G.R. No. 118843, 6 February 1997
Petitioner Eriks Pte. Ltd. is a non-resident foreign corporation engaged in the manufacture and sale of elements used in sealing pumps, valves and pipes for industrial purposes, valves and control equipment used for industrial fluid control and PVC pipes and fittings for industrial uses. In its complaint, it alleged that:(I)t is a corporation duly organized and existing under the laws of the Republic of Singapore with address at 18 Pasir Panjang Road #09-01, PSA Multi-Storey Complex, Singapore 0511. It is not licensed to do business in the Philippines and i(s) not so engaged and is suing on an isolated transaction for which it has capacity to sue . . . (par. 1, Complaint; p. 1, Record)
On various dates covering the period January 17 — August 16, 1989, private respondent Delfin Enriquez, Jr., doing business under the name and style of Delrene EB Controls Center and/or EB Karmine Commercial, ordered and received from petitioner various elements used in sealing pumps, valves, pipes and control equipment, PVC pipes and fittings.
The transfers of goods were perfected in Singapore, for private respondent’s account, F.O.B. Singapore, with a 90-day credit term. Subsequently, demands were made by petitioner upon private respondent to settle his account, but the latter failed/refused to do so.
On August 28, 1991, petitioner corporation filed with the Regional Trial Court of Makati, Branch 138,4 Civil Case No. 91-2373 entitled “Eriks Pte. Ltd. vs. Delfin Enriquez, Jr.” for the recovery of S$41,939.63 or its equivalent in Philippine currency, plus interest thereon and damages. Private respondent responded with a Motion to Dismiss, contending that petitioner corporation had no legal capacity to sue.
In an Order dated March 8, 1993,5 the trial court dismissed the action on the ground that petitioner is a foreign corporation doing business in the Philippines without a license. On appeal, respondent Court affirmed said order as it deemed the series of transactions between petitioner, corporation and private respondent not to be an “isolated or casual transaction.”
Whether or not petitioner corporation may maintain an action in Philippine courts considering that it has no license to do business in the country based on its claim that its business with private respondent are isolated transactions?
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.
The aforementioned provision prohibits, not merely absence of the prescribed license, but it also bars a foreign corporation “doing business” in the Philippines without such license access to our courts. A foreign corporation without such license is not ipso facto incapacitated from bringing an action. A license is necessary only if it is “transacting or doing business in the country.
However, there is no definitive rule on what constitutes “doing,” “engaging in,” or “transacting” business. The Corporation Code itself does not define such terms. To fill the gap, the evolution of its statutory definition has produced a rather all-encompassing concept in Republic Act No. 7042 in this wise:Sec. 3. Definitions. — As used in this Act: xxx xxx xxx (d) the phrase “doing business” shall include soliciting orders, service contracts, opening offices, whether called “liaison” offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totalling one hundred eight(y) (180) days or more; participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works,or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization: Provided, however, That the phrase “doing business” shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; nor having a nominee director or officer to represent its interests in such corporation; nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account. (emphasis supplied)
More than the sheer number of transactions entered into, a clear and unmistakable intention on the part of petitioner to continue the body of its business in the Philippines is more than apparent. As alleged in its complaint, it is engaged in the manufacture and sale of elements used in sealing pumps, valves, and pipes for industrial purposes, valves and control equipment used for industrial fluid control and PVC pipes and fittings for industrial use. Thus, the sale by petitioner of the items covered by the receipts, which are part and parcel of its main product line, was actually carried out in the progressive prosecution of commercial gain and the pursuit of the purpose and object of its business, pure and simple.
Further, its grant and extension of 90-day credit terms to private respondent for every purchase made, unarguably shows an intention to continue transacting with private respondent, since in the usual course of commercial transactions, credit is extended only to customers in good standing or to those on whom there is an intention to maintain long-term relationship. This being so, the existence of a distributorship agreement between the parties, as alleged but not proven by private respondent, would, if duly established by competent evidence, be merely corroborative, and failure to sufficiently prove said allegation will not significantly affect the finding of the courts below. Nor our own ruling.
Thus, we hold that the series of transactions in question could not have been isolated or casual transactions. 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.
Given the facts of this case, we cannot see how petitioner’s business dealings will fit the category of “isolated transactions” considering that its intention to continue and pursue the corpus of its business in the country had been clearly established. It has not presented any convincing argument with equally convincing evidence for us to rule otherwise.
Accordingly and ineluctably, petitioner must be held to be incapacitated to maintain the action a quo against private respondent. It was never the intent of the legislature to bar court access to a foreign corporation or entity which happens to obtain an isolated order for business in the Philippines. Neither, did it intend to shield debtors from their legitimate liabilities or obligations. But it cannot allow foreign corporations or entities which conduct regular business any access to courts without the fulfillment by such corporations of the necessary requisites to be subjected to our government’s regulation and authority. By securing a license, the foreign entity would be giving assurance that it will abide by the decisions of our courts, even if adverse to it.
*Case Digest by Mary Tweetie Antonette G. Semprun, JD – IV, Andres Bonifacio College, SY 2019 – 2020