FOREIGN CORPORATION

G.R. No. 102223 August 22, 1996

COMMUNICATION MATERIALS AND DESIGN, INC et al vs.CA et al.

Facts:

Petitioners COMMUNICATION MATERIALS AND DESIGN, INC., (CMDI) and ASPAC MULTI-TRADE INC.,
(ASPAC) are both domestic corporations.. Private Respondents ITEC, INC. and/or ITEC, INTERNATIONAL,
INC. (ITEC) are corporations duly organized and existing under the laws of the State of Alabama, USA.
There is no dispute that ITEC is a foreign corporation not licensed to do business in the Philippines.

ITEC entered into a contract with ASPAC referred to as “Representative Agreement”. Pursuant to the
contract, ITEC engaged ASPAC as its “exclusive representative” in the Philippines for the sale of ITEC’s
products, in consideration of which, ASPAC was paid a stipulated commission. Through a “License
Agreement” entered into by the same parties later on, ASPAC was able to incorporate and use the name
“ITEC” in its own name. Thus , ASPAC Multi-Trade, Inc. became legally and publicly known as ASPAC-ITEC
(Philippines).

One year into the second term of the parties’ Representative Agreement, ITEC decided to terminate the
same, because petitioner ASPAC allegedly violated its contractual commitment as stipulated in their
agreements. ITEC charges the petitioners and another Philippine Corporation, DIGITAL BASE
COMMUNICATIONS, INC. (DIGITAL), the President of which is likewise petitioner Aguirre, of using
knowledge and information of ITEC’s products specifications to develop their own line of equipment and
product support, which are similar, if not identical to ITEC’s own, and offering them to ITEC’s former
customer.

The complaint was filed with the RTC by ITEC. Defendants filed a motion to dismiss the complaint on the
following grounds: (1) That plaintiff has no legal capacity to sue as it is a foreign corporation doing
business in the Philippines without the required BOI authority and SEC license, and (2) that plaintiff is
simply engaged in forum shopping which justifies the application against it of the principle of “forum non
conveniens”. The MTD was denied.

Issue: Whether or not the Philippine court acquire jurisdiction over the corporation despite allegations
of lack of capacity to sure because of non-registration.

Ruling:

We are persuaded to conclude that ITEC had been “engaged in” or “doing business” in the Philippines for
some time now. This is the inevitable result after a scrutiny of the different contracts and agreements
entered into by ITEC with its various business contacts in the country. Its arrangements, with these
entities indicate convincingly that ITEC is actively engaging in business in the country.
A foreign corporation doing business in the Philippines may sue in Philippine Courts although not
authorized to do business here against a Philippine citizen or entity who had contracted with and
benefited by said corporation. To put it in another way, a party is estopped to challenge the personality
of a corporation after having acknowledged the same by entering into a contract with it. And the
doctrine of estoppel to deny corporate existence applies to a foreign as well as to domestic corporations.
One who has dealt with a corporation of foreign origin as a corporate entity is estopped to deny its
corporate existence and capacity.

In Antam Consolidated Inc. vs. CA et al. we expressed our chagrin over this commonly used scheme of
defaulting local companies which are being sued by unlicensed foreign companies not engaged in
business in the Philippines to invoke the lack of capacity to sue of such foreign companies. Obviously, the
same ploy is resorted to by ASPAC to prevent the injunctive action filed by ITEC to enjoin petitioner from
using knowledge possibly acquired in violation of fiduciary arrangements between the parties.

According to petitioner, the Philippine Court has no venue to apply its discretion whether to give
cognizance or not to the present action, because it has not acquired jurisdiction over the person of the
plaintiff in the case, the latter allegedly having no personality to sue before Philippine Courts. This
argument is misplaced because the court has already acquired jurisdiction over the plaintiff in the suit,
by virtue of his filing the original complaint. And as we have already observed, petitioner is not at liberty
to question plaintiff’s standing to sue, having already acceded to the same by virtue of its entry into the
Representative Agreement referred to earlier.

Thus, having acquired jurisdiction, it is now for the Philippine Court, based on the facts of the case,
whether to give due course to the suit or dismiss it, on the principle of forum non convenience. Hence,
the Philippine Court may refuse to assume jurisdiction in spite of its having acquired jurisdiction.
Conversely, the court may assume jurisdiction over the case if it chooses to do so; provided, that the
following requisites are met:

1) That the Philippine Court is one to which the parties may conveniently resort to;
2) That the Philippine Court is in a position to make an intelligent decision as to the law and the facts;
and,
3) That the Philippine Court has or is likely to have power to enforce its decision.
The aforesaid requirements having been met, and in view of the court’s disposition to give due course to
the questioned action, the matter of the present forum not being the “most convenient” as a ground for
the suit’s dismissal, deserves scant consideration.

G.R. No. 73765 August 26, 1991

HANG LUNG BANK, LTD., petitioner,

vs.
HON. FELINTRIYE G. SAULOG, Presiding Judge, Regional Trial Court, National Capital Judicial Region,
Branch CXLII, Makati, Metro Manila, and CORDOVA CHIN SAN, respondents.

Facts:
Petitioner Hang Lung Bank, Ltd., which was not doing business in the Philippines, entered into two (2)
continuing guarantee agreements with Cordova Chin San in Hongkong whereby the latter agreed to pay
on demand all sums of money which may be due the bank from Worlder Enterprises to the extent of the
total amount of two hundred fifty thousand Hongkong dollars (HK $250,000).1

Worlder Enterprises having defaulted in its payment, petitioner filed in the Supreme Court of Hongkong
a collection suit against Worlder Enterprises and Chin San. Summonses were allegedly served upon
Worlder Enterprises and Chin San at their addresses in Hongkong but they failed to respond thereto.

Thereafter, petitioner through counsel sent a demand letter to Chin San at his Philippine address but
again, no response was made thereto. Hence, petitioner instituted in the court below an action seeking
"the enforcement of its just and valid claims against private respondent, who is a local resident, for a
sum of money based on a transaction which was perfected, executed and consummated abroad."2

Chin San filed a motion to dismiss on the grounds that petitioner had no legal capacity to sue and that
venue was improperly laid. The motion was granted. The lower court ruled that plaintiff Hang Lung Bank,
Ltd. with business and postal address at the 3rd Floor, United Centre, 95 Queensway, Hongkong, does
not do business in the Philippines. The continuing guarantee, Annexes "A" and "B" appeared to have
been transacted in Hongkong.

Issue: Whether or not the foreign banking corporation has the capacity to file action

Ruling:

We need not detain ourselves on the issue of improper venue. Suffice it to state that private respondent
waived his right to invoke it when he forthwith filed his answer to the complaint thereby necessarily
implying submission to the jurisdiction of the court.8

The resolution of this petition hinges on a determination of whether petitioner foreign banking
corporation has the capacity to file the action below.

Private respondent correctly contends that since petitioner is a bank, its capacity to file an action in this
jurisdiction is governed by the General Banking Act (Republic Act No. 337), particularly Section 14
thereof which provides:

SEC. 14. No foreign bank or banking corporation formed, organized or existing under any laws
other than those of the Republic of the Philippines shall be permitted to transact business in the
Philippines, or maintain by itself or assignee any suit for the recovery of any debt, claims, or
demand whatsoever, until after it shall have obtained, upon order of the Monetary Board, a
license for that purpose from the Securities and Exchange Commissioner. Any officer, director or
agent of any such corporation who transacts business in the Philippines without the said license
shall be punished by imprisonment for not less than one year nor more than ten years and by a
fine of not less than one thousand pesos nor more than ten thousand pesos. (45 O.G. No. 4,
1647, 1649-1650)

In construing this provision, we adhere to the interpretation given by this Court to the almost identical
Section 69 of the old Corporation Law (Act No. 1459) which reads:
 SEC. 69. No foreign corporation or corporation formed, organized, or existing under any laws
other than those of the Philippines shall be permitted to transact business in the Philippines or
maintain by itself or assignee any suit for the recovery of any debt, claim, or demand whatever,
unless it shall have the license prescribed in the section immediately preceding. Any officer,
director or agent of the corporation or any person transacting business for any foreign
corporation not having the license prescribed shall be punished by imprisonment for not less
than six months nor more than two years or by a fine of not less than two hundred pesos nor
more than one thousand pesos, or by both such imprisonment and fine, in the discretion of the
Court.

In a long line of cases, this Court has interpreted this last quoted provision as not altogether prohibiting a
foreign corporation not licensed to do business in the Philippines from suing or maintaining an action in
Philippine courts.9 What it seeks to prevent is a foreign corporation doing business in the Philippines
without a license from gaining access to Philippine courts.

Indeed, the phraseologies of Section 14 of the General Banking Act and its almost identical counterpart
Section 69 of the old Corporation Law are misleading in that they seem to require a foreign corporation,
including a foreign bank or banking corporation, not licensed to do business and not doing business in
the Philippines to secure a license from the Securities and Exchange Commission before it can bring or
maintain an action in Philippine courts. To avert such misimpression, Section 133 of the Corporation
Code is now more plainly worded thus:

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.

Under this provision, we have ruled that a foreign corporation may sue in this jurisdiction for
infringement of trademark and unfair competition although it is not doing business in the Philippines13
because the Philippines was a party to the Convention of the Union of Paris for the Protection of
IndustrialProperty.14

We even went further to say that a foreign corporation not licensed to do business in the Philippines
may not be denied the right to file an action in our courts for an isolated transaction in this country.15

Since petitioner foreign banking corporation was not doing business in the Philippines, it may not be
denied the privilege of pursuing its claims against private respondent for a contract which was entered
into and consummated outside the Philippines