G.R. No. 173463, 13 October 2010

FACTS:

Global Business Holdings merged with Asian Banking Corporation (ABC), with the former as the surviving corporation. Prior to the merger, ABC had an existing software license agreement with Surecomp Software, a foreign corporation in the Netherlands for the ABC’s bank operation system for a period of twenty years. After the merger, Global Business holdings found the software unusable, and therefore terminated the contract with Surecomp Software. As a result of the early termination, Surecomp filed an action for breach of contract with damages before the Philippine RTC. Global Business moved to dismiss the case on the ground that Surecomp had no capacity to sue because it was doing business in the Philippines without a license. RTC ruled in favor of Surecomp hodling that Global Business, being the successor in interest of ABC is estopped from denying Surecomps capacity to sue, to which the CA agreed, hence this petition.

ISSUE:

Whether or not Global Business Holdings is estopped from denying Surecomp’s capacity to sue.

RULING:

Yes. As a general rule, a corporation has a legal status only within the state or territory in which it was organized. 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 which it cannot institute a suit in the Philippines. The exception to this rule is the doctrine of estoppel. 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.

*Case Digest by Benjie L. Sumalpong, JD – 4, Andres Bonifacio College, SY 2019 – 2020