001])

https://lawphil.net/judjuris/juri2001/jun2001/gr_105364_2001.html

Facts:

In the case of Philippine Veterans Bank Employees Union-N.U.B.E. and Perfecto V. Fernandez
(petitioners) against Honorable Benjamin Vega (respondent judge), the Central Bank of the Philippines,
and the Liquidator of the Philippine Veterans Bank (respondents), the central issue revolves around
whether a liquidation court can continue liquidation proceedings for the Philippine Veterans Bank (PVB)
when Congress had passed Republic Act No. 7169, mandating its rehabilitation and reopening. The
Central Bank had initially filed a petition for assistance in the liquidation of PVB in 1985. Petitioners,
representing employees' claims for unpaid wages and benefits, joined the proceedings. Even after
substantial payments, many employees remained unpaid. In 1992, Congress enacted R.A. No. 7169,
aimed at the rehabilitation of PVB, followed by a certificate of authority to reopen the bank by the
Central Bank. Despite this, the respondent judge continued with liquidation proceedings, prompting the
instant petition.

Issues:

The primary issue before the court is whether the enactment of R.A. No. 7169 and the subsequent
events rendered the liquidation court functus officio, thereby depriving the respondent judge of
authority to continue with liquidation proceedings. Additionally, the issue of the legal effectivity of R.A.
No. 7169 is raised concerning whether it took effect upon approval or upon publication.

Rulings:

The Supreme Court ruled in favor of the petitioners. R.A. No. 7169, titled "An Act To Rehabilitate The
Philippine Veterans Bank," which became effective on January 2, 1992, explicitly provided for the
reopening of PVB within three years. It also mandated the creation of a rehabilitation committee to
facilitate its implementation. The Monetary Board approved the rehabilitation plan, and PVB was
allowed to reopen on August 3, 1992. Liquidation and rehabilitation represent opposing concepts in
corporate law – liquidation entails winding up and settling, while rehabilitation focuses on reopening and
reorganizing. The court found that the enactment of R.A. No. 7169 rendered the liquidation court
functus officio, depriving it of authority to continue with liquidation proceedings. Publication's legal
effectivity was deemed irrelevant as the law clearly indicated it became effective immediately upon its
approval. The Court held that to allow liquidation to continue would obstruct the rehabilitation of PVB.
The arguments put forth by the Central Bank and the intervenors were deemed without merit. Thus, the
liquidation proceedings were ordered to be terminated.

Liquidation, in corporation law, connotes a winding up or settling with creditors and debtors. 9 It is the
winding up of a corporation so that assets are distributed to those entitled to receive them. It is the
process of reducing assets to cash, discharging liabilities and dividing surplus or loss.
On the opposite end of the spectrum is rehabilitation which connotes a reopening or reorganization.
Rehabilitation contemplates a continuance of corporate life and activities in an effort to restore and
reinstate the corporation to its former position of successful operation and solvency.

• Metropolitan Bank vs. Board of Trustees of Riverside Mills Provident & Retirement Fund (630
SCRA 350 [2010])

https://lawphil.net/judjuris/juri2010/sep2010/gr_176959_2010.html

Facts:

Riverside Mills Corporation (RMC) established a Provident and Retirement Plan for its employees, where
both RMC and its employees contributed to the Fund. The Plan stipulated that no part of the Fund's
assets shall revert to RMC until all liabilities of the Plan have been satisfied. Philippine Banking
Corporation (Philbank), now Metropolitan Bank & Trust Company, acted as a trustee for the Fund. When
RMC ceased operations, Philbank applied the Fund to RMC's outstanding obligations without consulting
the beneficiaries of the Fund, citing its inability to locate the beneficiaries and arguing that the Fund had
technically reverted to RMC.

Issues:

1. Whether the reversion and application of the Fund by Philbank to pay RMC's outstanding obligations
were valid.

2. Whether the RMC Provident and Retirement Fund Board of Trustees had the authority to authorize
the release of the Fund to its beneficiaries.

Rulings:

The Supreme Court held that the reversion of the Fund to pay RMC's debt was invalid. The Fund was
intended for the benefit of RMC's employees, and its assets could not revert to RMC until all liabilities of
the Plan had been satisfied. Philbank had no power to effect the reversion, and its efforts to locate the
beneficiaries were inadequate.

The Court also found that the RMC Provident and Retirement Fund Board of Trustees had the authority
to authorize the release of the Fund to its beneficiaries. The termination of RMC's business operations
did not dissolve the Board's authority to act on behalf of the Fund for liquidation purposes. Therefore,
the Board's resolution authorizing the release of the Fund to its beneficiaries was within its power.

Furthermore, the Court ruled that the award of attorney's fees to the beneficiaries was proper because
Philbank's unjustified actions compelled them to seek judicial relief to protect their rights.

This case emphasizes the importance of corporate trustees adhering to the terms of trust agreements
and ensuring the protection of beneficiaries' rights when handling trust assets. It also highlights the
significance of following corporate and trust laws in resolving disputes involving trust funds.
a dissolved corporation shall nevertheless continue as a body corporate for three (3) years for the
purpose of prosecuting and defending suits by or against it and enabling it to settle and close its
affairs, to dispose and convey its property and to distribute its assets, but not for the purpose of
continuing the business for which it was established. Within those three (3) years, the corporation
may appoint a trustee or receiver who shall carry out the said purposes beyond the three (3)-year
winding-up period. Thus, a trustee of a dissolved corporation may commence a suit which can
proceed to final judgment even beyond the three (3)-year period of liquidation

In the same manner, during and beyond the three (3)-year winding-up period, the Board may do no
more than settle and close the affairs of the Fund. The Board retains its authority to act on behalf of
its members, albeit, in a limited capacity. It may commence suits on behalf of its members but not
continue managing the Fund for purposes of maximizing profits.