1

TITLE XV: FOREIGN CORPORATIONS

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

G.R. No. 152392 May 26, 2005EXPERTRAVEL & TOURS, INC., petitioner, vs.COURT OF APPEALS and KOREAN AIRLINES, respondent.

D E C I S I O N

CALLEJO, SR., J.:Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 61000 dismissing the petition for certiorari and mandamus filed by Expertravel and Tours, Inc. (ETI).

The AntecedentsKorean Airlines (KAL) is a corporation established and registered in the Republic of South Korea and licensed to do business in the Philippines. Its general manager in the Philippines is Suk Kyoo Kim, while its appointed counsel was Atty. Mario Aguinaldo and his law firm.

On September 6, 1999, KAL, through Atty. Aguinaldo, filed a Complaint2 against ETI with the Regional Trial Court (RTC) of Manila, for the collection of the principal amount of P260,150.00, plus attorneys fees and exemplary damages. The verification and certification against forum shopping was signed by Atty. Aguinaldo, who indicated therein that he was the resident agent and legal counsel of KAL and had caused the preparation of the complaint.

ETI filed a motion to dismiss the complaint on the ground that Atty. Aguinaldo was not authorized to execute the verification and certificate of non-forum shopping as required by Section 5, Rule 7 of the Rules of Court. KAL opposed the motion, contending that Atty. Aguinaldo was its resident agent and was registered as such with the Securities and Exchange Commission (SEC) as required by the Corporation Code of the Philippines. It was further alleged that Atty. Aguinaldo was also the corporate secretary of KAL. Appended to the said opposition was the identification card of Atty. Aguinaldo, showing that he was the lawyer of KAL.

During the hearing of January 28, 2000, Atty. Aguinaldo claimed that he had been authorized to file the complaint through a resolution of the KAL Board of Directors approved during a special meeting held on June 25, 1999. Upon his motion, KAL was given a period of 10 days within which to submit a copy of the said resolution. The trial court granted the motion. Atty. Aguinaldo subsequently filed other similar motions, which the trial court granted.

Finally, KAL submitted on March 6, 2000 an Affidavit3 of even date, executed by its general manager Suk Kyoo Kim, alleging that the board of directors conducted a special teleconference on June 25, 1999, which he and Atty. Aguinaldo attended. It was also averred that in that same teleconference, the board of directors approved a resolution authorizing Atty. Aguinaldo to execute the certificate of non-forum shopping and to file the complaint. Suk Kyoo Kim also alleged, however, that the corporation had no written copy of the aforesaid resolution.

On April 12, 2000, the trial court issued an Order4 denying the motion to dismiss, giving credence to the claims of Atty. Aguinaldo and Suk Kyoo Kim that the KAL Board of Directors indeed conducted a teleconference on June 25, 1999, during which it approved a resolution as quoted in the submitted affidavit.

ETI filed a motion for the reconsideration of the Order, contending that it was inappropriate for the court to take judicial notice of the said teleconference without any prior hearing. The trial court denied the motion in its Order5 dated August 8, 2000.

ETI then filed a petition for certiorari and mandamus, assailing the orders of the RTC. In its comment on the petition, KAL appended a certificate signed by Atty. Aguinaldo dated January 10, 2000, worded as follows:

SECRETARYS/RESIDENT AGENTS CERTIFICATE

KNOW ALL MEN BY THESE PRESENTS:

I, Mario A. Aguinaldo, of legal age, Filipino, and duly elected and appointed Corporate Secretary and Resident Agent of KOREAN AIRLINES, a foreign corporation duly organized and existing under and by virtue of the laws of the Republic of Korea and also duly registered and authorized to do business in the Philippines, with office address at Ground Floor, LPL Plaza Building, 124 Alfaro St., Salcedo Village, Makati City, HEREBY CERTIFY that during a special meeting of the Board of Directors of the Corporation held on June 25, 1999 at which a quorum was present, the said Board unanimously passed, voted upon and approved the following resolution which is now in full force and effect, to wit:

RESOLVED, that Mario A. Aguinaldo and his law firm M.A. Aguinaldo & Associates or any of its lawyers are hereby appointed and authorized to take with whatever legal action necessary to effect the collection of the unpaid account of Expert Travel & Tours. They are hereby specifically authorized to prosecute, litigate, defend, sign and execute any document or paper necessary to the filing and prosecution of said claim in Court, attend the Pre-Trial Proceedings and enter into a compromise agreement relative to the above-mentioned claim.

IN WITNESS WHEREOF, I have hereunto affixed my signature this 10th day of January, 1999, in the City of Manila, Philippines.

(Sgd.)

MARIO A. AGUINALDOResident Agent

SUBSCRIBED AND SWORN to before me this 10th day of January, 1999, Atty. Mario A. Aguinaldo exhibiting to me his Community Tax Certificate No. 14914545, issued on January 7, 2000 at Manila, Philippines.

Doc. No. 119;Page No. 25;Book No. XXIVSeries of 2000.(Sgd.) ATTY. HENRY D. ADASANotary Public Until December 31, 2000PTR #889583/MLA 1/3/20006

On December 18, 2001, the CA rendered judgment dismissing the petition, ruling that the verification and certificate of non-forum shopping executed by Atty. Aguinaldo was sufficient compliance with the Rules of Court. According to the appellate court, Atty. Aguinaldo had been duly authorized by the board resolution approved on June 25, 1999, and was the resident agent of KAL. As such, the RTC could not be faulted for taking judicial notice of the said teleconference of the KAL Board of Directors.

ETI filed a motion for reconsideration of the said decision, which the CA denied. Thus, ETI, now the petitioner, comes to the Court by way of petition for review on certiorari and raises the following issue:

DID PUBLIC RESPONDENT COURT OF APPEALS DEPART FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS WHEN IT RENDERED ITS QUESTIONED DECISION AND WHEN IT ISSUED ITS QUESTIONED RESOLUTION, ANNEXES A AND B OF THE INSTANT PETITION?7The petitioner asserts that compliance with Section 5, Rule 7, of the Rules of Court can be determined only from the contents of the complaint and not by documents or pleadings outside thereof. Hence, the trial court committed grave abuse of discretion amounting to excess of jurisdiction, and the CA erred in considering the affidavit of the respondents general manager, as well as the Secretarys/Resident Agents Certification and the resolution of the board of directors contained therein, as proof of compliance with the requirements of Section 5, Rule 7 of the Rules of Court. The petitioner also maintains that the RTC cannot take judicial notice of the said teleconference without prior hearing, nor any motion therefor. The petitioner reiterates its submission that the teleconference and the resolution adverted to by the respondent was a mere fabrication.

The respondent, for its part, avers that the issue of whether modern technology is used in the field of business is a factual issue; hence, cannot be raised in a petition for review on certiorari under Rule 45 of the Rules of Court. On the merits of the petition, it insists that Atty. Aguinaldo, as the resident agent and corporate secretary, is authorized to sign and execute the certificate of non-forum shopping required by Section 5, Rule 7 of the Rules of Court, on top of the board resolution approved during the teleconference of June 25, 1999. The respondent insists that "technological advances in this time and age are as commonplace as daybreak." Hence, the courts may take judicial notice that the Philippine Long Distance Telephone Company, Inc. had provided a record of corporate conferences and meetings through FiberNet using fiber-optic transmission technology, and that such technology facilitates voice and image transmission with ease; this makes constant communication between a foreign-based office and its Philippine-based branches faster and easier, allowing for cost-cutting in terms of travel concerns. It points out that even the E-Commerce Law has recognized this modern technology. The respondent posits that the courts are aware of this development in technology; hence, may take judicial notice thereof without need of hearings. Even if such hearing is required, the requirement is nevertheless satisfied if a party is allowed to file pleadings by way of comment or opposition thereto.

In its reply, the petitioner pointed out that there are no rulings on the matter of teleconferencing as a means of conducting meetings of board of directors for purposes of passing a resolution; until and after teleconferencing is recognized as a legitimate means of gathering a quorum of board of directors, such cannot be taken judicial notice of by the court. It asserts that safeguards must first be set up to prevent any mischief on the public or to protect the general public from any possible fraud. It further proposes possible amendments to the Corporation Code to give recognition to such manner of board meetings to transact business for the corporation, or other related corporate matters; until then, the petitioner asserts, teleconferencing cannot be the subject of judicial notice.

The petitioner further avers that the supposed holding of a special meeting on June 25, 1999 through teleconferencing where Atty. Aguinaldo was supposedly given such an authority is a farce, considering that there was no mention of where it was held, whether in this country or elsewhere. It insists that the Corporation Code requires board resolutions of corporations to be submitted to the SEC. Even assuming that there was such a teleconference, it would be against the provisions of the Corporation Code not to have any record thereof.

The petitioner insists that the teleconference and resolution adverted to by the respondent in its pleadings were mere fabrications foisted by the respondent and its counsel on the RTC, the CA and this Court.

The petition is meritorious.

Section 5, Rule 7 of the Rules of Court provides:

SEC. 5. Certification against forum shopping. The plaintiff or principal party shall certify under oath in the complaint or other initiatory pleading asserting a claim for relief, or in a sworn certification annexed thereto and simultaneously filed therewith: (a) that he has not theretofore commenced any action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present status thereof; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is pending, he shall report that fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory pleading has been filed.

Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other initiatory pleading but shall be cause for the dismissal of the case without prejudice, unless otherwise provided, upon motion and after hearing. The submission of a false certification or non-compliance with any of the undertakings therein shall constitute indirect contempt of court, without prejudice to the corresponding administrative and criminal actions. If the acts of the party or his counsel clearly constitute willful and deliberate forum shopping, the same shall be ground for summary dismissal with prejudice and shall constitute direct contempt, as well as a cause for administrative sanctions.

It is settled that the requirement to file a certificate of non-forum shopping is mandatory8 and that the failure to comply with this requirement cannot be excused. The certification is a peculiar and personal responsibility of the party, an assurance given to the court or other tribunal that there are no other pending cases involving basically the same parties, issues and causes of action. Hence, the certification must be accomplished by the party himself because he has actual knowledge of whether or not he has initiated similar actions or proceedings in different courts or tribunals. Even his counsel may be unaware of such facts.9 Hence, the requisite certification executed by the plaintiffs counsel will not suffice.10In a case where the plaintiff is a private corporation, the certification may be signed, for and on behalf of the said corporation, by a specifically authorized person, including its retained counsel, who has personal knowledge of the facts required to be established by the documents. The reason was explained by the Court in National Steel Corporation v. Court of Appeals,11 as follows:

Unlike natural persons, corporations may perform physical actions only through properly delegated individuals; namely, its officers and/or agents.

The corporation, such as the petitioner, has no powers except those expressly conferred on it by the Corporation Code and those that are implied by or are incidental to its existence. In turn, a corporation exercises said powers through its board of directors and/or its duly-authorized officers and agents. Physical acts, like the signing of documents, can be performed only by natural persons duly-authorized for the purpose by corporate by-laws or by specific act of the board of directors. "All acts within the powers of a corporation may be performed by agents of its selection; and except so far as limitations or restrictions which may be imposed by special charter, by-law, or statutory provisions, the same general principles of law which govern the relation of agency for a natural person govern the officer or agent of a corporation, of whatever status or rank, in respect to his power to act for the corporation; and agents once appointed, or members acting in their stead, are subject to the same rules, liabilities and incapacities as are agents of individuals and private persons."

For who else knows of the circumstances required in the Certificate but its own retained counsel. Its regular officers, like its board chairman and president, may not even know the details required therein.

Indeed, the certificate of non-forum shopping may be incorporated in the complaint or appended thereto as an integral part of the complaint. The rule is that compliance with the rule after the filing of the complaint, or the dismissal of a complaint based on its non-compliance with the rule, is impermissible. However, in exceptional circumstances, the court may allow subsequent compliance with the rule.12 If the authority of a partys counsel to execute a certificate of non-forum shopping is disputed by the adverse party, the former is required to show proof of such authority or representation.

In this case, the petitioner, as the defendant in the RTC, assailed the authority of Atty. Aguinaldo to execute the requisite verification and certificate of non-forum shopping as the resident agent and counsel of the respondent. It was, thus, incumbent upon the respondent, as the plaintiff, to allege and establish that Atty. Aguinaldo had such authority to execute the requisite verification and certification for and in its behalf. The respondent, however, failed to do so.

The verification and certificate of non-forum shopping which was incorporated in the complaint and signed by Atty. Aguinaldo reads:

I, Mario A. Aguinaldo of legal age, Filipino, with office address at Suite 210 Gedisco Centre, 1564 A. Mabini cor. P. Gil Sts., Ermita, Manila, after having sworn to in accordance with law hereby deposes and say: THAT -

1. I am the Resident Agent and Legal Counsel of the plaintiff in the above entitled case and have caused the preparation of the above complaint;

2. I have read the complaint and that all the allegations contained therein are true and correct based on the records on files;

3. I hereby further certify that I have not commenced any other action or proceeding involving the same issues in the Supreme Court, the Court of Appeals, or different divisions thereof, or any other tribunal or agency. If I subsequently learned that a similar action or proceeding has been filed or is pending before the Supreme Court, the Court of Appeals, or different divisions thereof, or any tribunal or agency, I will notify the court, tribunal or agency within five (5) days from such notice/knowledge.

(Sgd.)

MARIO A. AGUINALDOAffiantCITY OF MANILA

SUBSCRIBED AND SWORN TO before me this 30th day of August, 1999, affiant exhibiting to me his Community Tax Certificate No. 00671047 issued on January 7, 1999 at Manila, Philippines.

Doc. No. 1005;Page No. 198;Book No. XXISeries of 1999.(Sgd.)

ATTY. HENRY D. ADASANotary PublicUntil December 31, 2000PTR No. 320501 Mla. 1/4/9913

As gleaned from the aforequoted certification, there was no allegation that Atty. Aguinaldo had been authorized to execute the certificate of non-forum shopping by the respondents Board of Directors; moreover, no such board resolution was appended thereto or incorporated therein.

While Atty. Aguinaldo is the resident agent of the respondent in the Philippines, this does not mean that he is authorized to execute the requisite certification against forum shopping. Under Section 127, in relation to Section 128 of the Corporation Code, the authority of the resident agent of a foreign corporation with license to do business in the Philippines is to receive, for and in behalf of the foreign corporation, services and other legal processes in all actions and other legal proceedings against such corporation, thus:

SEC. 127. Who may be a resident agent. A resident agent may either be an individual residing in the Philippines or a domestic corporation lawfully transacting business in the Philippines: Provided, That in the case of an individual, he must be of good moral character and of sound financial standing.

SEC. 128. Resident agent; service of process. The Securities and Exchange Commission shall require as a condition precedent to the issuance of the license to transact business in the Philippines by any foreign corporation that such corporation file with the Securities and Exchange Commission a written power of attorney designating some persons who must be a resident of the Philippines, on whom any summons and other legal processes may be served in all actions or other legal proceedings against such corporation, and consenting that service upon such resident agent shall be admitted and held as valid as if served upon the duly-authorized officers of the foreign corporation as its home office.14Under the law, Atty. Aguinaldo was not specifically authorized to execute a certificate of non-forum shopping as required by Section 5, Rule 7 of the Rules of Court. This is because while a resident agent may be aware of actions filed against his principal (a foreign corporation doing business in the Philippines), such resident may not be aware of actions initiated by its principal, whether in the Philippines against a domestic corporation or private individual, or in the country where such corporation was organized and registered, against a Philippine registered corporation or a Filipino citizen.

The respondent knew that its counsel, Atty. Aguinaldo, as its resident agent, was not specifically authorized to execute the said certification. It attempted to show its compliance with the rule subsequent to the filing of its complaint by submitting, on March 6, 2000, a resolution purporting to have been approved by its Board of Directors during a teleconference held on June 25, 1999, allegedly with Atty. Aguinaldo and Suk Kyoo Kim in attendance. However, such attempt of the respondent casts veritable doubt not only on its claim that such a teleconference was held, but also on the approval by the Board of Directors of the resolution authorizing Atty. Aguinaldo to execute the certificate of non-forum shopping.

In its April 12, 2000 Order, the RTC took judicial notice that because of the onset of modern technology, persons in one location may confer with other persons in other places, and, based on the said premise, concluded that Suk Kyoo Kim and Atty. Aguinaldo had a teleconference with the respondents Board of Directors in South Korea on June 25, 1999. The CA, likewise, gave credence to the respondents claim that such a teleconference took place, as contained in the affidavit of Suk Kyoo Kim, as well as Atty. Aguinaldos certification.

Generally speaking, matters of judicial notice have three material requisites: (1) the matter must be one of common and general knowledge; (2) it must be well and authoritatively settled and not doubtful or uncertain; and (3) it must be known to be within the limits of the jurisdiction of the court. The principal guide in determining what facts may be assumed to be judicially known is that of notoriety. Hence, it can be said that judicial notice is limited to facts evidenced by public records and facts of general notoriety.[15] Moreover, a judicially noticed fact must be one not subject to a reasonable dispute in that it is either: (1) generally known within the territorial jurisdiction of the trial court; or (2) capable of accurate and ready determination by resorting to sources whose accuracy cannot reasonably be questionable.16Things of "common knowledge," of which courts take judicial matters coming to the knowledge of men generally in the course of the ordinary experiences of life, or they may be matters which are generally accepted by mankind as true and are capable of ready and unquestioned demonstration. Thus, facts which are universally known, and which may be found in encyclopedias, dictionaries or other publications, are judicially noticed, provided, they are of such universal notoriety and so generally understood that they may be regarded as forming part of the common knowledge of every person. As the common knowledge of man ranges far and wide, a wide variety of particular facts have been judicially noticed as being matters of common knowledge. But a court cannot take judicial notice of any fact which, in part, is dependent on the existence or non-existence of a fact of which the court has no constructive knowledge.17In this age of modern technology, the courts may take judicial notice that business transactions may be made by individuals through teleconferencing. Teleconferencing is interactive group communication (three or more people in two or more locations) through an electronic medium. In general terms, teleconferencing can bring people together under one roof even though they are separated by hundreds of miles.18 This type of group communication may be used in a number of ways, and have three basic types: (1) video conferencing - television-like communication augmented with sound; (2) computer conferencing - printed communication through keyboard terminals, and (3) audio-conferencing-verbal communication via the telephone with optional capacity for telewriting or telecopying.19A teleconference represents a unique alternative to face-to-face (FTF) meetings. It was first introduced in the 1960s with American Telephone and Telegraphs Picturephone. At that time, however, no demand existed for the new technology. Travel costs were reasonable and consumers were unwilling to pay the monthly service charge for using the picturephone, which was regarded as more of a novelty than as an actual means for everyday communication.20 In time, people found it advantageous to hold teleconferencing in the course of business and corporate governance, because of the money saved, among other advantages include:

1. People (including outside guest speakers) who wouldnt normally attend a distant FTF meeting can participate.

2. Follow-up to earlier meetings can be done with relative ease and little expense.

3. Socializing is minimal compared to an FTF meeting; therefore, meetings are shorter and more oriented to the primary purpose of the meeting.

4. Some routine meetings are more effective since one can audio-conference from any location equipped with a telephone.

5. Communication between the home office and field staffs is maximized.

6. Severe climate and/or unreliable transportation may necessitate teleconferencing.

7. Participants are generally better prepared than for FTF meetings.

8. It is particularly satisfactory for simple problem-solving, information exchange, and procedural tasks.

9. Group members participate more equally in well-moderated teleconferences than an FTF meeting.21On the other hand, other private corporations opt not to hold teleconferences because of the following disadvantages:

1. Technical failures with equipment, including connections that arent made.

2. Unsatisfactory for complex interpersonal communication, such as negotiation or bargaining.

3. Impersonal, less easy to create an atmosphere of group rapport.

4. Lack of participant familiarity with the equipment, the medium itself, and meeting skills.

5. Acoustical problems within the teleconferencing rooms.

6. Difficulty in determining participant speaking order; frequently one person monopolizes the meeting.

7. Greater participant preparation time needed.

8. Informal, one-to-one, social interaction not possible.22Indeed, teleconferencing can only facilitate the linking of people; it does not alter the complexity of group communication. Although it may be easier to communicate via teleconferencing, it may also be easier to miscommunicate. Teleconferencing cannot satisfy the individual needs of every type of meeting.23In the Philippines, teleconferencing and videoconferencing of members of board of directors of private corporations is a reality, in light of Republic Act No. 8792. The Securities and Exchange Commission issued SEC Memorandum Circular No. 15, on November 30, 2001, providing the guidelines to be complied with related to such conferences.24 Thus, the Court agrees with the RTC that persons in the Philippines may have a teleconference with a group of persons in South Korea relating to business transactions or corporate governance.

Even given the possibility that Atty. Aguinaldo and Suk Kyoo Kim participated in a teleconference along with the respondents Board of Directors, the Court is not convinced that one was conducted; even if there had been one, the Court is not inclined to believe that a board resolution was duly passed specifically authorizing Atty. Aguinaldo to file the complaint and execute the required certification against forum shopping.

The records show that the petitioner filed a motion to dismiss the complaint on the ground that the respondent failed to comply with Section 5, Rule 7 of the Rules of Court. The respondent opposed the motion on December 1, 1999, on its contention that Atty. Aguinaldo, its resident agent, was duly authorized to sue in its behalf. The respondent, however, failed to establish its claim that Atty. Aguinaldo was its resident agent in the Philippines. Even the identification card25 of Atty. Aguinaldo which the respondent appended to its pleading merely showed that he is the company lawyer of the respondents Manila Regional Office.

The respondent, through Atty. Aguinaldo, announced the holding of the teleconference only during the hearing of January 28, 2000; Atty. Aguinaldo then prayed for ten days, or until February 8, 2000, within which to submit the board resolution purportedly authorizing him to file the complaint and execute the required certification against forum shopping. The court granted the motion.26 The respondent, however, failed to comply, and instead prayed for 15 more days to submit the said resolution, contending that it was with its main office in Korea. The court granted the motion per its Order27 dated February 11, 2000. The respondent again prayed for an extension within which to submit the said resolution, until March 6, 2000.28 It was on the said date that the respondent submitted an affidavit of its general manager Suk Kyoo Kim, stating, inter alia, that he and Atty. Aguinaldo attended the said teleconference on June 25, 1999, where the Board of Directors supposedly approved the following resolution:

RESOLVED, that Mario A. Aguinaldo and his law firm M.A. Aguinaldo & Associates or any of its lawyers are hereby appointed and authorized to take with whatever legal action necessary to effect the collection of the unpaid account of Expert Travel & Tours. They are hereby specifically authorized to prosecute, litigate, defend, sign and execute any document or paper necessary to the filing and prosecution of said claim in Court, attend the Pre-trial Proceedings and enter into a compromise agreement relative to the above-mentioned claim.29But then, in the same affidavit, Suk Kyoo Kim declared that the respondent "do[es] not keep a written copy of the aforesaid Resolution" because no records of board resolutions approved during teleconferences were kept. This belied the respondents earlier allegation in its February 10, 2000 motion for extension of time to submit the questioned resolution that it was in the custody of its main office in Korea. The respondent gave the trial court the impression that it needed time to secure a copy of the resolution kept in Korea, only to allege later (via the affidavit of Suk Kyoo Kim) that it had no such written copy. Moreover, Suk Kyoo Kim stated in his affidavit that the resolution was embodied in the Secretarys/Resident Agents Certificate signed by Atty. Aguinaldo. However, no such resolution was appended to the said certificate.

The respondents allegation that its board of directors conducted a teleconference on June 25, 1999 and approved the said resolution (with Atty. Aguinaldo in attendance) is incredible, given the additional fact that no such allegation was made in the complaint. If the resolution had indeed been approved on June 25, 1999, long before the complaint was filed, the respondent should have incorporated it in its complaint, or at least appended a copy thereof. The respondent failed to do so. It was only on January 28, 2000 that the respondent claimed, for the first time, that there was such a meeting of the Board of Directors held on June 25, 1999; it even represented to the Court that a copy of its resolution was with its main office in Korea, only to allege later that no written copy existed. It was only on March 6, 2000 that the respondent alleged, for the first time, that the meeting of the Board of Directors where the resolution was approved was held via teleconference.

Worse still, it appears that as early as January 10, 1999, Atty. Aguinaldo had signed a Secretarys/Resident Agents Certificate alleging that the board of directors held a teleconference on June 25, 1999. No such certificate was appended to the complaint, which was filed on September 6, 1999. More importantly, the respondent did not explain why the said certificate was signed by Atty. Aguinaldo as early as January 9, 1999, and yet was notarized one year later (on January 10, 2000); it also did not explain its failure to append the said certificate to the complaint, as well as to its Compliance dated March 6, 2000. It was only on January 26, 2001 when the respondent filed its comment in the CA that it submitted the Secretarys/Resident Agents Certificate30 dated January 10, 2000.

The Court is, thus, more inclined to believe that the alleged teleconference on June 25, 1999 never took place, and that the resolution allegedly approved by the respondents Board of Directors during the said teleconference was a mere concoction purposefully foisted on the RTC, the CA and this Court, to avert the dismissal of its complaint against the petitioner.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No. 61000 is REVERSED and SET ASIDE. The Regional Trial Court of Manila is hereby ORDERED to dismiss, without prejudice, the complaint of the respondent.

SO ORDERED.Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. L-45144 April 3, 1939M. E. GREY, plaintiff-appellant, vs.INSULAR LUMBER COMPANY, defendant-appelle.

C. H. Van Hoven and Harvey and O'Brien for appellant.Ross, Lawrence, Selph and Carrascoso for appellee.CONCEPCION, J.:The only question of law raised in this appeal is whether the plaintiff-appellant is entitled, as stockholder of the defendant-appellee Insular Lumber Company, to inspect and examine the books records of the transactions of said defendant.

The parties submitted a stipulation of facts on which the lower court based its judgment denying the mandamus against the defendant and absolving it from the complaint.

According to the stipulation of facts, the defendants was and is a corporation organized and existing under the laws of the State of New York, licensed to engage in business in the Philippines, with offices in the City of Manila, in Fabrica, Occidental Negros, in New York and in Philadelphia. The plaintiff was and is the owner and possessor of 57 shares of the capital stock of the defendant corporation, registered in his name in the books thereof; that he does not own three per cent of the total capital stock of the corporation, nor does he represent stockholders who own three per cent of its capital; that during the years 1932 and 1933, the plaintiff asked the offices of the defendant in Manila and in Fabrica to permit him to examine the books and records of the business of said defendant, but he was not allowed to do so; that under the law of New York, the right of a stockholder to examine the books and records of a corporation organized under the laws of that State, have been, during the entire period material to this action, only those provided in section 77 of the Stock Corporation Law, which reads as follows:

Financial Statement to Stockholders: Stockholders owning three per centum of the shares of any corporation other than a moneyed corporation may make a written request to the treasurer or other fiscal officer thereof for a statement of its affairs, under oath, embracing a particular account of all its assets and liabilities, and the treasurer shall make such statement and deliver it to the person making the request within thirty days thereafter, and keep on file in the office of the corporation for twelve months thereafter a copy of such statement, which shall at all times during business hours be exhibited to any stockholders demanding an examination thereof; but the treasurer shall not be required to deliver more than one such statement in any one year. The Supreme Court, or any justice thereof, may upon application, for good cause shown, extend the time for making and delivering such statement. For every neglect or refusal to comply with the provisions of this section the corporation shall and pay to the person making such request the sum of Fifty Dollars, and the further sum of ten dollars for every twenty-four hours thereafter until such statement shall be furnished. (S. C. L., sec. 77.)

That neither the plaintiff nor any other stockholder of the defendant corporation has asked its treasurer or any of its officers for a statement of its affairs, as provided in the statutes of New York; neither did the plaintiff ask to be allowed to examine any of the statements prepared by the defendant corporation and existing in its files, as provided by the statutes of New York.

In the light of the foregoing facts agreed upon by the parties and in accordance with section 77 of the Stock Corporation Law of New York which is conceded to be the law that governs the right of a stockholder to examine the books and papers of a corporation, it is a question fully settled that the plaintiff not being a stockholder owning at least three per cent of the capital stock of the defendant corporation, has no right to examine the books and records of the corporation nor to require a statement of its affairs embracing a particular account of its assets and liabilities.

Plaintiff-appellant contends, however, that, in accordance with our Corporation Law, under which the defendant company was registered to do business in the Philippines, the plaintiff, as stockholder, is entitled to inspect the record of the transactions of the defendant corporation (sec. 51, Act No. 1459, and this right, which is recognized in the common law, has not been altered by section 77 of the Stock Corporation Law of New York quoted in the stipulation of facts, and can be enforced by mandamus.

To this, defendant corporation answers, in the first place, that stipulation of facts is finding upon both parties and cannot be altered by either of them. (25 R. C. L., 1104, 1105.) In the second place, on the strength of this principle, plaintiff-appellant is bound to adhere to the agreement made by him with the defendant corporation in paragraph four of the stipulation of facts, to the effect that the rights of a stockholder, under the law of New York, to examine the books and records of a corporation organized under the laws of said State, and during the entire period material to this action, are only those provided in section 77 Stock Corporation Law of New York. Under this law, plaintiff has the right to be furnished by the treasurer or other fiscal officer of the corporation with statement of its affairs embracing a particular account of all its assets and liabilities. In the third place, inasmuch as plaintiff, either at the hearing or in his motion for new trial, did not ask to have the stipulation of facts altered or changed, he cannot now, for the first time on appeal, raise the question that aside from the right conferred upon him by section 77 of the Stock Corporation Law of New York, he also entitled under the common law to examine and inspect the books and records of the defendant corporation. In the fourth place, neither can this right under the common law be granted the defendant in the present case, since the same can only be granted at the discretion of the court, under certain conditions, to wit:

(a) That the stockholder of a corporation in New York has the right to inspect its books and records if it can be shown that he seeks information for an honest purpose (14 C. J., 853), or to protect his interest as stockholder. (In re Steinway, 159 N. Y., 250; 53 N. E., 1103; 45 L. R. A., 461 [aff. 31 App. Div., 70; 52 N. Y. S., 343]).

(b) That said right to examine and inspect the books of the corporation must be exercised in good faith, for a specific and honest purpose, and not to gratify curiosity, or for speculative or vexatious purposes. (14 C. J., 854, 855.)

The appellant has made no effort to prove or even allege that the information he desired to obtain through the examination and inspection of defendant's books was necessary to protect his interests as stockholder of the corporation, or that it was for a specific and honest purpose, and not to gratify curiosity, nor for speculative or vexatious purposes.

In view of the foregoing, we affirm the judgment of the lower court, with costs against the appellant. So ordered.

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.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 of certiorari to 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 for certiorari.

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 of Western 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 in Western Equipment and Supply Co. vs. Reyes regarding 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 COURTManila

FIRST DIVISION

G.R. No. L-49695 April 7, 1986

HATHIBHAI BULAKHIDAS, petitioner, vs.THE HONORABLE PEDRO L. NAVARRO, as Presiding Judge of the Court of First Instance of Rizal, Seventh Judicial District, Pasig, Metro Manila, Branch 11 and DIAMOND SHIPPING CORPORATION, respondent.

Teves, Campos, Hernandez & Lim Law Office for private respondent.

PATAJO, J.:This is a petition for review on certiorari of the order of the then Court of First Instance of Rizal, Branch 11 dated August 21, 1978, dismissing petitioner's complaint.

Petitioner, a foreign partnership, filed a complaint against a domestic corporation, Diamond Shipping Corporation, before the Court of First Instance of Rizal for the recovery of damages allegedly caused by the failure of the said shipping corporation to deliver the goods shipped to it by petitioner to their proper destination. Paragraph 1 of said complaint alleged that plaintiff is "a foreign partnership firm not doing business in the Philippines" and that it is "suing under an isolated transaction." Defendant filed a motion to dismiss the complaint on the ground that plaintiff has no capacity to sue and that the complaint does not state a valid cause of action against defendant.

Acting on said motion to dismiss, the Court of First Instance dismissed the complaint on the ground that plaintiff being "a foreign corporation or partnership not doing business in the Philippines it cannot exercise the right to maintain suits before our Courts."

Hence, this petition.

The issue of whether or not a foreign corporation not engaged in business in the Philippines can institute an action before our courts is already wen settled in this jurisdiction.

Aetna Casualty and Surety Co. vs. Pacific Star Lines, 80 SCRA 635, is a case similar to the present one in that the action is also one for recovery of damages sustained by cargo shipped on defendants' vessels. Defendants set up the defense that plaintiff is a foreign corporation not duly licensed to do business in the Philippines and, therefore, without capacity to sue and be sued. In overruling said defense, this Court said:

It is settled that if a foreign corporation is not engaged in business in the Philippines, it may not be denied the right to file an action in Philippine courts for isolated transactions.

The object of Sections 68 and 69 of the Corporation law was not to prevent the foreign corporation from performing single acts, but to prevent it from acquiring a domicile for the purpose of business without taking the steps necessary to render it amenable to suit in the local courts. It was never the purpose of the Legislature to exclude a foreign corporation which happens to obtain an isolated order for business from the Philippines, from securing redress in the Philippine courts.

In Mentholatum Co. Inc. et al. vs. Mangaliman, et al., this Court ruled that:

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. vs. 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 vs. Implement Dealers Mut. Fire Ins. Co., 241 N.W. 75, 77; Pauline Oil & Gas Co. vs. Mutual Tank Line Co., 246 P. 851, 852, 118 Okl. 111; Automotive Material Co. vs. American Standard Metal Products Corp., 158 N.E. 698, 703, 327 III. 367.)

And in Eastboard Navigation, Ltd. et al vs. Juan Ysmael & Co., Inc., this Court held that:

(d) While plaintiff is a foreign corporation without license to transact business in the Philippines, it does not follow that it has no capacity to bring the present action. Such license is not necessary because it is not engaged in business in the Philippines. In fact, the transaction herein involved is the first business undertaken by plaintiff in the Philippines, although on a previous occasion plaintiff's vessel was chartered by the National Rice and Corn Corporation to carry rice cargo from abroad to the Philippines. These two isolated transactions do not constitute engaging in business in the Philippines within the purview of Sections 68 and 69 of the Corporation Law so as to bar plaintiff from seeking redress in our courts. (Marshall Wells Co. vs. Henry W. Elser & Co. 49 Phil., 70; Pacific Vegetable Oil Corporation vs. Angle O. Singson, G.R. No. L-7917, April 29, 1955.)

Again, in Facilities Management Corporation vs. De la Osa 89 SCRA 131, 139, following Aetna Casualty & Surety Co. vs. Pacific Star Line, supra, held a foreign corporation not engaged in business in the Philippines is not barred from seeking redress from the courts of the Philippines.

The case of Atlantic Mutual Insurance Co. vs. Cebu Stevedoring Co., 17 SCRA 1037, cited by respondent finds no application to the case at bar. It must be observed in the Atlantic case that there was no allegation in the complaint that the two foreign corporations involved therein were not engaged in business in the Philippines. All that was averred in the complaint was that they were both foreign corporations existing under the laws of the United States. Thus, the qualifying circumstance of the said foreign corporations' capacity to sue is wanting. Contrary to the Atlantic case, the complaint filed by petitioner herein sufficiently alleged that it is a foreign partnership (or corporation) not engaged in business in the Philippines and that it was suing under an isolated transaction.

WHEREFORE, the order of respondent Court dismissing the petitioner's complaint is hereby set aside and the case remanded for further proceedings, with costs against private respondent.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. L-26332 October 26, 1968THE SWEDISH EAST ASIA CO., LTD., petitioner, vs.MANILA PORT SERVICE AND/OR MANILA RAILROAD COMPANY, respondents.

Ross, Selph, Salcedo, Del Rosario, Bito & Misa for petitioner.Government Corporate Counsel D. F. Macaranas for respondents.CASTRO, J.:This is a petition for review of the decision of the Court of Appeals in CA-G.R. 34279-R, entitled "The Swedish East Asia Co., Ltd. vs. Manila Port Service, et al." The petitioner, The Swedish East Asia Co., Ltd., a corporation duly organized and existing under the laws of Sweden with principal offices at Gothenburg, Sweden, is admittedly not licensed to do business in the Philippines.

On December 3, 1967 the MS "SUDAN", owned and operated by the petitioner, arrived at the port of Manila and discharged cargo destined thereto unto the custody of the respondent Manila Port Service, a subsidiary of the respondent Manila Railroad Company, contractor and operator of the arrastre service of the port of Manila. By mistake, cargo destined for Hongkong consisting of sixteen bundles of "lifts of mild steel tees window sections" covering which the petitioner had issued a bill of lading in the name of S.A. Citals Lodelinsart, as shipper, and of Welcome Trading Co. of Hongkong, as consignee, were also landed at Manila. The erroneous discharge was obviously engendered by the fact that the same ship on the same day discharged forty similar bundles destined for consignees in the Philippines.

Vicente Pacheco, claims manager of the International Harvester McCleod and Company, the petitioner's agent in Manila, upon being notified by letter from Hongkong of the erroneous discharge, sent the company's customs men to investigate, who found the sixteen bundles at the customs piers. Pacheco then instructed their customs men to arrange for the reshipment of the sixteen bundles to Hongkong and accomplish all necessary papers for payment of customs, arrastre and storage charges due on the goods, which charges were as a matter of fact paid by the petitioner. However, the reshipment of all the sixteen bundles was not effected, because only eight of these were available at the time that all were scheduled to be loaded on board the M.S. "Minikoi" bound for Hongkong, as the remaining eight could not be found. After an exchange of letters between Pacheco and the Manila Port Service, in the last of which the latter advised the International Harvester of its inability to locate the eight missing bundles, the petitioner, on January 10, 1958, presented a formal claim for the value of the missing cargo to the Manila Port Service in the sum of P2,349.62. On March 8, 1960 the petitioner received a letter from the respondents rejecting the claim.

On March 13, 1961 the petitioner filed a complaint in the Court of First Instance of Manila, for recovery of the amount of P2,349.62, the value of the missing goods, which sum it had paid to the consignee in Hongkong, as well as the amount of P2,000 in moral damages and P1,000 as attorney's fees, and costs.

On April 29, 1964, after due trial, the lower court rendered judgment ordering the respondents, jointly and severally, to pay the petitioner the sum of P2,349.62, with interest thereon at the rate of 6% per annum from March 13, 1961, the date of the filing of the complaint, and the sum of P600 in attorney's fees, plus costs.

From this judgment, the respondents interposed an appeal to the Court of Appeals, which on April 30, 1966 promulgated its decision reversing that of the lower court and absolving the respondents.

Hence, the present recourse.

The petitioner contends in this appeal that the Court of Appeals erred "(1) in holding that the obligation of the Manila Port Service to a non-resident consignee of cargo not destined for Manila but mistakenly discharged at Manila is governed by its management contract with the Bureau of Customs and not by article 2154 of the Civil Code of the Philippines; (2) assuming arguendo that the management contract of the Manila Port Service with the Bureau of Customs governs the obligations of respondents and is binding on petitioner, in holding that a claim filed thirty-eight days after the discharge of the cargo but within fifteen days from the time the cargo was placed at the disposal of the consignee is time-barred; and (3) in not holding that suit against the Manila Port Service for loss of cargo may be filed within one year from notice of the rejection of consignee's claim."

The Court of Appeals held that the petitioner's action in the lower court was time-barred, its claim having been filed only on January 10, 1958, or thirty-eight days from December 3, 1957, when the cargo in question was landed at the port of Manila, and court action having been commenced only on March 13, 1961, or more than three years thereafter, in violation of the provisions of the management contract between the Manila Port Service and the Bureau of Customs, which, in part, reads:

... in any event the CONTRACTOR shall be relieved and released of any and all responsibility or liability for loss, damage, misdelivery and/or non-delivery of goods unless suit in the court of proper jurisdiction is brought within a period one (1) year from the date of the discharge of the goods, or from the date when the claim for the value of such goods have [sic] been rejected or denied by the CONTRACTOR, provided that such claim shall have been filed with the contractor within 15 days from the date of discharge of the last package from the carrying vessel ...

The petitioner argues that the cases cited by the Court of Appeals, on the basis of which it absolved the respondents from liability, are not applicable to the case at bar, because the said cases involved cargo destined for the Philippines, and the consignees are residents of the Philippines who availed themselves of the services of the customs arrastre operator. These conditions, the petitioner states, do not exist in the present case as (1) the cargo herein involved was destined not for Manila but for Hongkong, (2) the consignee is not a resident of the Philippines, (3) the cargo was mistakenly discharged at Manila unto the custody of the arrastre operator, and (4) the consignee cannot be said to have availed itself of the services of the arrastre operator.

Admitting that the Hongkong consignee of the cargo involved is not bound by the management contract, for the reason that it was not charged with notice of the provisions thereof, the respondents nonetheless maintain that the petitioner is bound thereby, because the petitioner had been transacting business with the respondents regularly in the past and is charged with knowledge of the provisions of the management contract. They further argue that since it was the petitioner, and not the consignee, which had mistakenly delivered the goods, there could be no subrogation in favor of the petitioner entitling it to invoke in its favor the non-applicability of the management contract to the consignee.

It is our view that the position taken by the petitioner is correct. True it is that this Court has held in a number of cases that it is not only the parties to a management contract that are bound thereby, but also third parties who have availed themselves of the services of the arrastre operator, taking delivery therefrom in pursuance of a permit and a pass issued by the latter.1 The disparate facts of the present case, however, do not warrant application of this doctrine. For it is not disputed that the petitioner had no intention of availing itself of the services of the Manila Port Service, nor did it seek to derive benefit therefrom, in so far as the cargo in question is concerned. On the contrary, its intention was to have the sixteen bundles discharged in Hongkong, pursuant to its contract with the consignee, the Welmore Trading Co., to deliver the cargo to that place. Discharge of the good in Manila was made through mistake, in good faith.

The petitioner not being bound by the management contract either as a party thereto or as one who has taken advantage of the provisions thereof, it follows that its right to bring an action to recover the value of the missing goods can not be limited by the pre-conditions as to time set forth in the said management contract.

The respondents who had no right to the sixteen bundles delivered to them by mistake, had actually received them, thereby giving rise to an obligation on their part to return them to the one who delivered them by mistake, which, by virtue of this circumstance, acquired the character of creditor of the receiver, remaining at the same time answerable to the consignee thereof.2 It results that the petitioner having acquired the right to demand in its own capacity the return of the shipment delivered by mistake to the respondents, this Court may grant relief to it not as subrogee of the consignee, but as creditor in its own right, in which capacity the petitioner has brought this action as shown by the allegations of the complaint considered as a whole.

In the case at bar, there is no question that the defendants received the sixteen bundles which were mistakenly discharged in Manila as in fact they were located at the piers, and that the charges for their storage were paid by the petitioner. There was therefore an obligation on the part of the respondents to return them to the petitioner.

The defense that the agents of the shipper were negligent in allowing the landing of the cargo at Manila by mistake, will not exempt the respondents from liability, because the obligation of one who has erroneously received a thing to return the same to the one who delivered it by mistake remains unaffected by such circumstance. And this holds true even where, as in this case, the one who wrongfully delivered the thing, pays its value to the rightful owner thereof.

The foregoing disquisition dispenses with the need of passing upon the other two assignments of error.

The complaint having been filed on March 13, 1961, less than four years from the date the petitioner's right of action accrued, that is, from December 3, 1957, when the missing cargo was admittedly landed unto the custody of the defendants, the action of the petitioner has not prescribed, whether we apply article 1146 of the new Civil Code which provides for a prescriptive period of four years for an action "upon an injury to the rights of the plaintiff," or article 1149 of the same Code which provides that "all other actions whose periods are not fixed in this Code or in other laws must be brought within five years from the time the right of action accrues."

The respondents challenge the petitioner's capacity to sue, it being admittedly a foreign corporation without license to engage in business in the Philippines, citing section 69 of the Corporation Law. It must be stated however that this section is not applicable to a foreign corporation performing single acts or "isolated transactions."3 There is nothing in the record to show that the petitioner has been in the Philippines engaged in continuing business or enterprise for which it was organized, when the sixteen bundles were erroneously discharged in Manila, for it to be cosidered as transacting business in the Philippines. The fact is that the bundles, the value of which is sought to be recovered, were landed not as a result of a business transaction, "isolated" or otherwise, but due to a mistaken belief that they were part of the shipment of forty similar bundles consigned to persons or entities in the Philippines. There is no justification, therefore, for invoking the provisions of section 69 of the Corporation Law.

ACCORDINGLY, the judgment of the Court of Appeals is reversed, and another judgment is hereby rendered ordering the respondents, jointly and severally, to pay the petitioner the sum of P2,349.62 with interest thereon at the rate of 6% per annum from March 13, 1961, the date of the filing of the complaint, until the amount shall have been fully paid, and the sum of P600 as attorney's fees. Costs against the respondents.

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

G.R. No. L-61523 July 31, 1986

ANTAM CONSOLIDATED, INC., TAMBUNTING TRADING CORPORATION and AURORA CONSOLIDATED SECURITIES and INVESTMENT CORPORATION, petitioners, vs.THE COURT OF APPEALS, THE HONORABLE MAXIMIANO C. ASUNCION (Court of First Instance of Laguna, Branch II [Sta. Cruz]) and STOKELY VAN CAMP, INC., respondents. Siguion Reyna, Montecillo & Ongsiako Law Offices for petitioners.

Bito, Misa & Lozada Law Offices for respondents.

GUTIERREZ, JR., J.:This petition for certiorari and prohibition seeks to set aside the order of the Regional Trial Court of Laguna which denied the petitioners' motion to dismiss on the ground that the reason relied upon by them does not appear to be indubitable. Petitioners also seek to set aside the decision and resolution of the Intermediate Appellate Court which respectively upheld the order of the trial court and denied the petitioners' motion for reconsideration of the same.

On April 9, 1981, respondent Stokely Van Camp. Inc. (Stokely) filed a complaint against Banahaw Milling Corporation (Banahaw), Antam Consolidated, Inc., Tambunting Trading Corporation (Tambunting), Aurora Consolidated Securities and Investment Corporation, and United Coconut Oil Mills, Inc. (Unicom) for collection of sum of money.

In its complaint, Stokely alleged: (1) that it is a corporation organized and existing under the laws of the state of Indiana, U.S.A. and has its principal office at 941 North Meridian Street, Indianapolis, Indiana, U.S.A., and one of its subdivisions "Capital City Product Company" (Capital City) has its office in Columbus, Ohio, U.S.A.; (2) that Stokely and Capital City were not engaged in business in the Philippines prior to the commencement of the suit so that Stokely is not licensed to do business in this country and is not required to secure such license; (3) that on August 21, 1978, Capital City and Coconut Oil Manufacturing (Phil.) Inc. (Comphil) with the latter acting through its broker Roths child Brokerage Company, entered into a contract (No. RBS 3655) wherein Comphil undertook to sell and deliver and Capital City agreed to buy 500 long tons of crude coconut oil to be delivered in October/November 1978 at the c.i.f. price of US$0.30/1b. but Comphil failed to deliver the coconut oil so that Capital City covered its coconut oil needs in the open market at a price substantially in excess of the contract and sustained a loss of US$103,600; that to settle Capital City's loss under the contract, the parties entered into a second contract (No. RBS 3738) on November 3, 1978 wherein Comphil undertook to buy and Capital City agreed to sell 500 long tons of coconut crude oil under the same terms and conditions but at an increased c.i.f. price of US$0.3925/lb.; (4) that the second contract states that "it is a wash out against RBS 3655" so that Comphil was supposed to repurchase the undelivered coconut oil at US$0.3925 from Capital City by paying the latter the sum of US$103,600.00 which is the same amount of loss that Capital City sustained under the first contract; that Comphil again failed to pay said amount, so to settle Capital City's loss, it entered into a third contract with Comphil on January 24, 1979 wherein the latter undertook to sell and deliver and Capital City agreed to buy the same quantity of crude coconut oil to be delivered in April/May 1979 at the c.i.f. price of US$0.3425/lb.; (5) that the latter price was 9.25 cents/lb. or US$103,600 for 500 long tons below the then current market price of 43.2 cents/lb. and by delivering said quantity of coconut oil to Capital City at the discounted price, Comphil was to have settled its US$103,600 liability to Capital City; (6) that Comphil failed to deliver the coconut oil so Capital City notified the former that it was in default; (7) that Capital City sustained damages in the amount of US$175,000; and (8) that after repeated demands from Comphil to pay the said amount, the latter still refuses to pay the same.

Respondent Stokely further prayed that a writ of attachment be issued against any and all the properties of the petitioners in an amount sufficient to satisfy any lien of judgment that the respondent may obtain in its action. In support of this provisional remedy and of its cause of action against the rest of the petitioners other than Comphil, the respondent alleged the following: 1) After demands were made by respondent on Comphil, the Tambuntings ceased to be directors and officers of Comphil and were replaced by their five employees, who were managers of Tambunting's pawnshops and said employees caused the name of Comphil to be changed to "Banahaw Milling Corporation" and authorized one of the Tambuntings, Antonio P. Tambunting, Jr., who was at that time neither a director nor officer of Banahaw to sell its oil mill; 2) Unicom has taken over the entire operations and assets of Banahaw because the entire and outstanding capital stock of the latter was sold to the former; 3) ALL of the issued and outstanding capital stock of Comphil are owned by the Tambuntings who were the directors and officers of Comphil and who were the ones who benefited from the sale of Banahaw's assets or shares to Unicorn; 4) ALL of the petitioners evaded their obligation to respondent by the devious scheme of using Tambunting employees to replace the Tambuntings in the management of Banahaw and disposing of the oil mill of Banahaw or their entire interests to Unicorn; and 5) Respondent has reasonable cause to believe and does believe that the coconut oil milk which is the only substantial asset of Banahaw is about to be sold or removed so that unless prevented by the Court there will probably be no assets of Banahaw to satisfy its claim.

On April 10, 1981, the trial court ordered the issuance of a writ of attachment in favor of the respondent upon the latter's deposit of a bond in the amount of P l,285,000.00.

On June 3, 1981, the respondent filed a motion for reconsideration to reduce the attachment bond. Attached to this motion is an affidavit by the assistant attorney of the respondent's counsel stating that he has verified with the records of Comphil and the Securities and Exchange Commission (SEC) the facts he alleged in the prayer for the attachment order.

On June 11, 1981, the petitioners filed a motion to dismiss the complaint on the ground that the respondent, being a foreign corporation not licensed to do business in the Philippines, has no personality to maintain the instant suit.

After the respondent had filed an opposition to the motion to dismiss and petitioner has opposed the attachment and the motion to reduce the attachment bond, the trial court issued an order, dated August 10, 1981, reducing the attachment bond to P 500,000.00 and denying the motion to dismiss by petitioners on the ground that the reason cited therein does not appear to be indubitable.

Petitioners filed a petition for certiorari before the Indianapolis intermediate Appellate Court.

On June 14, 1982, the appellate court dismissed the petition stating that the respondent judge did not commit any grave abuse of discretion in deferring the petitioners' motion to dismiss because the said judge is not yet satisfied that he has the necessary facts which would permit him to make a judicious resolution. The appellate court further ruled that in another case entitled United Coconut Oil Mills, Inc. and Banahaw Milling Corporation v. Hon. Maximiano C. Asuncion and Stokely Van Camp, Inc. where the facts and issues raised therein are intrinsically the same as in the case at bar, it has already denied the petition for certiorari filed by Unicom and Banahaw for lack of merit and the same was upheld by the Supreme Court.

Petitioners filed a motion for reconsideration but the same was denied. Hence, they filed this instant petition for certiorari and prohibition with prayer for temporary restraining order, questioning the propriety of the appellate court's decision in: a) affirming the deferment of the resolution on petitioner' motion to dismiss; and b) denying the motion to set, aside the order of attachment.

With regards to the first question, petitioners maintain that the appellate court erred in denying their motion to dismiss since the ground relied upon by them is clear and indubitable, that is, that the respondent has no personality to sue. Petitioners argue that to maintain the suit filed with the trial court, the respondent should have secured the requisite license to do business in the Philippines because, in fact, it is doing business here. Petitioners anchor their argument that the respondent is a foreign corporation doing business in the Philippines on the fact that by the respondent's own allegations, it has participated in three transactions, either as a seller or buyer, which are by their nature, in the pursuit of the purpose and object for which it was organized. Petitioners further argue that the test of whether one is doing business or not is "whether there is continuity of transactions which are in the pursuance of the normal business of the corporation" and that the transactions entered into by respondent undoubtedly fall within this category.

We reject the petitioners' arguments.

In the case of Top-Weld Manufacturing, Inc. v. ECED, S.A. (138 SCRA 118,127-128), we stated:

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 (Mentholatum Co. v. Mangaliman, 72 Phil.524). Thus, a foreign corporation with a settling agent in the Philippines which issues twelve marine policies covering different shipments to the Philippines (General Corporation of the Philippines v. Union Insurance Society of Canton, Ltd., 87 Phil. 313) and a foreign corporation which had been collecting premiums on outstanding policies (Manufacturing Life Insurance Co., v. Meer, 89 Phil. 351) 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. (Far East International Import and Export Corporation v. Nankai Kogyo, Co., 6 SCRA 725).

In the Mentholatum Co. v. Mangaliman case earlier cited, this Court held:

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...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 warning-organized or whether it has substantially was retired from it and turned it over to another. (Traction Cos. v. Collectors of Int. Revenue [CCA., 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 workers 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, 327 111. 367.) '

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 transaction 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. Thus, the trial court, and the appellate court did not err in denying the petitioners' motion to dismiss not only because the ground thereof does not appear to be indubitable but because the respondent, being a foreign corporation not doing business in the Philippines, does not need to obtain a license to do business in order to have the capacity to sue. As we have held in Eastboard Navigation Ltd. v. Juan Ysmael and Co., Inc. (102 Phil. 1, 18):

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(d) While plaintiff is a foreign corporation without license to transact business in the Philippines, it does not follow that it has no capacity to bring the present action. Such license is ' not necessary because it is not engaged in business in the Philippines. In fact, the transaction herein involved is the first business undertaken by plaintiff in the Philippines, although on a previous occasion plaintiff's vessel was chartered by the National Rice and Corn Corporation to carry rice cargo from abroad to the Philippines. These two isolated transactions do not constitute engaging in business in the Philippines within the purview of Sections 68 and 69 of the Corporation Law so as to bar plaintiff from seeking redress in our courts (Marshall-Wells Co. v. Henry W. Elser & Co. 49 Phil. 70; Pacific Vegetable Oil Corporation v. Angel 0. Singson, G.R. No. L-7917, April 29, 1955; also cited in Facilities Management Corporation v. De la Osa, 89 SCRA 131, 138).

We agree with the respondent that it is a common ploy of defaulting local companies which are sued by unlicensed foreign companies not engaged in business in the Philippines to invoke lack of capacity to sue. The respondent cites decisions from 1907 to 1957 recognizing and rejecting the improper use of this procedural tactic. (Damfschieffs Rhedered Union v. Cia Trans-atlantica, 8 Phil. 766 11907]; Marshall-Wells Co. v. Henry W. Elser & Co., 49 Phil. 70 [1924]; Western Equipment Co. v. Reyes, 51 Phil. 115 [1927]; Central Republic Bank v. Bustamante, 71 Phil. 359 [1941]; Pacific Vegetable Oil Co. v. Singson, 96 Phil.-986 [1955]; Eastboard Navigation, Ltd. v. Juan Ysmael and Co., Inc., 102 Phil. 1 [1957]). The doctrine of lack of capacity to sue based on failure to first acquire a local license is based on considerations of sound public policy. It intended to favor domestic corporations who enter was never into solitary transactions with unwary foreign firms and then repudiate their obligations simply because the latter are not licensed to do business in this country. The petitioners in this case are engaged in the exportation of coconut oil, an export item so vital in our country's economy. They filed this petition on the ground that Stokely is an unlicensed foreign corporation without a bare allegation or showing that their defenses in the collection case are valid and meritorious. We cannot fault the two courts below for acting as they did.

Anent the second issue they raise, the petitioners contend that the trial court should not have issued the order of attachment and the appellate court should not have affirmed the same because the verification in support of the prayer for attachment is insufficient. They state that the person who made such verification does not personally know the facts relied upon for the issuance of the attachment order. Petitioners capitalize on the fact that Renato Calma, the assistant attorney of Bito, Misa, and Lozada, counsel for respondent, stated in his verification that "he has read the foregoing complaint and that according to his information and belief the allegations therein contained are true and correct."

The above contention deserves scant consideration.

We rule that the defect in the original verification was cured when Renato Calma subsequently executed an affidavit to the effect that the allegations he made in support of the prayer for attachment were verified by him from the records of Comphil and the Securities and Exchange Commission. Moreover, petitioner had the opportunity to oppose the issuance of the writ.

As to the merit of the attachment order itself, we find that the allegations in the respondent's complaint satisfactorily justify the issuance of said order.

WHEREFORE, IN VIEW OF THE FOREGOING, the petition is DISMISSED for lack of merit. The Temporary Restraining Order dated February 2, 1983 is hereby DISSOLVED. Costs against the petitioners.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

FIRST DIVISION

G.R. No. L-38649 March 26, 1979

FACILITIES MANAGEMENT CORPORATION, J. S. DREYER, and J. V. CATUIRA, petitioners, vs.LEONARDO DE LA ROSA AND THE HONORABLE COURT OF INDUSTRIAL RELATIONS, respondents. Sycip, Salazar, Feliciano & Associates for petitioners.

Benjamin M. Mendoza for respondent Court.

MAKASIAR, J:Petition for review on certiorari of the decision of the Court of Industrial Relations, dated February 14, 1972, ordering petitioners herein to pay private respondent Leonardo de la Osa his overtime compensation, as wen as his swing shift and graveyard shift premiums at the rate of fifty (50%) per cent of his basic sa (Annex E, p. 31, rollo).

The aforesaid decision was based on a report submitted by the Hearing Examiner, CIR (Dagupan City Branch), the pertinent portions of which are quoted hereinbelow:::

In a petition filed on July 1, 1967, Leonardo dela Osa sought his reinstatement. with full backwages, as well as the recovery of his ove