Republic of the PhilippinesSUPREME COURTManilaEN BANCG.R. No. L-14441December 17, 1966PEDRO R. PALTING,petitioner,vs.SAN JOSE PETROLEUM INCORPORATED,respondent.BARRERA,J.:This is a petition for review of the order of August 29, 1958, later supplemented and amplified by another dated September 9, 1958, of the Securities and Exchange Commission denying the opposition to, and instead, granting the registration, and licensing the sale in the Philippines, of 5,000,000 shares of the capital stock of the respondent-appellee San Jose Petroleum, Inc. (hereafter referred to as SAN JOSE PETROLEUM), a corporation organized and existing in the Republic of Panama.On September 7, 1956, SAN JOSE PETROLEUM filed with the Philippine Securities and Exchange Commission a sworn registration statement, for the registration and licensing for sale in the Philippines Voting Trust Certificates representing 2,000,000 shares of its capital stock of a par value of $0.35 a share, at P1.00 per share. It was alleged that the entire proceeds of the sale of said securities will be devoted or used exclusively to finance the operations of San Jose Oil Company, Inc. (a domestic mining corporation hereafter to be referred to as SAN JOSE OIL) which has 14 petroleum exploration concessions covering an area of a little less than 1,000,000 hectares, located in the provinces of Pangasinan, Tarlac, Nueva Ecija, La Union, Iloilo, Cotabato, Davao and Agusan. It was the express condition of the sale that every purchaser of the securities shall not receive a stock certificate, but a registered or bearer-voting-trust certificate from the voting trustees named therein James L. Buckley and Austin G.E. Taylor, the first residing in Connecticut, U.S.A., and the second in New York City. While this application for registration was pending consideration by the Securities and Exchange Commission, SAN JOSE PETROLEUM filed an amended Statement on June 20, 1958, for registration of the sale in the Philippines of its shares of capital stock, which was increased from 2,000,000 to 5,000,000, at a reduced offering price of from P1.00 to P0.70 per share. At this time the par value of the shares has also been reduced from $.35 to $.01 per share.1Pedro R. Palting and others, allegedly prospective investors in the shares of SAN JOSE PETROLEUM, filed with the Securities and Exchange Commission an opposition to registration and licensing of the securities on the grounds that (1) the tie-up between the issuer, SAN JOSE PETROLEUM, a Panamanian corporation and SAN JOSE OIL, a domestic corporation, violates the Constitution of the Philippines, the Corporation Law and the Petroleum Act of 1949; (2) the issuer has not been licensed to transact business in the Philippines; (3) the sale of the shares of the issuer is fraudulent, and works or tends to work a fraud upon Philippine purchasers; and (4) the issuer as an enterprise, as well as its business, is based upon unsound business principles. Answering the foregoing opposition of Palting, et al., the registrant SAN JOSE PETROLEUM claimed that it was a "business enterprise" enjoying parity rights under the Ordinance appended to the Constitution, which parity right, with respect to mineral resources in the Philippines, may be exercised, pursuant to the Laurel-Langley Agreement, only through the medium of a corporation organized under the laws of the Philippines. Thus, registrant which is allegedly qualified to exercise rights under the Parity Amendment, had to do so through the medium of a domestic corporation, which is the SAN JOSE OIL. It refused the contention that the Corporation Law was being violated, by alleging that Section 13 thereof applies only to foreign corporations doing business in the Philippines, and registrant was not doing business here. The mere fact that it was a holding company of SAN JOSE OIL and that registrant undertook the financing of and giving technical assistance to said corporation did not constitute transaction of business in the Philippines. Registrant also denied that the offering for sale in the Philippines of its shares of capital stock was fraudulent or would work or tend to work fraud on the investors. On August 29, 1958, and on September 9, 1958 the Securities and Exchange Commissioner issued the orders object of the present appeal.The issues raised by the parties in this appeal are as follows:1. Whether or not petitioner Pedro R. Palting, as a "prospective investor" in respondent's securities, has personality to file the present petition for review of the order of the Securities and Exchange Commission;2. Whether or not the issue raised herein is already moot and academic;3. Whether or not the "tie-up" between the respondent SAN JOSE PETROLEUM, a foreign corporation, and SAN JOSE OIL COMPANY, INC., a domestic mining corporation, is violative of the Constitution, the Laurel-Langley Agreement, the Petroleum Act of 1949, and the Corporation Law; and4. Whether or not the sale of respondent's securities is fraudulent, or would work or tend to work fraud to purchasers of such securities in the Philippines.1. In answer to the notice and order of the Securities and Exchange Commissioner, published in 2 newspapers of general circulation in the Philippines, for "any person who is opposed" to the petition for registration and licensing of respondent's securities, to file his opposition in 7 days, herein petitioner so filed an opposition. And, the Commissioner, having denied his opposition and instead, directed the registration of the securities to be offered for sale, oppositor Palting instituted the present proceeding for review of said order.Respondent raises the question of the personality of petitioner to bring this appeal, contending that as a mere "prospective investor", he is not an "Aggrieved" or "interested" person who may properly maintain the suit. Citing a 1931 ruling of Utah State Supreme Court2it is claimed that the phrase "party aggrieved" used in the Securities Act3and the Rules of Court4as having the right to appeal should refer only to issuers, dealers and salesmen of securities.It is true that in the cited case, it was ruled that the phrase "person aggrieved" is that party "aggrieved by the judgment or decree where it operates on his rights of property or bears directly upon his interest", that the word "aggrieved" refers to "a substantial grievance, a denial of some personal property right or the imposition upon a party of a burden or obligation." But a careful reading of the case would show that the appeal therein was dismissed because the court held that an order of registration was not final and therefore not appealable. The foregoing pronouncement relied upon by herein respondent was made in construing the provision regarding an order of revocation which the court held was the one appealable. And since the law provides that in revoking the registration of any security, only the issuer and every registered dealer of the security are notified, excluding any person or group of persons having no such interest in the securities, said court concluded that the phrase "interested person" refers only to issuers, dealers or salesmen of securities.We cannot consider the foregoing ruling by the Utah State Court as controlling on the issue in this case. Our Securities Act in Section 7(c) thereof, requires the publication and notice of the registration statement. Pursuant thereto, the Securities and Exchange Commissioner caused the publication of an order in part reading as follows:. . . Any person who is opposed with this petition must file his written opposition with this Commission within said period (2 weeks). . . .In other words, as construed by the administrative office entrusted with the enforcement of the Securities Act, any person (who may not be "aggrieved" or "interested" within the legal acceptation of the word) is allowed or permitted to file an opposition to the registration of securities for sale in the Philippines. And this is in consonance with the generally accepted principle that Blue Sky Laws are enacted to protect investors and prospective purchasers and to prevent fraud and preclude the sale of securities which are in fact worthless or worth substantially less than the asking price. It is for this purpose that herein petitioner duly filed his opposition giving grounds therefor. Respondent SAN JOSE PETROLEUM was required to reply to the opposition. Subsequently both the petition and the opposition were set for hearing during which the petitioner was allowed to actively participate and did so by cross-examining the respondent's witnesses and filing his memorandum in support of his opposition. He therefore to all intents and purposes became a party to the proceedings. And under the New Rules of Court,5such a party can appeal from a final order, ruling or decision of the Securities and Exchange Commission. This new Rule eliminating the word "aggrieved" appearing in the old Rule, being procedural in nature,6and in view of the express provision of Rule 144 that the new rules made effective on January 1, 1964 shall govern not only cases brought after they took effect but all further proceedings in cases thenpending, except to the extent that in the opinion of the Court their application would not be feasible or would work injustice, in which event the former procedure shall apply, we hold that the present appeal is properly within the appellate jurisdiction of this Court.The order allowing the registration and sale of respondent's securities is clearly a final order that is appealable. The mere fact that such authority may be later suspended or revoked, depending on future developments, does not give it the character of an interlocutory or provisional ruling. And the fact that seven days after the publication of the order, the securities are deemed registered (Sec. 7, Com. Act 83, as amended), points to the finality of the order. Rights and obligations necessarily arise therefrom if not reviewed on appeal.Our position on this procedural matter that the order is appealable and the appeal taken here is proper is strengthened by the intervention of the Solicitor General, under Section 23 of Rule 3 of the Rules of Court, as the constitutional issues herein presented affect the validity of Section 13 of the Corporation Law, which, according to the respondent, conflicts with the Parity Ordinance and the Laurel-Langley Agreement recognizing, it is claimed, its right to exploit our petroleum resources notwithstanding said provisions of the Corporation Law.2. Respondent likewise contends that since the order of Registration/Licensing dated September 9, 1958 took effect 30 days from September 3, 1958, and since no stay order has been issued by the Supreme Court, respondent's shares became registered and licensed under the law as of October 3, 1958. Consequently, it is asserted, the present appeal has become academic. Frankly we are unable to follow respondent's argumentation. First it claims that the order of August 29 and that of September 9, 1958 are not final orders and therefor are not appealable. Then when these orders, according to its theory became final and were implemented, it argues that the orders can no longer be appealed as the question of registration and licensing became moot and academic.But the fact is that because of the authority to sell, the securities are, in all probabilities, still being traded in the open market. Consequently the issue is much alive as to whether respondent's securities should continue to be the subject of sale. The purpose of the inquiry on this matter is not fully served just because the securities had passed out of the hands of the issuer and its dealers. Obviously, so long as the securities are outstanding and are placed in the channels of trade and commerce, members of the investing public are entitled to have the question of the worth or legality of the securities resolved one way or another.But more fundamental than this consideration, we agree with the late Senator Claro M. Recto, who appeared asamicus curiaein this case, that while apparently the immediate issue in this appeal is the right of respondent SAN JOSE PETROLEUM to dispose of and sell its securities to the Filipino public, the real and ultimate controversy here would actually call for the construction of the constitutional provisions governing the disposition, utilization, exploitation and development of our natural resources. And certainly this is neither moot nor academic.3. We now come to the meat of the controversy the "tie-up" between SAN JOSE OIL on the one hand, and the respondent SAN JOSE PETROLEUM and its associates, on the other. The relationship of these corporations involved or affected in this case is admitted and established through the papers and documents which are parts of the records: SAN JOSE OIL, is a domestic mining corporation, 90% of the outstanding capital stock of which is owned by respondent SAN JOSE PETROLEUM, a foreign (Panamanian) corporation, the majority interest of which is owned by OIL INVESTMENTS, Inc., another foreign (Panamanian) company. This latter corporation in turn is wholly (100%) owned by PANTEPEC OIL COMPANY, C.A., and PANCOASTAL PETROLEUM COMPANY, C.A., both organized and existing under the laws of Venezuela. As of September 30, 1956, there were 9,976 stockholders of PANCOASTAL PETROLEUM found in 49 American states and U.S. territories, holding 3,476,988 shares of stock; whereas, as of November 30, 1956, PANTEPEC OIL COMPANY was said to have 3,077,916 shares held by 12,373 stockholders scattered in 49 American state. In the two lists of stockholders, there is no indication of the citizenship of these stockholders,7or of the total number of authorized stocks of each corporation, for the purpose of determining the corresponding percentage of these listed stockholders in relation to the respective capital stock of said corporation.Petitioner, as well as theamicus curiaeand the Solicitor General8contend that the relationship between herein respondent SAN JOSE PETROLEUM and its subsidiary, SAN JOSE OIL, violates the Petroleum Law of 1949, the Philippine Constitution, and Section 13 of the Corporation Law, which inhibits a mining corporation from acquiring an interest in another mining corporation. It is respondent's theory, on the other hand, that far from violating the Constitution; such relationship between the two corporations is in accordance with the Laurel-Langley Agreement which implemented the Ordinance Appended to the Constitution, and that Section 13 of the Corporation Law is not applicable because respondent is not licensed to do business, as it is not doing business, in the Philippines.Article XIII, Section 1 of the Philippine Constitution provides:SEC. 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, and other natural resources of the Philippines belong to the State, and their disposition, exploitation, development, or utilizationshall be limited to citizens of the Philippines, or to corporations or associations at least sixty per centum of the capital of which is owned by such citizens, subject to any existing right, grant, lease or concession at the time of the inauguration of this Government established under this Constitution. . . . (Emphasis supplied)In the 1946 Ordinance Appended to the Constitution, this right (to utilize and exploit our natural resources) was extended to citizens of the United States, thus:Notwithstanding the provisions of section one, Article Thirteen, and section eight, Article Fourteen, of the foregoing Constitution, during the effectivity of the Executive Agreement entered into by the President of the Philippines with the President of the United States on the fourth of July, nineteen hundred and forty-six, pursuant to the provisions of Commonwealth Act Numbered Seven hundred and thirty-three, but in no case to extend beyond the third of July, nineteen hundred and seventy-four, the disposition, exploitation, development, and utilization of all agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, and other natural resources of the Philippines, and the operation of public utilities shall,if open to any person, be open to citizens of the United States, and to all forms of business enterprises owned or controlled, directly or indirectly, by citizens of the United States in the same manner as to, and under the same conditions imposed upon, citizens of the Philippines or corporations or associations owned or controlled by citizens of the Philippines(Emphasis supplied.)In the 1954 Revised Trade Agreement concluded between the United States and the Philippines, also known as the Laurel-Langley Agreement, embodied in Republic Act 1355, the following provisions appear:ARTICLE VI1. The disposition, exploitation, development and utilization of all agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces and sources of potential energy, and other natural resources of either Party, and the operation of public utilities, shall, if open to any person, be open to citizens of the other Party and toall forms of business enterprise owned or controlled, directly or indirectly, by citizens of such other Party in the same manner as to and under the same conditions imposed upon citizens or corporations or associations owned or controlled by citizens of the Party granting the right.2. The rights provided for in Paragraph 1 may be exercised, . . . in the case of citizens of the United States, with respect to natural resources in the public domain in the Philippines,only through the medium of a corporation organized under the laws of the Philippines and at least 60% of the capital stock of which is owned or controlled by citizens of the United States. . . .3. The United States of America reserves the rights of the several States of the United States to limit the extent to which citizens or corporations or associations owned or controlled by citizens of the Philippines may engage in the activities specified in this Article.The Republic of the Philippines reserves the power to deny any of the rights specified in this Article to citizens of the United States who are citizens of States, or to corporations or associations at least 60% of whose capital stock or capital is owned or controlled by citizens of States, which deny like rights to citizens of the Philippines, or to corporations or associations which are owned or controlled by citizens of the Philippines. . . .(Emphasis supplied.)Re-stated, the privilege to utilize, exploit, and develop the natural resources of this country was granted, by Article XIII of the Constitution, to Filipinocitizensor to corporations or associations 60% of the capital of which isowned by such citizens. With the Parity Amendment to the Constitution, the same right was extended to citizens of the United States and business enterprisesowned or controlled directly or indirectly, by citizens of the United States.There could be no serious doubt as to the meaning of the word "citizens" used in the aforementioned provisions of the Constitution. The right was granted to 2 types of persons: natural persons (Filipino or American citizens) and juridical persons (corporations 60% of which capital is owned by Filipinos and business enterprises owned or controlled directly or indirectly, by citizens of the United States). In American law, "citizen" has been defined as "one who, under the constitution and laws of the United States, has a right to vote for representatives in congress and other public officers, and who is qualified to fill offices in the gift of the people. (1 Bouvier's Law Dictionary, p. 490.) A citizen is One of the sovereign people. A constituent member of the sovereignty, synonymous with the people." (Scott v. Sandford, 19 Ho. [U.S.] 404, 15 L. Ed. 691.)A member of the civil state entitled to all its privileges. (Cooley, Const. Lim. 77. See U.S. v. Cruikshank 92 U.S. 542, 23 L. Ed. 588; Minor v. Happersett 21 Wall. [U.S.] 162, 22 L. Ed. 627.)These concepts clarified, is herein respondent SAN JOSE PETROLEUM an American business enterprise entitled to parity rights in the Philippines? The answer must be in the negative, for the following reasons:Firstly It is not owned or controlleddirectlyby citizens of the United States, because it is owned and controlled by a corporation, the OIL INVESTMENTS, another foreign (Panamanian) corporation.Secondly Neither can it be said that it is indirectly owned and controlled by American citizens through the OIL INVESTMENTS, for this latter corporation is in turn owned and controlled, not by citizens of the United States, but still by two foreign (Venezuelan) corporations, the PANTEPEC OIL COMPANY and PANCOASTAL PETROLEUM.Thirdly Although it is claimed that these two last corporations are owned and controlled respectively by 12,373 and 9,979 stockholders residing in the different American states, there is no showing in the certification furnished by respondent that the stockholders of PANCOASTAL or those of them holding the controlling stock, are citizens of the United States.Fourthly Granting that these individual stockholders are American citizens, it is yet necessary to establish that the different states of which they are citizens, allow Filipino citizens or corporations or associations owned or controlled by Filipino citizens, to engage in the exploitation, etc. of the natural resources of these states (see paragraph 3, Article VI of the Laurel-Langley Agreement,supra). Respondent has presented no proof to this effect.Fifthly But even if the requirements mentioned in the two immediately preceding paragraphs are satisfied, nevertheless to hold that the set-up disclosed in this case, with a long chain of intervening foreign corporations, comes within the purview of the Parity Amendment regarding business enterprises indirectly owned or controlled by citizens of the United States, is to unduly stretch and strain the language and intent of the law. For, to what extent must the word "indirectly" be carried? Must we trace the ownership or control of these various corporationsad infinitumfor the purpose of determining whether the American ownership-control-requirement is satisfied? Add to this the admitted fact that the shares of stock of the PANTEPEC and PANCOASTAL which are allegedly owned or controlleddirectlyby citizens of the United States, are traded in the stock exchange in New York, and you have a situation where it becomes a practical impossibility to determine at any given time, the citizenship of the controlling stock required by the law. In the circumstances, we have to hold that the respondent SAN JOSE PETROLEUM, as presently constituted, is not a business enterprise that is authorized to exercise the parity privileges under the Parity Ordinance, the Laurel-Langley Agreement and the Petroleum Law. Its tie-up with SAN JOSE OIL is, consequently, illegal.What, then, would be the Status of SAN JOSE OIL, about 90% of whose stock is owned by SAN JOSE PETROLEUM? This is a query which we need not resolve in this case as SAN JOSE OIL is not a party and it is not necessary to do so to dispose of the present controversy. But it is a matter that probably the Solicitor General would want to look into.There is another issue which has been discussed extensively by the parties. This is whether or not an American mining corporation may lawfully "be in anywise interested in any other corporation (domestic or foreign) organized for the purpose of engaging in agriculture or in mining," in the Philippines or whether an American citizen owning stock in more than one corporation organized for the purpose of engaging in agriculture or in mining, may own more than 15% of the capital stock then outstanding and entitled to vote, of each of such corporations, in view of the express prohibition contained in Section 13 of the Philippine Corporation Law. The petitioner in this case contends that the provisions of the Corporation Law must be applied to American citizens and business enterprise otherwise entitled to exercise the parity privileges, because both the Laurel-Langley Agreement (Art. VI, par. 1) and the Petroleum Act of 1948 (Art. 31), specifically provide that the enjoyment by them of the same rights and obligations granted under the provisions of both laws shall be "in the same manner as to, and under the same conditions imposed upon, citizens of the Philippines or corporations or associations owned or controlled by citizens of the Philippines." The petitioner further contends that, as the enjoyment of the privilege of exploiting mineral resources in the Philippines by Filipino citizens or corporations owned or controlled by citizens of the Philippines (which corporation must necessarily be organized under the Corporation Law), is made subject to the limitations provided in Section 13 of the Corporation Law, so necessarily the exercise of the parity rights by citizens of the United States or business enterprise owned or controlled, directly or indirectly, by citizens of the United States, must equally be subject to the same limitations contained in the aforesaid Section 13 of the Corporation Law.In view of the conclusions we have already arrived at, we deem it not indispensable for us to pass upon this legal question, especially taking into account the statement of the respondent (SAN JOSE PETROLEUM) that it is essentially a holding company, and as found by the Securities and Exchange Commissioner, its principal activity is limited to the financing and giving technical assistance to SAN JOSE OIL.4. Respondent SAN JOSE PETROLEUM, whose shares of stock were allowed registration for sale in the Philippines, was incorporated under the laws of Panama in April, 1956 with an authorized capital stock of $500,000.00, American currency, divided into 50,000,000 shares at par value of $0.01 per share. By virtue of a 3-party Agreement of June 14, 1956, respondent was supposed to have received from OIL INVESTMENTS 8,000,000 shares of the capital stock of SAN JOSE OIL (at par value of $0.01 per share), plus a note for $250,000.00 due in 6 months, for which respondent issued in favor of OIL INVESTMENTS 16,000,000 shares of its capital stock, at $0.01 per share or with a value of $160,000.00, plus a note for $230,297.97 maturing in 2 years at 6% per annum interest,9and the assumption of payment of the unpaid price of 7,500,000 (of the 8,000,000 shares of SAN JOSE OIL).On June 27, 1956, the capitalization of SAN JOSE PETROLEUM was increased from $500,000.00 to $17,500,000.00 by increasing the par value of the same 50,000,000 shares, from $0.01 to $0.35. Without any additional consideration, the 16,000,000 shares of $0.01 previously issued to OIL INVESTMENTS with a total value of $160,000.00 were changed with 16,000,000 shares of the recapitalized stock at $0.35 per share, or valued at $5,600,000.00. And, to make it appear that cash was received for these re-issued 16,000,000 shares, the board of directors of respondent corporation placed a valuation of $5,900,000.00 on the 8,000,000 shares of SAN JOSE OIL (still having par value of $0.10 per share) which were received from OIL INVESTMENTS as part-consideration for the 16,000,000 shares at $0.01 per share.In the Balance Sheet of respondent, dated July 12, 1956, from the $5,900,000.00, supposedly the value of the 8,000,000 shares of SAN JOSE OIL, the sum of $5,100,000.00 was deducted, corresponding to the alleged difference between the "value" of the said shares and the subscription price thereof which is $800,000.00 (at $0.10 per share). From this $800,000.00, the subscription price of the SAN JOSE OIL shares, the amount of $319,702.03 was deducted, as allegedly unpaid subscription price, thereby giving a difference of $480,297.97, which was placed as the amount allegedly paid in on the subscription price of the 8,000,000 SAN JOSE OIL shares. Then, by adding thereto the note receivable from OIL INVESTMENTS, for $250,000.00 (part-consideration for the 16,000,000 SAN JOSE PETROLEUM shares), and the sum of $6,516.21, as deferred expenses, SAN JOSE PETROLEUM appeared to have assets in the sum of $736,814.18.These figures are highly questionable. Take the item $5,900,000.00 the valuation placed on the 8,000,000 shares of SAN JOSE OIL. There appears no basis for such valuation other than belief by the board of directors of respondent that "should San Jose Oil Company be granted the bulk of the concessions applied for upon reasonable terms, that it would have a reasonable value of approximately $10,000,000."10Then, of this amount, the subscription price of $800,000.00 was deducted and called it "difference between the (above) valuation and the subscription price for the 8,000,000 shares." Of this $800,000.00 subscription price, they deducted the sum of $480,297.97 and the difference was placed as the unpaid portion of the subscription price. In other words, it was made to appear that they paid in $480,297.97 for the 8,000,000 shares of SAN JOSE OIL. This amount ($480,297.97) was supposedly that $250,000.00 paid by OIL INVESMENTS for 7,500,000 shares of SAN JOSE OIL, embodied in the June 14 Agreement, and a sum of $230,297.97 the amount expended or advanced by OIL INVESTMENTS to SAN JOSE OIL. And yet, there is still an item among respondent's liabilities, for $230,297.97 appearing as note payable to Oil Investments, maturing in two (2) years at six percent (6%) per annum.11As far as it appears from the records, for the 16,000,000 shares at $0.35 per share issued to OIL INVESTMENTS, respondent SAN JOSE PETROLEUM received from OIL INVESTMENTS only the note for $250,000.00 plus the 8,000,000 shares of SAN JOSE OIL, with par value of $0.10 per share or a total of $1,050,000.00 the only assets of the corporation. In other words, respondent actually lost $4,550,000.00, which was received by OIL INVESTMENTS.But this is not all. Some of the provisions of the Articles of Incorporation of respondent SAN JOSE PETROLEUM are noteworthy; viz:(1) the directors of the Company need not be shareholders;(2) that in the meetings of the board of directors, any director may be represented and may vote through a proxy who also need not be a director or stockholder; and(3) that no contract or transaction between the corporation and any other association or partnership will be affected, except in case of fraud, by the fact that any of the directors or officers of the corporation is interested in, or is a director or officer of, such other association or partnership, and that no such contract or transaction of the corporation with any other person or persons, firm, association or partnership shall be affected by the fact that any director or officer of the corporation is a party to or has an interest in, such contract or transaction, or has in anyway connected with such other person or persons, firm, association or partnership; and finally, that all and any of the persons who may become director or officer of the corporation shall be relieved from all responsibility for which they may otherwise be liable by reason of any contract entered into with the corporation, whether it be for his benefit or for the benefit of any other person, firm, association or partnership in which he may be interested.These provisions are in direct opposition to our corporation law and corporate practices in this country. These provisions alone would outlaw any corporation locally organized or doing business in this jurisdiction. Consider the unique and unusual provision that no contract or transaction between the company and any other association or corporation shall be affected except in case of fraud, by the fact that any of the directors or officers of the company may be interested in or are directors or officers of such other association or corporation; and that none of such contracts or transactions of this company with any person or persons, firms, associations or corporations shall be affected by the fact that any director or officer of this company is a party to or has an interest in such contract or transaction or has any connection with such person or persons, firms associations or corporations; and that any and all persons who may become directors or officers of this company are hereby relieved of all responsibility which they would otherwise incur by reason of any contract entered into which this company either for their own benefit, or for the benefit of any person, firm, association or corporation in which they may be interested.The impact of these provisions upon the traditional judiciary relationship between the directors and the stockholders of a corporation is too obvious to escape notice by those who are called upon to protect the interest of investors. The directors and officers of the company can do anything, short of actual fraud, with the affairs of the corporation even to benefit themselves directly or other persons or entities in which they are interested, and with immunity because of the advance condonation or relief from responsibility by reason of such acts. This and the other provision which authorizes the election of non-stockholders as directors, completely disassociate the stockholders from the government and management of the business in which they have invested.To cap it all on April 17, 1957, admittedly to assure continuity of the management and stability of SAN JOSE PETROLEUM, OIL INVESTMENTS, asholder of the only subscribed stockof the former corporation and acting "on behalf ofall futureholders of voting trust certificates," entered into a voting trust agreement12with James L. Buckley and Austin E. Taylor, whereby said Trustees were given authority to vote the shares represented by the outstanding trust certificates (including those that may henceforth be issued) in the following manner:(a) At all elections of directors, the Trustees will designate a suitable proxy or proxiesto vote for the election of directors designated by the Trustees in their own discretion, having in mind the best interests of the holders of the voting trust certificates, it being understood that any and all of the Trustees shall be eligible for election as directors;(b) On any propositionfor removal of a director, the Trustees shall designate a suitable proxy or proxies to vote for or against such propositionas the Trustees in their own discretion may determine,having in mind the bestinterest of the holders of the voting trust certificates;(c) With respect toall other mattersarising at any meeting of stockholders, the Trustees will instruct such proxy or proxies attending such meetings to vote the shares of stock held by the Trusteesin accordance with the written instructions of each holder of voting trust certificates. (Emphasis supplied.)It was also therein provided that the said Agreement shall be binding upon the parties thereto, their successors, and upon all holders of voting trust certificates.And these are the voting trust certificates that are offered to investors as authorized by Security and Exchange Commissioner. It can not be doubted that the sale of respondent's securities would, to say the least, work or tend to work fraud to Philippine investors.FOR ALL THE FOREGOING CONSIDERATIONS, the motion of respondent to dismiss this appeal, is denied and the orders of the Securities and Exchange Commissioner, allowing the registration of Respondent's securities and licensing their sale in the Philippines are hereby set aside. The case is remanded to the Securities and Exchange Commission for appropriate action in consonance with this decision. With costs. Let a copy of this decision be furnished the Solicitor General for whatever action he may deem advisable to take in the premises. So ordered.Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar and Sanchez, JJ.,concur.Castro, J.,took no part.

Republic of the PhilippinesSUPREME COURTManilaEN BANCG.R. No. L-47701 June 27, 1941THE MENTHOLATUM CO., INC., ET AL.,petitioners,vs.ANACLETO MANGALIMAN, ET AL.,respondents.Araneta, Zaragoza, Araneta & Bautista for petitioners.Benito Soliven for respondents.LAUREL,J.:This is a petition for a writ ofcertiorarito review the decision of the Court of Appeals dated June 29, 1940, reversing the judgment of the Court of First Instance of Manila and dismissing petitioners' complaint.On October 1, 1935, the Mentholatum Co., Inc., and the Philippine-American Drug Co., Inc. instituted an action in the Court of First Instance of Manila, civil case No. 48855, against Anacleto Mangaliman, Florencio Mangaliman and the Director of the Bureau of Commerce for infringement of trade mark and unfair competition. Plaintiffs prayed for the issuance of an order restraining Anacleto and Florencio Mangaliman from selling their product "Mentholiman," and directing them to render an accounting of their sales and profits and to pay damages. The complaint stated, among other particulars, that the Mentholatum Co., Inc., is a Kansas corporation which manufactures Mentholatum," a medicament and salve adapted for the treatment of colds, nasal irritations, chapped skin, insect bites, rectal irritation and other external ailments of the body; that the Philippine-American Drug co., Inc., is its exclusive distributing agent in the Philippines authorized by it to look after and protect its interests; that on June 26, 1919 and on January 21, 1921, the Mentholatum Co., Inc., registered with the Bureau of Commerce and Industry the word, "Mentholatum," as trade mark for its products; that the Mangaliman brothers prepared a medicament and salve named "Mentholiman" which they sold to the public packed in a container of the same size, color and shape as "Mentholatum"; and that, as a consequence of these acts of the defendants, plaintiffs suffered damages from the dimunition of their sales and the loss of goodwill and reputation of their product in the market.After a protracted trial, featured by the dismissal of the case on March 9, 1936 for failure of plaintiff's counsel to attend, and its subsequent reinstatement on April 4, 1936, the Court of First Instance of Manila, on October 29, 1937, rendered judgment in favor of the complainants, the dispositive part of its decision reading thus:En meritos de todo lo expuesto, este Juzgado dicta sentencia:(a) Haciendo que sea perpetuo y permanente el iterdicto prohibitorio preliminar expedido contra Anacleto Mangaliman, sus agentes y empleados, prohibiendoles vender su producto en la forma en que se vendia al incoarse la demanda de autos, o de alguna otra manera competir injustamente contra el producto de las demandantes, y de usar la marca industrial "MENTHOLIMAN" en sus productos;(b) Ordenando al demandado Anacleto Mangaliman, que rinda exacta cuenta de sus ganancias por la venta de su producto desde el dia 10 de marzo de 1934, hasta la fecha de esta decision, y que pague a las demandantes, en concepto de daos y perjuicios, lo que resulte ser la ganancia de dicho demandado;(c) Condenando a dicho demandado, Anacleto Mangaliman, a pagar un multa de cincuenta pesos (P50) por desacato al Juzgado, y las costas del juicio; y(d) Sobreseyendo la contra-reclamacion del demandado, Anacleto Mangaliman, contra las demandantes.In the Court of Appeals, where the cause was docketed as CA-G. R. No. 46067, the decision of the trial court was, on June 29, 1940, reversed, said tribunal holding that the activities of the Mentholatum Co., Inc., were business transactions in the Philippines, and that, by section 69 of the Corporation Law, it may not maintain the present suit. Hence, this petition forcertiorari.In seeking a reversal of the decision appealed from, petitioners assign the following errors:1. The Court of Appeals erred in declaring that the transactions of the Mentholatum Co., Inc., in the Philippines constitute "transacting business" in this country as this term is used in section 69 of the Corporation Law. The aforesaid conclusion of the Court of Appeals is a conclusion of law and not of fact.2. The Court of Appeals erred in not holding that whether or not the Mentholatum Co., Inc., has transacted business in the Philippines is an issue foreign to the case at bar.3. The Court of Appeals erred in not considering the fact that the complaint was filed not only by the Mentholatum Co., Inc., but also by the Philippine-American Drug Co., Inc., and that even if the Mentholatum Co., Inc., has no legal standing in this jurisdiction, the complaint filed should be decided on its merits since the Philippine-American Drug Co., Inc., has sufficient interest and standing to maintain the complaint.Categorically stated, this appeal simmers down to an interpretation of section 69 of the Corporation Law, and incidentally turns upon a substantial consideration of two fundamental propositions, to wit: (1) whether or not the petitioners could prosecute the instant action without having secured the license required in section 69 of the Corporation Law; and (2) whether or not the Philippine-American Drug Co., Inc., could by itself maintain this proceeding.Petitioners maintain that the Mentholatum Co., Inc., has not sold personally any of its products in the Philippines; that the Philippine-American Drug Co., Inc., like fifteen or twenty other local entities, was merely an importer of the products of the Mentholatum Co., Inc., and that the sales of the Philippine-American Drug Co., Inc., were its own and not for the account of the Mentholatum Co., Inc. Upon the other hand, the defendants contend that the Philippine-American Drug Co., Inc., is the exclusive distributing agent in the Philippines of the Mentholatum Co., Inc., in the sale and distribution of its product known as "Mentholatum"; that, because of this arrangement, the acts of the latter; and that the Mentholatum Co., Inc., being thus engaged in business in the Philippines, and not having acquired the license required by section 68 of the Corporation Law, neither it nor the Philippine-American Drug co., Inc., could prosecute the present action.Section 69 of Act No. 1459 reads:SEC. 69. No foreign corporation or corporation formed, organized, or existing under any laws other than those of the Philippine Islands shall be permitted to transact business in the Philippine Islands 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, 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 the present case, no dispute exists as to facts: (1) that the plaintiff, the Mentholatum Co., Inc., is a foreign corporation; (2) that it is not licensed to do business in the Philippines. The controversy, in reality, hinges on the question of whether the said corporation is or is not transacting business in the Philippines.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. (Traction Cos. v. Collectors of Int. Revenue [C. C. A. Ohio], 223 F. 984, 987.) 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. (Griffin v. Implement Dealers' Mut. Fire Ins. Co., 241 N. W. 75, 77; Pauline Oil & Gas Co. v. Mutual Tank Line Co., 246 P. 851, 852, 118 Okl. 111; Automotive Material Co. v. American Standard Metal Products Corp., 158 N. E. 698, 703, 327 III. 367.)In its decision of June 29, 1940, the Court of Appeals concluded that "it is undeniable that the Mentholatum Co., through its agent, the Philippine-American Drug Co., Inc., has been doing business in the Philippines by selling its products here since the year 1929, at least." This is assailed by petitioners as a pure conclusion of law. This finding is predicated upon the testimony of Mr. Roy Springer of the Philippine-American Drug Co., Inc., and the pleadings filed by petitioners. The complaint filed in the Court of First Instance of Manila on October 1, 1935, clearly stated that the Philippine-American Drug Co., Inc., is the exclusive distributing agent in the Philippine Islands of the Mentholatum Co., Inc., in the sale and distribution of its product known as the Mentholatum." The object of the pleadings being to draw the lines of battle between litigants and to indicate fairly the nature of the claims or defenses of both parties (1 Sutherland's Code Pleading, Practice & Forms, sec. 83; Milliken v. Western Union Tel. Co., 110 N. Y. 403, 18 N. E. 251; Eckrom v. Swenseld, 46 N. D. 561, 563, 179 N. W. 920), a party cannot subsequently take a position contradictory to, or inconsistent with, his pleadings, as the facts therein admitted are to be taken as true for the purpose of the action. (46 C. J., sec. 121, pp. 122-124.) It follows that whatever transactions the Philippine-American Drug Co., Inc., had executed in view of the law, the Mentholatum Co., Inc., did it itself. And, the Mentholatum Co., Inc., being a foreign corporation doing business in the Philippines without the license required by section 68 of the Corporation Law, it may not prosecute this action for violation of trade mark and unfair competition. Neither may the Philippine-American Drug Co., Inc., maintain the action here for the reason that the distinguishing features of the agent being his representative character and derivative authority (Mechem on Agency, sec. 1; Sory on Agency, sec. 3; Sternaman v. Metropolitan Life Ins. Co., 170 N. Y. 21), it cannot now, to the advantage of its principal, claim an independent standing in court.The appellees below, petitioners here, invoke the case ofWestern Equipment and Supply Co. vs. Reyes(51 Phil., 115). The Court of Appeals, however, properly distinguished that case from the one at bar in that in the former "the decision expressly says that the Western Equipment and Supply Co. was not engaged in business in the Philippines, and significantly added that if the plaintiff had been doing business in the Philippine Islands without first obtaining a license, 'another and a very different question would be presented'. " It is almost unnecessary to remark in this connection that the recognition of the legal status of a foreign corporation is a matter affecting the policy of the forum, and the distinction drawn in our Corporation Law is an expression of that policy. The general statement made inWestern Equipment and Supply Co. vs. Reyesregarding the character of the right involved should not be construed in derogation of the policy-determining authority of the State.The right of the petitioner conditioned upon compliance with the requirements of section 69 of the Corporation Law to protect its rights, is hereby reserved.The writ prayed for should be, as it hereby is, denied, with costs against the petitioners.So ordered.

Republic of the PhilippinesSUPREME COURTManilaTHIRD DIVISIONG.R. No. 118843 February 6, 1997ERIKS PTE. LTD.,petitioner,vs.COURT OF APPEALS, and DELFIN F. ENRIQUEZ, JR.,respondents.PANGANIBAN,J.:Is a foreign corporation which sold its products sixteen times over a five-month period to the same Filipino buyer without first obtaining a license to do business in the Philippines, prohibited from maintaining an action to collect payment therefor in Philippine courts? In other words, is such foreign corporation "doing business" in the Philippines without the required license and thus barred access to our court system?This is the main issue presented for resolution in the instant petition for review, which seeks the reversal of the Decision1of the Court of Appeals, Seventh Division, promulgated on January 25, 1995, in CA-G.R. CV No. 41275 which affirmed, for want of capacity to sue, the trial court's dismissal of the collection suit instituted by petitioner.The FactsPetitioner 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:2(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 ordered materials were delivered via airfreight under the following invoices:3Date Invoice No. AWB No. Amount 17 Jan 89 27065 618-7496-2941 S$ 5,010.5924 Feb 89 27738 618-7553-6672 14,402.1302 Mar 89 27855 (freight & hand- 1,164.18ling charges perInv. 27738)03 Mar 89 27876 618-7553-7501 1,394.3203 Mar 89 27877 618-7553-7501 1,641.5710 Mar 89 28046 618-7578-3256/ 7,854.60618-7578-348121 Mar 89 28258 618-7578-4634 27.7214 Apr 89 28901 618-7741-7631 2,756.5319 Apr 89 29001 Self-collect 458.8016 Aug 89 31669 (handcarried by 1,862.00buyer)S$36,392.4421 Mar 89 28257 618-7578-4634 415.5004 Apr 89 28601 618-7741-7605 884.0914 Apr 89 28900 618-7741-7631 1,269.5025 Apr 89 29127 618-7741-9720 883.8002 May 89 29232 (By seafreight) 120.0005 May 89 29332 618-7796-3255 1,198.4015 May 89 29497 (Freight & hand- 111.94ling charges perInv. 29127 S$ 4,989.2931 May 89 29844 618-7796-5646 545.70S$ 545.70Total S$ 41,927.43The 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 138,4Civil 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, 1993,5the trial court dismissed the action on the ground that petitioner is a foreign corporation doing business in the Philippines without a license. The dispositive portion of said order reads:6WHEREFORE, in view of the foregoing, the motion to dismiss is hereby GRANTED and accordingly, the above-entitled case is hereby DISMISSED.SO ORDERED.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." Thus, respondent Court likewise found petitioner to be without legal capacity to sue, and disposed of the appeal as follows:7WHEREFORE, the appealed Order should be, as it is hereby AFFIRMED. The complaint is dismissed. No costs.SO ORDERED.Hence, this petition.The IssueThe main issue in this petition is whether petitioner corporation may maintain an action in Philippine courts considering that it has no license to do business in the country. The resolution of this issue depends on whether petitioner's business with private respondent may be treated as isolated transactions.Petitioner insists that the series of sales made to private respondent would still constitute isolated transactions despite the number of invoices covering several separate and distinct items sold and shipped over a span of four to five months, and that an affirmation of respondent Court's ruling would result in injustice and unjust enrichment.Private respondent counters that to declare petitioner as possessing capacity to sue will render nugatory the provisions of the Corporation Code and constitute a gross violation of our laws. Thus, he argues, petitioner is undeserving of legal protection.The Court's RulingThe petition has no merit.The Concept of Doing BusinessThe 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.8A foreign corporation without such license is notipso factoincapacitated from bringing an action. A license is necessary only if it is "transacting or doing businessin 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. 70429in 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; andany 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)In the durable case ofThe Mentholatum Co.vs.Mangaliman, this Court discoursed on the test to determine whether a foreign company is "doing business" in the Philippines, thus:10. . . 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. (Traction Cos. v. Collectors of Int. Revenue [C.C.A., Ohio], 223 F. 984, 987.] 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.] (sic) (Griffin v. Implement Dealer's Mut. Fire Ins. Co., 241 N.W. 75, 77; Pauline Oil & Gas Co. v. Mutual Tank Line Co., 246 P. 851, 852, 118 Okl. 111; Automotive Material Co. v. American Standard Metal Products Corp., 158 N.E. 698, 703, 327 III. 367.)The accepted rule in jurisprudence is that each case must be judged in the light of its own environmental circumstances.11It should be kept in mind that the purpose of the law is to subject the foreign corporation doing business in the Philippines to the jurisdiction of our courts. It is not to prevent the foreign corporation from performing single or isolated acts, but to bar it from acquiring a domicile for the purpose of business without first taking the steps necessary to render it amenable to suits in the local courts.The trial court held that petitioner-corporation was doing business without a license, finding that:12The invoices and delivery receipts covering the period of (sic) from January 17, 1989 to August 16, 1989 cannot be treated to a mean singular and isolated business transaction that is temporary in character. Granting that there is no distributorship agreement between herein parties, yet by the mere fact that plaintiff, each time that the defendant posts an order delivers the items as evidenced by the several invoices and receipts of various dates only indicates that plaintiff has the intention and desire to repeat the (sic) said transaction in the future in pursuit of its ordinary business. Furthermore, "and if the corporation is doing that for which it was created, the amount or volume of the business done is immaterial and a single act of that character may constitute doing business". (See p. 603, Corp. Code, De Leon 1986 Ed.).Respondent Court affirmed this finding in its assailed Decision with this explanation:13. . . Considering the factual background as laid out above, the transaction cannot be considered as an isolated one. Note that there were 17 orders and deliveries (only sixteen per our count) over a four-month period. The appellee (private respondent) made separate orders at various dates. The transactions did not consist of separate deliveries for one single order. In the case at bar, the transactions entered into by the appellant with the appellee are a series of commercial dealings which would signify an intent on the part of the appellant (petitioner) to do business in the Philippines and could not by any stretch of the imagination be considered an isolated one, thus would fall under the category of'doing business.Even if We were to view, as contended by the appellant, that the transactions which occurred between January to August 1989, constitute a single act or isolated business transaction, this being the ordinary business of appellant corporation, it can be said to be illegally doing or transacting business without a license. . . . Here it can be clearly gleaned from the four-month period of transactions between appellant and appellee that it was a continuing business relationship, which would, without doubt, constitute doing business without a license. For all intents and purposes, appellant corporation is doing or transacting business in the Philippines without a license and that, therefore in accordance with the specific mandate of section 144 of the Corporation Code, it has no capacity to sue. (emphasis ours)We find no reason to disagree with both lower courts. 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. It is precisely upon the set of facts above detailed that we concur with respondent Court that petitioner corporation was doing business in the country.Equally important is the absence of any fact or circumstance which might tend even remotely to negate such intention to continue the progressive prosecution of petitioner's business activities in this country. Had private respondent not turned out to be a bad risk, in all likelihood petitioner would have indefinitely continued its commercial transactions with him, and not surprisingly, in ever increasing volumes.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.14Given 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.Incapacitated to Maintain SuitAccordingly and ineluctably, petitioner must be held to be incapacitated to maintain the actiona quoagainst 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.15But 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.Other Remedy Still AvailableBy this judgment, we are not foreclosing petitioner's right to collect payment.Res judicatadoes not set in a case dismissed for lack of capacity to sue, because there has been no determination on the merits.16Moreover, this Court has ruled that subsequent acquisition of the license will cure the lack of capacity at the time of the execution of the contract.17The requirement of a license is not meant to put foreign corporations at a disadvantage. Rather, the doctrine of lack of capacity to sue is based on considerations of sound public policy.18Thus, it has been ruled inHome Insurancethat:19. . . The primary purpose of our statute is to compel a foreign corporation desiring to do business within the state to submit itself to the jurisdiction of the courts of this state. The statute was not intended to exclude foreign corporations from the state. . . . The better reason, the wiser and fairer policy, and the greater weight lie with those decisions which hold that where, as here, there is a prohibition with a penalty, with no express or implied declarations respecting the validity of enforceability of contracts made by qualified foreign corporations, the contracts . . . are enforceable . . . upon compliance with the law. (Peter &, Burghard Stone Co. v. Carper, 172 N.E. 319 [1930].)While we agree with petitioner that the county needs to develop trade relations and foster friendly commercial relations with other states, we also need to enforce our laws that regulate the conduct of foreigners who desire to do business here. Such strangers must follow our laws and must subject themselves to reasonable regulation by our government.WHEREFORE, premises considered, the instant petition is hereby DENIED and the assailed Decision is AFFIRMED.SO ORDERED.

Republic of the PhilippinesSUPREME COURTManilaFIRST DIVISIONG.R. No. 79986 September 14, 1990GRANGER ASSOCIATES,petitioner,vs.MICROWAVE SYSTEMS, INC., LORETO F. STEWARD, MENARDO R. JIMENEZ and JOHN PALMER,respondents.Castillo, Laman, Tan & Pantaleon for petitioner.Fernando Ma. Alberto for respondents.CRUZ,J.:The Court is once again asked to interpret the phrase "doing business in the Philippines" as applied to an unlicensed foreign corporation that has filed a complaint against a domestic corporation.The foreign corporation is Granger Associates, the herein petitioner, which was organized in the United States and has no license to do business in this country. The domestic corporation is Microwave Systems, Inc., one of the herein private respondents, which has been sued for recovery of a sum equivalent to US$900,633.30 allegedly due from it to the petitioner.The claim arose from a series of agreements concluded between the two parties, principally the contract dated March 28, 1977, under which Granger licensed MSI to manufacture and sell its products in the Philippines and extended to the latter certain loans, equipment and parts; the contract dated May 17, 1979, for the sale by Granger of its Model 7100/7200 Multiplex Equipment to MSI and the Supplemental and Amendatory Agreement concluded in December 1979.Payment of these contracts not having been made as agreed upon, Granger filed a complaint against MSI and the other private respondents on June 29, 1984, in the Regional Trial Court of Pasay City. This was docketed as Civil Case No. 1982-P. In its answer, MSI alleged the affirmative defense that the plaintiff had no capacity to sue, being an unlicensed foreign corporation, and moved to dismiss.The law invoked by the defendants was Section 133 of the Corporation Code reading as follows: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; ...The trial court, after considering the evidence of the parties in light of their respective memoranda, sustained the defendants and granted the motion to dismiss.1On appeal, the order of dismissal was affirmed by the respondent court2prompting the present petition under Rule 45 of the Rules of Court.In this petition, Granger seeks the reversal of the respondent court on the ground that MSI has failed to prove its affirmative allegation that Granger was transacting business in the Philippines. It insists that it has dealt only with MSI and not the general public and contends that dealing with the public itself is an indispensable ingredient of transacting business. It also argues that its agreements with MSI covered only one isolated transaction for which it did not have to secure a license to be able to file its complaint.According to Section 1 of Rep. Act No. 5455 ...the phrase "doing business" shall include soliciting orders, purchases, 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 Philippines for a period or periods totalling one hundred eighty days or more; participating in the management, supervision or control of any domestic business firm, entity or corporation in the Philippines; any other act or acts that imply a continuity of commercial dealings or arrangements and contemplates to that extent the performance of acts or works, or the exercise of some of these functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization.This Court interpreted the same phrase in the old case ofMentholatum v. Mangaliman3as follows: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. (Traction Cos. v. Collectors of Int. Revenue [C.C.A. Ohio], 223 F. 984,987.) 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. (Griffin v. Implement Dealers' Mut. Fire Ins. Co., 241 N.W. 75, 77, Pauline Oil & Gas Go. v. Mutual Tank Line Co., 246 p. 851, 852,118 Okl. 111; Automotive Material CO. v. American Standard Metal Products Corp., 158 N.E. 698, 703, 327, I11. 367.)We have amplified one that discussion in subsequent cases, among themTop-Weld Manufacturing, Inc. v. ECED, S.A.,4where we said:There is no general rule or governing principle laid down as to what constitutes "doing" or "engaging in" or ""transacting" business in the Philippines. Each case must be judged in the light of its peculiar circumstance Thus, a foreign corporation with a settling agent in the Philippines which issued twelve marine policies covering different shipments to the Philippines and a foreign corporation which had been collecting premiums on outstanding policies were regarded as doing business here. The acts of these corporations should be distinguished from a single or isolated business transaction or occasional, incidental and casual transactions which do not come within the meaning of the law. Where a single act or transaction, however, is not merely incidental or casual but indicates the foreign corporation's intention to do other business in the Philippines, said single act or transaction constitutes "doing" or "engaging in" or "transacting" business in the Philippines.The petitioner contends that its various transactions with the private respondent were mere facets of the basic agreement licensing MSI to manufacture and sell Granger's products in the Philippines. All subsequent agreements were merely auxiliary to that first contract and should not be considered separate transactions coming 'within the concept of "doing business in the Philippines."The Supplemental and Amendatory Agreement concluded by Granger and MSI in December 1979 enumerates the various agreements between them thus:1. Agreement dated March 28, 1977,under which MSI acquired from GRANGER the right to manufacture, assemble, test, rent and sell, or otherwise deal in certain electronic communications equipment designed and manufactured by GRANGER;2. Agreement to Purchase Shares dated March 28, 1977 under which GRANGER was granted the option to purchase thirty (30%) percent equity of MSI;3. Amendatory Agreement dated May l2, 1978, adopting certain amendments to the Agreement dated March 28, 1977 for the purpose of complying with the requirements imposed by the Board of Investments and the Central Bank of the Philippines;4. Exclusive Distributorship and Marketing Agreement dated May 16,1978, appointing MSI to handle sale, distribution and promotion of products of GRANGER outside of the Republic of the Philippines;5. Sales Agency Agreement, dated May 16, 1978, under which MSI was appointed by GRANGER as the latter's exclusive sales representative outside the Philippines to market GRANGER products;6. Agreement for Purchase of Shares dated May 17,1978, manifesting the intention of GRANGER to exercise its option to purchase thirty (30%) percent of the issued and outstanding shares of stock of MSI equivalent to a total of 9,000 issued shares of MSI;7. Model 7l00/7200 Multiplex Agreement dated May l7, 1979, prescribing the terms and conditions for the sale by GRANGER of Model 7100/7200 Multiplex Equipment to MSI;8. Technology Transfer Agreement dated May 17, 1979, transferring to and/or providing MSI by virtue of the Model 7100/7200 Multiplex Agreement, the necessary technical services, assistance, manuals, catalogues, sales, literature, etc. for the operation of the Model 7100/7200 Multiplex Equipment;9. Deed of Assignment of Receivables dated October 20, 1979, under which MSI assigned to GRANGER a certain percentage of its receivables from the Philippine Electronics, Inc. in favor of GRANGER to secure payment and performance of MSI's obligations to GRANGER under previous agreements.In the Model 7100/7200 Multiplex Equipment Agreement entered into on May 17, 1979, the following stipulations appear:4. GRANGER shall assign in favor of MSI all orders for the Model 7100/7200 Multiplex Equipment, which have not been filled by GRANGER at the date of the ratification of this Agreement as per paragraph 9 hereof, as described in a list hereto attached and made a part hereof as Annex "C". All proceeds under said orders shall be assigned to and received by MSI and MSI shall take over and assume all obligations which GRANGER may have pursuant to the orders of equipment within a reasonable time following receipt of the shipment of the Products by MSI but not to exceed one hundred eighty (180) days from date of said receipt. Any orders GRANGER may receive following the date on which this Agreement becomes effective as provided herein will be forwarded to MSI by GRANGER.xxx xxx xxx6. As an additional consideration for the purchase of the products, MSI binds itself to render all equipment support service and maintain reasonable amount of spares inventory for the equipment in the field previously having been sold by GRANGER or by RCA Corporation to their customers for a period of ten (10) years from the date the last sale of GRANGER is recorded. Any amount earned in providing such equipment support shall be billed and received by MSI. Additionally, MSI binds itself to assume the warranty obligations and advance the necessary funds to perform such obligations associated with Model 7l00/7200 Multiplex Equipment already sold by GRANGER. However, GRANGER shall reimburse MSI the out-of-pocket cost for the services rendered by MSI in connection with the warranty for the equipment assumed from GRANGER but only to the extent authorized in advance by GRANGER.A study of the enumeration does support the contention that many of the agreements concluded by the petitioner and the private respondent were intended merely to supplement the basic contract dated March 28, 1977. However, this is not true of the Multiplex agreement dated May 17, 1979, which dealt with a different subject matter and had a different consideration to be paid under a different method from that specified in the first agreement of the parties in 1977. It is also noted that in the supplemental and Amendatory Agreement, Granger sold to MSI certain materials/parts for 80 radios and granted it the right to exploit the designs of Model 6015, Series of radio equipment (1.5 Ghz.) and the Plug-In Order Wire, and the 6002 Series and Power Amplifiers. The subject matter of this transaction is also different from those covered by the previous agreements.Even if it be assumed for the sake of argument that the subject matter of the first contract is of the same kind as that of the subsequent agreements, that fact alone would not necessarily signify that all such agreements are merely auxiliary to the first. As long as it can be shown that the parties entered into a series of agreements, as in successive sales of the foreign company's regular products, that company shall be deemed as doing business in the Philippines.The quoted stipulations show that Granger had extended its personality in the Philippines and would receive orders for its products and discharge its warranty obligations through the agency of MSI It would even appear that Granger intended to transact business in the Philippines through the instrumentality of MSI not only for the sale and warranty of its products in this country. The 'agent, was expected to extend also in mainland China and other ASEAN countries, where MSI was to act as its representative in the development of possible markets for Granger products. Thus it was provided in the Agreement:6. OFF-SHORE MANUFACTURING.GRANGER undertakes to utilize MSI's manufacturing facilities in the Philippines in preference to any other manufacturer for offshore manufacture, assembly, fabrication and testing of equipment, sub-assemblies, printed circuit boards and related or allied activities, subject to MSI's demonstrated technical capability and its capacity to comply with normal quality and delivery requirement for such components and as long as such off-shore manufacturing would be to GRANGER's economic advantage.7. MAINLAND CHINA AND ASEANToward maximizing exploitation of export opportunities for the sale of MSI manufactured equipment under license from GRANGER, MSI undertakes to do or perform the following:a) MSI, independently or in concert with GRANGER shall develop a marketing strategy towards Mainland China market at its cost or on the basis of shared expense arrangement with GRANGER, agreed between both parties in advance, and shall pursue sales opportunities in that market as it deems warranted. This includes establishing local sales office to manage and monitor direct sales effort as well as appointments of non-exclusive manufacturer's Sales Representatives or non-exclusive Distributors as the case may be;b) MSI, always in close cooperation with GRANGER, shall develop and pursue direct sales opportunities in the ASEAN market for its own account, always reaching agreement with GRANGER in advance on a case-to-case basis as to the extent of reimbursing GRANGER for its direct or indirect expenses that it might be incurring while acting as an Exclusive Distributor or a Manufacturer's Representative for the licensed equipment in the ASEAN market.We also note that in the Supplemented and Amendatory Agreement of December 1979, Granger saw to it that it was assured of at least one seat in the board of directors of MSI; without prejudice to the right of Granger to request additional seats as its interest may require". Granger actually purchased 9,000 shares of MSI, representing 30% of the latter's issued and outstanding shares of stock.5The fact that it was directly involved in the business of MSI was also manifestation stipulation where Granger "acknowledged and confirmed" the transfer of a block of stocks from one shareholder to another group of investors. Such approval is not normally given except by a stockholder enjoying substantial participation in the management of the business of the company. The said stipulations read as follows.4. BOARD OF DIRECTORS.GRANGER shall be entitled to one (1) seat in the Board of Directors, with the option to fill said seat at its discretion and instance. GRANGER further interposes no objection to MSI's increasing the number of its Board of Directors without a corresponding entitlement to an additional seat, without prejudice however to the right of GRANGER to request additional seat as its interest may require.xxx xxx xxx8. CONFIRMATION OF SALE OF SHARES OF STOCK.The parties hereto take cognizance of the sale of shares of stock in MSI owned by Vicente C. Sayaon, in his personal capacity and as controlling stockholder of authorized representative of Cosmopolitan Realty Corporation and Visayas Realty and Investment Corporation, in favor of a new group of Filipino entrepreneurs represented in the transaction by Mrs. Remedios Porcuna. The Deed of Sale covering this transaction is incorporated hereto by reference and made an integral part of this Agreement.Pursuant to the provision embodied in the said Deed of Sale, GRANGER hereby acknowledges and confirms this transaction.The petitioner cites the regulations of the Board of Investments stating that mere investment in a local company by a foreign corporation should not be construed as doing business in the Philippines.6It cannot be denied, however, that the investment of Granger in MSI is quite substantial, enabling it to participate in the actual management and control of MSI In fact, it appointed a representative in the board of directors to protect its interests, and this director was so influential that, at his request, the regular board meeting was converted into an annual stockholder's meeting to take advantage of his presence.7At any rate, the administrative regulation, which is intended only to supplement the law, cannot prevail against the law itself as the Court has interpreted it. It is axiomatic that the delegate, in exercising the power to promulgate implementing regulations, cannot contradict the law from which the regulations derive their very existence. The courts, for their part, interpret the administrative regulations in harmony with the law that authorized them in the first place and avoid as much as possible any construction that would annul them as an invalid exercise of legislative power.On the question of whether the foreign corporation must be shown to have dealt with the public in general to be considered as transacting business in the Philippines, the following observations are instructive:On the other hand, if a corporation performs acts for which it was created or exercises some of the functions for which it was organized, the amount or volume of the business is immaterial and a single act of that character may constitute doing business. Thus, an engineering consulting firm that had entered into a single contract with a Philippine government agency for the purpose of rendering services for a period of three years as a technical consultant in engineering will be required to obtain a license to do business. Similarly, a foreign company invited to bid for IBRD and ADB international projects in the Philippines will be considered as doing business in the Philippines for which a license is required. In this regard, it is the performance by a foreign corporation of the acts for which it was created,regardless of volume of business, that determines whether a foreign corporation needs a license or not. (Emphasis supplied.)8Finally, this case must be distinguished fromAntam Consolidated, Inc. v. Court of Appeals,9where this Court declared:In the case at bar, the transactions entered into by the respondent with the petitioners are not a series of commercial dealings which signify an intent on the part of the respondent to do business in the Philippines but constitute an isolated one which does not fall under the category of "doing business". The records show that the only reason why the respondent entered into the second and third transactions with the petitioners was because it wanted to recover the loss it sustained from the failure of the petitioners to deliver the crude coconut oil under the first transaction and in order to give the latter a chance to make good on their obligation. Instead of making an outright demand on the petitioners, the respondent opted to try to push through with the transactions to recover the amount of US$103,600.00 it lost. This explains why in the second transaction, the petitioners were supposed to buy back the crude coconut oil they should have delivered to the respondent in an amount which will earn the latter a profit of US$103,600.00. When this failed the third transaction was entered into by the parties whereby the petitioners were supposed to sell crude coconut oil to the respondent at a discounted rate, the total amount of such discount being US$103,600.00. Unfortunately, the petitioners failed to deliver again, prompting the respondent to file the suit below.From these facts alone, it can be deduced that in reality, there was only one agreement between the petitioners and the respondent and that was the delivery by the former of 500 long tons of crude coconut oil to the latter, who in turn, must pay the corresponding price for the same. The three seemingly different transactions were entered into by the parties only in an effort to fulfill the basic agreement and in no way indicate an intent on the part of the respondent to engage in a continuity of transactions with petitioners which will categorize it as a foreign corporation doing business in the Philippines.We are convinced from an examination of the terms and conditions of the contracts and agreements entered into between petitioner and private respondents indicate that they established within our country a continuous business, and not merely one of a temporary character. Such agreements did not constitute only one isolated transaction, as the petitioner contends, but a succession of acts signifying the intent of Granger to extend its operations in the Philippines.In any event, it is now settled that even one single transaction may be construed as transacting business in the Philippines under certain circumstances, as we observed inFar East International Import and Export Corporation v. Nankai Kogyo Co., Ltd.,10thus:The rule stated in the preceding section that the doing of a single act does not constitute business within the meaning of statutes prescribing the conditions to be complied with by foreign corporations must be qualified to this extent, that a single act may bring the corporation within the purview of the statute where it is an act of the ordinary business of the corporation. In such a case, the single act or transaction is not merely incidental or casual, but is of such character as distinctly to indicate a purpose on the part of the foreign corporation to do other business in the state, and to make the state a base of operations for the conduct of a part of the corporations' ordinary business. (17 Fletchers Cyc. of Corporations, sec. 8470, pp. 572, 573, and authorities cited therein.)The petitioner stresses that whoever makes affirmative averments has the obligation to prove such averments and points out that the private respondent has not established its allegation that the petitioner is doing business in the Philippines. On the other hand, it is also the rule that the factual findings of the lower court are binding on this Court in the absence of any of those exceptional circumstances we have enumerated in many cases that warrant a different conclusion. Having assailed the finding of the respondent court that the petitioner is doing business in the Philippines, the petitioner had the burden of showing that such finding fell under the exception rather than the rule and so should be reviewed and reversed. The petitioner has not done this.The purpose of the rule requiring foreign corporations to secure a license to do business in the Philippines is to enable us to exercise jurisdiction over them for the regulation of their activities in this country, If a foreign corporation operates in the Philippines without submitting to our laws, it is only just that it not be allowed to invoke them in our courts when it should need them later for its own protection. While foreign investors are always welcome in this land to collaborate with us for our mutual benefit, they must be prepared as an indispensable condition to respect and be bound by Philippine law in proper cases, as in the one at bar.WHEREFORE the petition is DENIED, with costs against the petitioner. It is ordered.Narvasa ( Chairman), Gancayco, Grio-Aquino and Medialdea, JJ., concur.Republic of the PhilippinesSUPREME COURTManilaFIRST DIVISIONG.R. No. L-26809 December 29, 1977AETNA CASUALTY & SURETY COMPANY,plaintiff-appellant,vs.PACIFIC STAR LINE, THE BRADMAN CO. INC., MANILA PORT SERVICE and/or MANILA RAILROAD COMPANY, INC.,defendants-appellees.Domingo E. de Lara & Associates for appellant.Salcedo, Del Rosario, Bito & Mesa for appellee Pacific Star Line.D. F. Macaranas for appellee Manila Port Service, etc.FERNANDEZ,J.:This is an appeal from the decision of the Court of First Instance of Manila, Branch XVI, in Civil Case No. 53074 entitled Aetna Casualty & Surety Company vs. Pacific Star Line, The Bradman Co. Inc., Manila Port Service and/or Manila Railroad Company, Inc." dismissing the complaint on the ground that the plain