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

G.R. No. 171995, 18 April 2012

FACTS:

Petitioner Steelcase, Inc. is a foreign corporation existing under the laws of Michigan, United States of America (U.S.A.), and engaged in the manufacture of office furniture with dealers worldwide. Respondent Design International Selections, Inc. (“DISI”) 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 for sum of money against DISI alleging, among others, that DISI had an unpaid account of US$600,000.00.

ISSUE:

Whether or not Steelcase is not doing business in the Philippines without license.

RULING:

YES.Based on this list, the Supreme Court said that 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. 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.

Applying these rules, the Supreme Court said that DISI was founded in 1979 and is independently owned and managed. In addition to Steelcase products, DISI also distributed products of other companies including carpet tiles, relocatable walls and theater settings. The dealership agreement between Steelcase and DISI had been described by the owner himself as a buy and sell arrangement. This clearly belies DISI’s assertion that it was a mere conduit through which Steelcase conducted its business in the country. From the preceding facts, the only reasonable conclusion that can be reached is that DISI was an independent contractor, distributing various products of Steelcase and of other companies, acting in its own name and for its own account. As a result, Steelcase cannot be considered to be doing business in the Philippines by its act of appointing a distributor as it falls under one of the exceptions under R.A. No. 7042.

A foreign corporation doing business in the Philippines without a license may maintain suit in the Philippines against a domestic corporation or person who is party to a contract as the domestic corporation or person is deemed estopped from challenging the personality of the foreign corporation.

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

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