D.

DISSOLUTION and Exchange Commission shall thereupon issue the certificate of

dissolution.

a. DISSOLUTION (SEC. 117 OF THE CORPORATION CODE) When a corporation is contemplating dissolution, it must submit tax
return on the income earned by it from the beginning of the year up to
1. VOLUNTARY DISSOLUTION the date of its dissolution and pay the corresponding tax due. BPI v.
Sec. 117. Methods of dissolution. – A corporation formed or organized Court of Appeals, 363 SCRA 840 (2001).
under the provisions of this Code may be dissolved voluntarily or
involuntarily.  CREDITORS ARE AFFECTED (SEC. 119
Voluntary OF THE CORP. CODE)

Requirements where no creditors are affected. - Requirements where creditors are affected Sec. 119. Voluntary dissolution
where creditors are affected. – Where the dissolution of a corporation may
 NO CREDITORS ARE AFFECTED (SEC. prejudice the rights of any creditor, the petition for dissolution shall be filed
with the Securities and Exchange Commission. The petition shall be signed by a
118 OF THE CORP. CODE)
majority of its board of directors or trustees or other officers having the
management of its affairs, verified by its president or secretary or one of its
Sec. 118. Voluntary dissolution where no creditors are affected. – If directors or trustees, and shall set forth all claims and demands against it, and
dissolution of a corporation does not prejudice the rights of any creditor that its dissolution was resolved upon by the affirmative vote of the
having a claim against it, the dissolution may be effected by majority stockholders representing at least two-thirds (2/3) of the outstanding capital
vote of the board of directors or trustees, and by a resolution duly stock or by at least two-thirds (2/3) of the members at a meeting of its
adopted by the affirmative vote of the stockholders owning at least stockholders or members called for that purpose.
two-thirds (2/3) of the outstanding capital stock or of at least two-
thirds (2/3) of the members of a meeting to be held upon call of the If the petition is sufficient in form and substance, the Commission shall,
directors or trustees after publication of the notice of time, place and by an order reciting the purpose of the petition, fix a date on or before
object of the meeting for three (3) consecutive weeks in a which objections thereto may be filed by any person, which date shall not
newspaper published in the place where the principal office of said be less than thirty (30) days nor more than sixty (60) days after the entry
corporation is located; and if no newspaper is published in such place, of the order. Before such date, a copy of the order shall be published at least
once a week for three (3) consecutive weeks in a newspaper of general
then in a newspaper of general circulation in the Philippines, after circulation published in the municipality or city where the principal
sending such notice to each stockholder or member either by office of the corporation is situated, or if there be no such newspaper, then
registered mail or by personal delivery at least thirty (30) days prior in a newspaper of general circulation in the Philippines, and a similar
to said meeting. A copy of the resolution authorizing the dissolution copy shall be posted for three (3) consecutive weeks in three (3) public
shall be certified by a majority of the board of directors or trustees places in such municipality or city.
and countersigned by the secretary of the corporation. The Securities
1
Upon five (5) days’ notice, given after the date on which the right to file
objections as fixed in the order has expired, the Commission shall proceed to
hear the petition and try any issue made by the objections filed; and if no such
objection is sufficient, and the material allegations of the petition are true, it
shall render judgment dissolving the corporation and directing such disposition
of its assets as justice requires, and may appoint a receiver to collect such assets
and pay the debts of the corporation.

2. INVOLUNTARY DISSOLUTION (SEC. 121 OF THE

CORP. CODE, SEC. 6)
(SEC. 2 OF RULE 66 OF THE RULES OF COURT)

Section 121. Involuntary dissolution. – A corporation may be dissolved

by the Securities and Exchange Commission upon filing of a verified
complaint and after proper notice and hearing on the grounds provided
by existing laws, rules and regulations.

Rules of Court provides that a quo warranto proceedings may be

brought against a corporation:
1. When it has offended against a provision of an Act for its creation
or renewal.
2. When it has forfeited its privileges and franchises by non-user.
3. When it has committed or omitted an act which amounts to a
surrender of its corporate rights, privileges, or franchises.
When it has misused a right, privilege, or franchise conferred upon it by law,
or when it has exercised a right, privilege or franchise in contravention of law.

Sec. 2 Rule 66 When Solicitor General or public prosecutor must

commence action. — The Solicitor General or a public
prosecutor, when directed by the President of the Philippines, or
when upon complaint or otherwise he has good reason to
believe that any case specified in the preceding section can be
established by proof, must commence such action.

2
 QUO WARRANTO After a very careful and deliberate consideration of the evidence presented, the Solicitor General
came to the conclusion that the same did not warrant a quo warranto that could justify to terminate
corporate life, and that the corporate acts or omissions complained of had not resulted in substantial
 REPUBLIC V. BISAYA LAND injury to the public.

TRANSPORTATION, 81 SCRA 9 Hence, the Solicitor General withdrew the quo warranto proceedings filed against Bisaya.

NOTES: Issue:

Whether the solicitor general is vested with the full power to manage and control the State’s litigation,
REPUBLIC v BISAYA which includes the power to discontinue such litigation if and in his opinion this could be done.
***
Held:
- Sol gen has the power to withdraw quo warranto proceeding;
provided that there is an approval from the court The Court held that as the general rule is that the Solicitor General may manage and control
- Quo warranto proceeding: must sufficiently be proved that it is for the State’s litigation, which includes the power to discontinue such litigation if and in his
opinion this could be done, PROVIDED there is approval of the court.
public interest
*** Corp will the n be dissolved The purpose of the motion for the dismissal of the quo warranto is to take the State out of
***if public interest is not involved: the issue is only personal(other remedies unnecessary court litigation.
may be used
According to the Court, dissolution is a serious remedy granted to the Courts against offending
BUT even if public interest is involved: if evidences no established: QW will not lie corporations. Courts, as a general rule, should not resort to dissolution when the prejudice is not a
prejudice against the public or not an outright abuse of, or violation of the corporate charter.
(Dissolution)
Even if the prejudice is public in nature, the remedy is to enjoin or correct the mistake. Only when it
Republic vs. Bisaya Land Transportation Co. (Involuntary Dissolution) cannot be remedied anymore then that dissolution can come in.

Facts:

The Bisaya Land Transportation Co. (Bisaya) was engaged in the business of land and water
transportation.

The Solicitor General filed a petition for quo warranto for the dissolution of Bisaya alleging that
it had violated and offended the provisions of the Corporation Law and other statutes of the
Philippines by having committed acts amounting to a forfeiture of its franchise, rights, and
privileges and through various means misused and abused the terms of its franchise, some of
which were as follows:

1. falsely reconstituted its articles of incorporation by adding new purposes not originally
included;
2. acquiring public lands and timber concessions;
3. leasing of a pasture land; operating a general merchandise store which is neither
necessary for nor accomplishment of its principal purpose;
4. engaging in mining operations.
3
  GOVERNMENT V. PHIL. SUGAR ESTATE, 38 offended against the laws of the Philippine Island and had misused its corporate authority,
franchises and privileges and had assumed privileges and franchises not granted.
PHIL 15
Issue: Whether or not the corporation should be dissolved?
NOTES:
GOV v PHIL SUGAR ESTATE Held: The franchise granted to the Philippine Sugar Estate Co by which it was permitted to
exist and do business as a corporation in the Philippine Islands, be withdrawn and annulled
- SC held, to continue its business; BUT IT MUST STOP THE ACTS
and that it be disallowed to do and to continue doing business in the Philippine Islands,
COMPLAINED OF
Dissolution is an option: it will be exercised for a period of 6 mos. UNLESS it shall within a period of six months after final decision, liquidate, dissolve and
IF THE CORP DOES NOT STOP THE ACTS COMPLAINED OF separate absolutely in every respect and in all of its relations, complained of in the petition,
with The Tayabas Land Company, without any findings to costs. And it is hereby further ordered and
***Why is the decision of the SC contingent upon the happening of a
decreed that the record be returned to the lower court with direction that a judgment be entered in
certain event? accordance herewith. And be it further ordered and decreed, upon the presentation of positive proof
- Quo warranto proceeding is a last resort against the corporation: that the defendant corporation has complied in full with the foregoing order and decree that then and
QW will make the corp cease to exist in that case the complaint shall be dismissed, otherwise this decree shall remain in full force and
QW results in the dissolution of the corp, it is equivalent to death effect.
penalty (aut reviews: could be imposed and be suspended as well)
While it is true that the courts are given a wide discretion in ordering the dissolution
which means there has to be an option; a chance to cease and of corporations for violations of its franchises, etc., yet nevertheless, when such abuses and
desist the acts complained of violations constitute or threaten a substantial injury to the public or such as to amount to a
violation of the fundamental conditions of the contract (charter) by which the franchises were
granted and thus defeat the purpose of the grant, then the power of the courts should be
3 RIGHTS OF SECURITY HOLDER
exercised for the protection of the people.
1. Profit
2. Control Under the law the people of the Philippine Islands have guaranteed the payment of the interest upon
3. Residual assets cost of the construction of the railroad which occupied or occupies at least some of the lands
purchased by the defendant. Every additional dollar of increase in the price of the land purchased by
the railroad company added that much to the costs of construction and thereby increased the burden
Government v. Philippine Sugar Estate Co. imposed upon the people. The very and sole purpose of the intervention of the defendants in the
purchase of the land from the original owners was for the purpose of selling the same to the Railroad
Facts: The Philippine Sugar Estate Co. (PSEC) entered into a contract with the Tayabas Land
Company at profit — at an increased price, thereby directly increasing the burden of the people by
Company for the purpose of engaging in the business of purchasing parcels of land along the
way of additional taxation.
right of way of the Manila railroad Company through the province of Tayabas with a view of
reselling the same to the Manila RailRoad Company. PSEC by its charter was authorized to The purpose of the intervention of the defendant in the transactions in question, was to enrich itself at
engage in any mercantile or industrial enterprise. For a period of 18 months it had misused its the expense of the taxpayers of the Philippine Islands, who had, by a franchise granted, permitted
corporate authority, franchise and privileges and had assumed privileges and franchises not the defendant to exist and do business as a corporation. The defendant was not willing to allow the
granted. Railroad Company to purchase the land of the original owners. Its intervention with The Tayabas
Land Company was to obtain an increase in the price of the land in a resale of the same to the
PSEC contended that the money given to Tayabas Land Company was in a form of a loan.
railroad company. The conduct of the defendant in the premises merits the severest condemnation of
A quo warranto action was brought by the Attorney General to have the charter of the law.
PSEC declared forfeited. The complainant allege that the defendant corporation had continuously

4
  REPUBLIC V. SECURITY CREDIT, 19 SCRA 58 continuance of its illegal operations causes public injury owing to the number of persons affected
thereby.
NOTES:
A writ of quo warranto for its dissolution is proper.

3 RIGHTS OF SECURITY HOLDER

1. Profit NOTES:
2. Control
3. Residual assets
***Involuntary dissolution: tantamount to ceasing to exist as a juridical
REPUBLIC v SECURITY CREDIT person:
- Same as Phil Sugar Estate
- The corp was given notices to comply to stop the acts from QW may be filed against a corp by the SolGen; Public Interest should
the monetary board be involved
- But such notices and option, the corp did not exercise; Even if QW (not a public interest) lies; will give the corp a
then dissolution of corp is final chance to comply what is stated in the charter or stop the acts
complained of

3. Expiration of Term Sec 122

Republic vs Security Credit

Facts:
4. Shortening of Corpo Term
Security Credit was a corporation registered in the SEC. its primary purpose is to
engage in financing agricultural, commercial and industrial projects.
Sec 120
The Central Bank of the Philippines conducted an investigation and it was found out that 5. Non-Use of Corpo Charter and Continuous Inoperation
Security Credit is engaging in bank activities without the proper license and authority coming
from the Central Bank as required under R.A. No. 337.
Sec 22
One of the example of its activities is that it regularly lends funds from the receipt deposits. Liquidation of Corpo Assets Sec 122

Based on the finding of the Central bank, the Solicitor general commenced a quo warranto
proceedings for the dissolution of the corporation.

Issue: 3. EXPIRATION OF TERM (SEC. 122 OF THE CORP.

Is the action of the solicitor general proper? CODE)
Held:
Section 122. Corporate liquidation. – Every corporation whose charter expires by
A corporation, which misused its corporate funds and franchise by engaging in
illegal banking, may be dissolved. Its acts were willful, were repeated 50,000+ times and the
its own limitation or is annulled by forfeiture or otherwise, or whose corporate

5
existence for other purposes is terminated in any other manner, shall 5. Dissolution and liquidation
nevertheless be continued as a body corporate for three (3) years after the
time when it would have been so dissolved, for the purpose of prosecuting
and defending suits by or against it and enabling it to settle and close its A corporation that has a pending action and which cannot be
affairs, to dispose of and convey its property and to distribute its assets, but terminated within the three-year period after dissolution is authorized
not for the purpose of continuing the business for which it was established. to convey all its property to trustees to enable it to prosecute and
defend suits by or against the corporation beyond the three-year
period.
At any time during said three (3) years, the corporation is authorized and
empowered to convey all of its property to trustees for the benefit of
stockholders, members, creditors, and other persons in interest. From and Distribution of Assets
after any such conveyance by the corporation of its property in trust for the Distribution among the shareholders of the assets in winding up,
benefit of its stockholders, members, creditors and others in interest, all formal or informal may be made only to the prior claim of creditors
interest which the corporation had in the property terminates, the legal and after all debts have been paid or provided for. This is sometimes
interest vests in the trustees, and the beneficial interest in the expressed in terms of the trust fund doctrine.
stockholders, members, creditors or other persons in interest.
Liquidation Rehabilitation
- Connotes a winding up or - Connotes a reopening
Upon the winding up of the corporate affairs, any asset distributable to setting with creditors and of reorganization
any creditor or stockholder or member who is unknown or cannot be found
debtors. .
shall be escheated to the city or municipality where such assets are located.
- It is a winding up of a - Contemplates a
Except by decrease of capital stock and as otherwise allowed by this corporation so that assets continuance of
Code, no corporation shall distribute any of its assets or property except are distributed to those corporate life
upon lawful dissolution and after payment of all its debts and liabilities. entitled to receive them. and
activities in an effort to
- It is the process of reducing restore and reinstate
Methods of Liquidation
1. Liquidation by the directors themselves. assets to cash, discharging the corporation
2. Liquidation by a duly appointed receiver. liabilities and dividing in its former position
3. Liquidation by trustees to whom the board of directors had conveyed surplus or loss. of successful
the corporate assets. operation and solvency.

Rules of corporate recovery

The SEC approved the Rules of Procedure on Corporate recovery
effective on January 15, 2000.
1. It governs the rules on definition of terms
2. Common provisions
3. Suspension of payments
4. Rehabilitation
6
 4. SHORTENING OF CORPORATE TERM (SEC. 120
It has been held that where corporate directors are guilty of a breach of
OF THE CORP. CODE) trust and intracorporate remedy is futile, the minority stockholders may
resort to the courts for appropriate relief and, incidentally, as for the
appointment of a receiver for the protection of their rights.
Sec. 120. Dissolution by shortening corporate term. – A voluntary
dissolution may be effected by amending the articles of incorporation to
shorten the corporate term pursuant to the provisions of this Code. A 5. NON-USE OF CORPORATE CHARTER AND
copy of the amended articles of incorporation shall be submitted to the CONTIUOUS INOPERATION (SEC. 22 OF THE CORP.
Securities and Exchange Commission in accordance with this Code. Upon
approval of the amended articles of incorporation of the expiration of the CODE)
shortened term, as the case may be, the corporation shall be deemed Sec. 22. Effect of non-use of corporate charter and continuous in
dissolved without any further proceedings, subject to the provisions of this operation of a corporation. – If a corporation does not formally organize
Code on liquidation. and commence the transaction of its business or the construction of its
works within two (2) years from the date of its incorporation, its corporate
powers cease and the corporation shall be deemed dissolved. However, if
SEC requirements on shortening corporate term a corporation has commenced the transaction of its business but
1. Amended article of incorporation shortening its corporate term in subsequently becomes continuously inoperative for a period of at least
accordance with Section 16 of the Code. five (5) years, the same shall be ground for the suspension or revocation
2. A director’s certificate signed by at least a majority of the of its corporate franchise or certificate of incorporation.
directors/trustees and attested by the secretary, certified under oath,
stating that the amended articles of incorporation is a true and
correct copy as amended by the stockholders representing at least This provision shall not apply if the failure to organize, commence the
2/3 of the outstanding capital stock or at least 2/3 of the members in transactions of its businesses or the construction of its works, or to
case of non-stock corporations. continuously operate is due to causes beyond the control of the
3. A certification that no creditor shall be prejudiced by the dissolution. corporation as may be determined by the Securities and Exchange
4. A list of creditors, if any. Commission.
5. Consent of the creditors with regard to the dissolution.
6. Affidavit of stockholders/directors/ officers/members regarding any Organization
valid claim against the corporation. The idea of organization in reference to corporations means executive structure,
7. Latest balance sheet which must be earlier than the date of the
election of officers, providing for subscription and payment of capital, adoption
meeting of the stockholders approving the amendment of the
articles of incorporation. of by-laws, and other steps necessary to endow the legal entity with capacity to
8. Notice of dissolution. transact business for which it was created.
9. Tax clearance from the BIR.
10. Affidavit of the publisher anent the publication of the notice of the The Grant of corporate existence, conferred by the issuance of certificate
dissolution once a week for three (3) consecutive weeks in two (2) of incorporation, is subject to two subsequent conditions, to wit:
newspapers of general circulation in the Philippines. 1. The corporation must “formally organize”.
2. The corporation must actually begin the “transaction of its business”.
The SEC may appoint a receiver to collect such assets and pay the
debts of the corporation.
7
Failure to comply with either or both of these conditions within two (2) years
from the date of its incorporation, its corporate power cease and the
Methods of Liquidation
corporation must be deemed dissolved.
1. Liquidation by the directors themselves.
b. LIQUIDATION OF CORPORATE ASSETS (122 OF THE 2. Liquidation by a duly appointed receiver.
Liquidation by trustees to whom the board of directors had conveyed
CORP. CODE) the corporate assets.

Section 122. Corporate liquidation. – Every corporation whose charter expires

by its own limitation or is annulled by forfeiture or otherwise, or whose
corporate existence for other purposes is terminated in any other manner,
shall nevertheless be continued as a body corporate for three (3) years after
the time when it would have been so dissolved, for the purpose of prosecuting
and defending suits by or against it and enabling it to settle and close its
affairs, to dispose of and convey its property and to distribute its assets, but
not for the purpose of continuing the business for which it was established.

At any time during said three (3) years, the corporation is authorized and
empowered to convey all of its property to trustees for the benefit of
stockholders, members, creditors, and other persons in interest. From and
after any such conveyance by the corporation of its property in trust for the
benefit of its stockholders, members, creditors and others in interest, all
interest which the corporation had in the property terminates, the legal
interest vests in the trustees, and the beneficial interest in the stockholders,
members, creditors or other persons in interest.

Upon the winding up of the corporate affairs, any asset distributable to any
creditor or stockholder or member who is unknown or cannot be found shall
be escheated to the city or municipality where such assets are located.

Except by decrease of capital stock and as otherwise allowed by this Code, no

corporation shall distribute any of its assets or property except upon lawful
dissolution and after payment of all its debts and liabilities.

8
 Held:
 BUENAFLOR V. CAMARINES SUR INDUSTRY,
108 SCRA 472 A corporate grantee of a certificate of public convenience to operate an ice plant CANNOT
lawfully continue to sell ice after the expiration of its corporate life;
NOTES:
and neither can it apply for a new certificate for it is incapable of receiving a grant.

BUENAFLOR v CAMARINES At the point of dissolution, the doctrines of corporation by estoppel or de facto corporations
- Once a the life of a corp ceases; a 3 yrs stat extension for the corp are not made to apply to save the transaction.
to liquidate its assets One will see in Buenaflor the mandatory effects of dissolution. In fact, the general rule is that there
- Liabilities shall be settled; that is why 3 years has been is no juridical personality to serve but one purpose – for all transactions pertaining to
given to a dissolved corp liquidation. Any matter entered into that is not for the purpose of liquidation will be a void
transaction because of the non- existence of the corporate party.

JAIME T. BUENAFLOR, petitioner,

vs.
CAMARINES SUR INDUSTRY CORPORATION, respondent. (Liquidation of Corporate Assets)

Facts:

Jaime T. Buenaflor has appealed the decision of the Public Service Commission which rejected his
application to install and operate a 5-ton ice plant in Sabang (Calabanga, Camarines Sur) even as it
permitted Camarines Sur Industry Corporation to build in that barrio, a factory with the same output.

On June 25, 1957, Buenaflor filed his said application (P. S. Case 107548) together with another
application to establish a cold storage and refrigeration service of about 6,000 cubic feet capacity (P.
S. Case 107549).

The Commission, by order of September 12, 1957, set the applications for hearing on October 9,
1957, requiring applicant to publish them in two newspapers, and to serve copy thereof to Iñigo Daza
and Camarines Sur Industry Corporation (hereinafter called Camarines Corporation).

These owned ice plants in neighboring municipalities and had been apparently selling ice to
Sabang's inhabitants.

As to the ice plant, Buenaflor insists he should be given authority to establish a 5-ton ice plant — not
the new Camarines Corporation. His line of argument centers around the expiration of the old
Corporation's charter in 1953; and we think he touches the vital spot.

Issue:

Whether or not a corporate grantee of a certificate of public convenience to operate an ice plant may
lawfully continue to sell ice after the expiration of its corporate life?

9
 Held:
 NATIONAL ABACA V. PORE, 2 SCRA 989
Corporation Law contains no provision authorizing a corporation, after three (3) years from
the expiration of its lifetime, to continue in its corporate name actions instituted by it within
NOTES: said period of three (3) years.
NATIONAL ABACA v PORE
Section 77 of said law provides that the corporation shall "be continued as a body corporate for three
- Corp can no longer claim against 3rd party after the 3 yr
(3) years after the time when it would have been . . . dissolved, for the purpose of prosecuting and
period stat extension defending suits by or against it . . .", so that, thereafter, it shall no longer enjoy corporate existence
If within the 3 yr period the corp failed to proceed with a case against 3rd for such purpose. For this reason, section 78 of the same law authorizes the corporation, "at any time
person; its right to prosecute may be upon a designated trustee by the corp during said three years . . . to convey all of its property to trustees for the benefit of members,
stockholders, creditors and other interested", evidently for the purpose, among others, of enabling
said trustees to prosecute and defend suits by or against the corporation begun before the expiration
G.R. No. L-16779 August 16, 1961 of said period.

NATIONAL ABACA AND OTHER FIBERS CORPORATION, plaintiff-appellant,

vs.
APOLONIA PORE, defendant-appellee.

Facts:

On November 14, 1953, plaintiff filed with the Municipal Court of Tacloban, Leyte, a complaint,
against defendant Apolonia Pore, for the recovery of P1,213.34, allegedly advanced to her for
the purchase of hemp for the account of the former and for which she had allegedly failed to
account. The lower court rendered an action in favor of plaintiff.

Defendant appealed to the Court of First Instance of Leyte, upon the ground that plaintiff has no legal
capacity to sue, it having abolished by Executive Order No. 372 dated November 24,1950. That
pursuant to said executive order, plaintiff "shall nevertheless be continued as a body corporate for a
period of three (3) years from the effective date" of said executive order, which was November 30,
1950, "for the purpose of prosecuting and defending suits by or against it and of enabling the Board
of Liquidators" — thereby created — "gradually to settle and close its affairs", . . . and that this case
was begun on November 14, 1953, or before the expiration of the period aforementioned.

Issue:

Whether an action, commenced within three (3) years after the abolition of plaintiff, as a
corporation, may be continued by the same after the expiration of said period

10
  TAN TIONG BIO V. CIR, 100 PHIL 86 held criminally liable under the Internal Revenue Code. Ultimately, on 5 August 1954, the Collector
issued a final definitive ruling reaffirming the deficiency assessment against the Syndicate; from
which ruling the latter appealed to the Court of Tax Appeals. In the Court of Tax Appeals, the
NOTES: Solicitor-General moved for the dismissal of the appeal on the ground that the Central Syndicate no
longer had the capacity to sue because its term of existence had expired on 15 August 1948, as
- Upon dissolution of a corp; it losses its juridical personality; shown by its Articles of Incorporation attached to the motion to dismiss. The Syndicate opposed the
- it is invalid upon the BIR to impose tax assessments over the motion, alleging that although the corporation had gone defunct, its officers and directors not only
properties of the corp. stood liable for the assessment but had also been threatened to be held criminally liable therefor; and
offered to be substituted as appellants. After hearing the arguments of both parties, the Court of Tax
- In tax cases the gov can go after the person holding the corp’s Appeals issued a resolution dismissing the appeal, on the ground that whatever judgment it would
property, however in this case, there is no one who holds the render in favor of the Government would be unenforceable against the syndicate because it is a non-
property--therefore no real party in interest existing entity. From this resolution, the Syndicate appealed to the Supreme Court on petition for
review.
Tan Tiong Bio vs. Bureau of Internal Revenue Issue: Whether the government can insist on making a tax assessment against a corporation
that no longer exists and at the same time oppose the appeal questioning the legality of the
Facts: On or about 21 October 1946, the Central Syndicate, a corporation organized for the limited
assessment precisely on the ground that the corporation is non-existent, and has no longer
period of two years, addressed a letter to the Collector of Internal Revenue advising the latter of a capacity to sue.
sale of said corporation by one Dee Hong Lue of surplus properties purchased by the vendor from
the Foreign Liquidation Commission, with the condition that the vendee corporation would pay the 3 Held: It is true that sections 77 and 78 of our Corporation Law contemplate that corporate
1/2% sales tax on such surplus properties in the name and in behalf of the vendor Dee Hong Lue. In existence can be prolonged only for three years from and after the termination of the
the same letter, the Syndicate deposited with the Collector the amount of P43,750.00 to answer for corporate term, for the purpose of winding up its affairs;
the sales tax collectible on the purchase, but representing that Dee Hong Lue expected a refund from
the U.S. Government on the original purchase price because of non-delivery of various items and in the case of the Central Syndicate, the three years expired in 1951. On this basis, if it be
included in the contract, and that therefore, the original sales tax due on the sales price was subject true that the Syndicate thereafter had no personality to dispute the assessment, it would be
to readjustment and reduction. Subsequently, on 31 January 1948, Dee Hong Lue, through counsel, equally true that no valid assessment could be imposed on a corporation that no longer had
wrote the Collector advising him that the Foreign Liquidation Commission had given him a refund of juridical personality.
P31,522.18 on the purchase price of the aforesaid surplus properties, and requesting for the refund
of an alleged overpayment of sales tax in the amount of P1,103.28. The Collector ordered the case In any event, the government cannot insist on making a tax assessment against a corporation
investigated. Four years later, or on 4 January 1952, the Collector informed Dee Hong Lue of the that no longer exists and then turn around and oppose the appeal questioning the legality of the
denial of his request for tax refund. On the same day, the Collector wrote the Central Syndicate, assessment precisely on the ground that the corporation is non- existent, and has no longer capacity
informing it that the investigation made by the Bureau revealed that it was the Syndicate and not Dee to sue.
Hong Lue that had actually purchased the surplus goods in question (commonly known us the
"Mystery Pile") from the Foreign Liquidation Commission; that the properties were invoiced in the The government cannot adopt inconsistent stands and thereby deprive the officers and directors of
name of Dee Hong Lue in trust for the Syndicate because it was then only in the process of the defunct corporation of the remedy to question the validity and correctness of the assessment for
incorporation; and that the Syndicate, after it had been organized, made it appear that the goods which, if sustained, they would be held personally liable as successors-in-interest to the corporate
were sold to it by Dee Hong Lue, to evade payment of sales tax on its selling prices to the public; and property. The appeal should not have been dismissed but that the Court of Tax Appeals
assessed the Syndicate a deficiency sales tax of P27,038.30 and 25% surcharge of P6,759.58 or a should have allowed the substitution of its former officers and directors as parties-appellants,
total sum of P33,797.88, plus the amount of P300.00 as penalty. Because of the refusal of the since they are proper parties in interest in so far as they may be (and in fact are) held
Syndicate to pay the deficiency assessment, and the findings of the Bureau that the corporation had personally liable for the unpaid deficiency assessments made by the Collector of Internal
no existing properties to satisfy the assessment, the Collector wrote David Sycip and Yu Khe Thai, Revenue against the defunct Syndicate.
manager and president, respectively, of the Syndicate, to pay the corporation's tax liability or else be
11
  GELANO V. CA, 103 SCRA 90 China Banking Corporation, ISI, through Joseph Tan Yoc Su, executed a joint and several
promissory note with Carlos Gelano in favor of said bank in the amount of P8,000.00 payable in 60
days. For failure of Carlos Gelano to pay the promissory note upon maturity, the bank collected
NOTES: from the ISI the amount of P9,106.00 including interests, by debiting it from the corporation's
current account with the bank. Carlos Gelano was able to pay ISI the amount of P5,000.00 but the
The 3 yr period-only pertains to the conveyance to the trustees; the defunct balance of P4,106.00 remained unsettled. Guillermina M. Gelano refused to pay on the ground
corp may still continue prosecuting even beyond the 3yr period that she had no knowledge about the accommodation made by ISI in favor of her husband. On
29 May 1959, ISI, thru Atty. German Lee, filed a complaint for collection against the spouses
Gelano vs. Court of Appeals
before the Court of First Instance of Manila. Trial was held and when the case was at the stage of
submitting memorandum, Atty. Lee retired from active law practice and Atty. Eduardo F. Elizalde took
Facts: Insular Sawmill, Inc. (ISI) is a corporation organized on 17 September 1945 with a corporate over and prepared memorandum. In the meantime, ISI amended its Articles of Incorporation to
life of 50 years, or up to 17 September 1995, with the primary purpose of carrying on a general shorten its term of existence up to 31 December 1960 only. The amended Articles of
lumber and sawmill business. Incorporation was filed with, and approved by the Securities and Exchange Commission, but the trial
court was not notified of the amendment shortening the corporate existence and no substitution of
To carry on this business, ISI (Insular Sawmill Inc) leased the paraphernal property of Carlos party was ever made. On 20 November 1964 and almost 4 years after the dissolution of the
Gelano's wife Guillermina Mendoza-Gelano at the corner of Canonigo and Otis, Paco, Manila for corporation, the trial court rendered a decision in favor of ISI ordering Carlos Gelano to pay
P1,200.00 a month. ISI the sum of P19,650.00 with interest thereon at the legal rate from the date of the filing of the
complaint on 29 May 1959 until said sum is fully paid; and P4,106.00, with interest thereon at the
It was while ISI was leasing the aforesaid property that its officers and directors had come to know
legal rate from the date of the filing of the complaint until said sum is fully paid; and the sum of
Carlos Gelano who received from the corporation cash advances on account of rentals to be paid
P2,000.00 attorney's fees. The Court also ordered the spouses to solidarily pay ISI the sum of
by the corporation on the land.
P946.46, with interest thereon at the agreed rate of 12% per annum from 6 October 1946, until said
Between 19 November 1947 to 26 December 1950 Carlos Gelano obtained from ISI cash advances sum is fully paid; P550.00, with interest thereon at the legal rate from the date of the filing of the
of P25,950.00. The said sum was taken and received by Carlos Gelano on the agreement that ISI complaint until the said sum is fully paid; and costs of the suit. The court dismissed the counterclaims
could deduct the same from the monthly rentals of the leased premises until said cash advances are of the spouses. Both parties appealed to the Court of Appeals, with ISI appealing because it insisted
fully paid. that both Carlos Gelano and Guillermina Gelano should be held liable for the substantial portion of
the claim. On 23 August 1973, the Court of Appeals rendered a decision modifying the judgment of
Out of the aforementioned cash advances in the total sum of P25,950.00, Carlos Gelano was able to the trial court by holding the spouses jointly and severally liable on ISI's claim and increasing the
pay only P5,950.00 thereby leaving an unpaid balance of P20,000.00 which he refused to pay award of P4,106.00 to P8,160.00. After the spouses received a copy of the decision on 24 August
despite repeated demands by ISI. 1973, they came to know that the ISI was dissolved way back on 31 December 1960. Hence,
Guillermina M. Gelano refused to pay on the ground that said amount was for the personal the spouses filed a motion to dismiss the case and or reconsideration of the decision of the Court of
account of her husband asked for by, and given to him, without her knowledge and consent Appeals on grounds that the case was prosecuted even after dissolution of ISI as a corporation and
and did not benefit the family. that a defunct corporation cannot maintain any suit for or against it without first complying with the
requirements of the winding up of the affairs of the corporation and the assignment of its property
On various occasions from 4 May 1948 to 11 September 1949 the Spouses Gelano also made credit rights within the required period. Incidentally, after the receipt of the spouses' motion to dismiss
purchases of lumber materials from ISI with a total price of P1,120.46 in connection with the repair and/or reconsideration or on 28 October 1973, ISI thru its former directors filed a Petition for
and improvement of the spouses' residence. Receivership before the Court of First Instance of Manila (Special Proceedings 92303), which petition
is still pending before said court. On 5 November 1973, ISI filed a comment on the motion to dismiss
On 9 November 1949 partial payment was made by the spouses in the amount of P91.00 and in view and/or reconsideration and after the parties have filed reply and rejoinder, the Court of Appeals on 5
of the cash discount in favor of the spouses in the amount of P83.00, the amount due ISI on account July 1974 issued a resolution denying the aforesaid motion. The spouses filed the petition for review.
of credit purchases of lumber materials is P946.46 which the spouses failed to pay. On 14 July 1952,
in order to accommodate and help the spouses renew previous loans obtained by them from the
12
Issue: Whether a corporation, whose corporate life had ceased by the expiration of its terms of
existence, could still continue prosecuting and defending suits after its dissolution and
beyond the period of 3 years provided for under Act 1459, otherwise known as the Corporation
Law, to wind up its affairs, without having undertaken any step to transfer its assets to a trustee or
assignee.

Held:

When ISI was dissolved on 31 December 1960, under Section 77 of the Corporation Law, it still
has the right until 31 December 1963 to prosecute in its name the present case.

After the expiration of said period, the corporation ceased to exist for all purposes and it can
no longer sue or be sued.

However, a corporation that has a pending action and which cannot be terminated within the
3-year period after its dissolution is authorized under Section 78 to convey all its property to
trustees to enable it to prosecute and defend suits by or against the corporation beyond the
3-year period.

Although ISI did not appoint any trustee, yet the counsel who prosecuted and defended the
interest of the corporation in the present case and who in fact appeared in behalf of the
corporation may be considered a trustee of the corporation at least with respect to the matter
in litigation only.

Said counsel had been handling the case when the same was pending before the trial court
until it was appealed before the Court of Appeals and finally to the Supreme Court.

Therefore, there was a substantial compliance with Section 78 of the Corporation Law and as
such, ISI could still continue prosecuting the present case even beyond the period of 3 years
from the time of its dissolution.

Further, the case was instituted on 29 May 1959, during the time when the corporation was still very
much alive. Any litigation filed by or against it instituted within the period, but which could not
be terminated, must necessarily prolong that period until the final termination of said
litigation as otherwise corporations in liquidation would lose what should justly belong to
them or would be exempt from the payment of just obligations through a mere technicality,
something that courts should prevent.

13
 c. METHODS OF LIQUIDATION (1) under Section 3, Rule 104, of the Rules of Court [which superseded Section 66 of the
Corporation Law]7 whereby, upon voluntary dissolution of a corporation, the court may direct
 BOARD OF LIQUIDATORS V. KALAW, 20 "such disposition of its assets as justice requires, and may appoint a receiver to collect such
SCRA 987 assets and pay the debts of the corporation;"

NOTES: (2) under Section 77 of the Corporation Law, whereby

a corporation whose corporate existence is terminated, "shall nevertheless be

BOL v KALAW continued as a body corporate for three years after the time when it would have
been so dissolved,
- The BOL shall continue to exist
for the purpose of prosecuting and defending suits by or against it and of enabling it
Board of liquidators vs kalaw gradually to settle and close its affairs, to dispose of and convey its property

Facts: The National Coconut Corporation (NACOCO) General manager and board chairman was and to divide its capital stock, but not for the purpose of continuing the business
Maximo M. Kalaw embarked on copra trading activities. Four devastating typhoons visited the for which it was established;" and
Philippines which caused the non-fulfillment of various contracts. (3) under Section 78 of the Corporation Law, by virtue of which the corporation, within the
When it became clear that the contracts would be unprofitable, Kalaw submitted them to the board three year period just mentioned, "is authorized and empowered to convey all of its property
for approval. A meeting was then held and Kalaw made a full disclosure of the situation, apprised the to trustees for the benefit of members, stockholders, creditors, and others interested."
board of the impending heavy losses. No action was taken on the contracts. Neither did the board By Executive Order 372, the government, the sole stockholder, abolished NACOCO, and placed
vote thereon at the meeting. President Roxas made a statement that the NACOCO head did his best its assets in the hands of the Board of Liquidators. The Board of Liquidators thus became the trustee
to avert the losses, emphasized that government concerns faced the same risks that confronted on behalf of the government. It was an express trust. The legal interest became vested in the trustee
private companies, that NACOCO was recouping its losses, and that Kalaw was to remain in his — the Board of Liquidators. The beneficial interest remained with the sole stockholder — the
post. Not long thereafter, the board met again and they unanimously approved the contracts. government. At no time had the government withdrawn the property, or the authority to continue the
The practice of the corporation has been to allow its general manager to negotiate and execute present suit, from the Board of Liquidators. If for this reason alone, we cannot stay the hand of the
contracts in its copra trading activities for and in NACOCO's behalf without prior board approval. If Board of Liquidators from prosecuting this case to its final conclusion. The provisions of Section 78 of
the by-laws were to be literally followed, the board should give its stamp of prior approval on all the Corporation Law — the third method of winding up corporate affairs — find application.
corporate contracts. But that board itself, by its acts and through acquiescence, practically laid aside The SC held that accordingly, rule that the Board of Liquidators has personality to proceed as:
the by-law requirement of prior approval. party-plaintiff in this case.
NACOCO now claimed that KALAW entered into the controverted contracts without the prior
approval of the corporation's directorate. Plaintiff leans heavily on NACOCO's corporate by-laws.
Article IV (b), Chapter III thereof, recites, as amongst the duties of the general manager, the
obligation: "(b) To perform or execute on behalf of the Corporation upon prior approval of the Board,
all contracts necessary and essential to the proper accomplishment for which the Corporation was
organized."

ISSUE: WON plaintiff has lost its legal personality to continue this suit.

RULING: Accepted in this jurisdiction are three methods by which a corporation may wind up its
affairs:

14
  CHINA BANKING V. MICHELIN, 58 PHIL 261 regular proceeding whereby their justice and correctness may be inquired into after a reasonable
opportunity has been given to all the parties in interest to present objections and submit evidence in
NOTES: support of such objections." The said case is a parallel of the case at bar in that the receiver in that
CHINA BANKING v MICHELIN case, together with the claimant, appeared in open court and without previous notice to any of the
Appointment of receiver; The receiver in a liquidation proceeding stands in a different other parties in interest, the claim was submitted upon the favorable recommendation of the receiver
position with regards to trustee: and allowed by the court, and upon appeal to this court it was held that the trial court erred in
rendering judgment in such a summary manner.
a trustee is governed by a trusteeship agreement entrusted by the corp: Receiver is
2nd issue
appointed by the courts
Has the lower court’s decision has become final and unappealable?
58 Phil. 261 Ruling:
FACTS: No. The applicable law is sec 77 and 78 of the Corporation Law.
George O’Farrel & Cie Inc. is a domestic corporation acting as agent and The appointment of a receiver by the court to wind up the affairs of the corporation upon
representative of the Michelin & Cie, a foreign corporation engaged in the sale and petition of voluntary dissolution does not empower the court to hear and pass on the claims
distribution of Michelin tires. Michelin decided to discontinue their business relations, and it of the creditors of the corporation at first hand.
was discovered that O’Farrel failed to account for an amount representing the price of tires
sold by the latter. Michelin claims the money was disposed by O’Farrel for its own use and benefit In such cases the receiver does not act as a receiver of an insolvent corporation.
and without the authority or consent of Michelin. Gaston O’Farrel (the person) and Sanchez executed
All claims must be presented for allowance to the receiver or trustee or other proper persons
a mortgage on the house of O’Farrel and shares owned by both to guarantee payment of the amount
during the winding up proceedings which in this jurisdiction would be within the three years
to the Michelin, but left a balance which the latter seeks to recover. The board of the corporation filed
as the term for the corporate existence of the corporation, and if a claim is disputed or
a petition for its dissolution and sought the appointment of Gaston as receiver and liquidator, which
unliquidated so that the receiver cannot safely allow the same, it should be transferred to the
was granted by the trial court. Michelin filed its claim against O’Farrel Corp with a prayer that its claim
proper court for trial and allowance, and the amount so allowed then presented to the receiver
be allowed as a preferred one against the latter. Notice was given only to the corporation and to the
or trustee for payment.
claimant, no one else. The trial court granted the claim and nobody except Michelin and Gaston were
notified of the order. China Bank intervened and moved that Michelin’s claim be allowed as an The rulings of the receiver on the validity of claims submitted are subject to review by the
ordinary one under the Insolvency Law and that the sum of P5,000 paid by the receiver to the court appointing such receiver though no appeal is taken to the latter’s ruling.
appellee on account of the latter’s claim be refunded to the funds of the corporation in liquidation for
the benefit of the rest of the creditors. The lower court dismissed the case stating the decision has
become final and unappealable. The decree of dissolution in the case at bar having been entered on August 22, 1930, and the motion
ISSUE: Can the court declare the claim preferred? of the appellant, China Banking Corporation, appearing to have been filed on September 30, 1931, or
about thirteen months later, it follows that the motion was filed on time to have the appellee’s claim
Ruling: No. According to the Corporation Law, during the winding up proceedings after reviewed by the court under the provisions of the said sections of the Corporation Law, and the trial
dissolution, no creditor will be permitted by legal process or otherwise to acquire priority, or to court, therefore, erred in finding that the order of November 8, 1930, allowing appellee’s claim was
enforce his claim against the property held for distribution as against the rights of other creditors. final and unappealable under the provisions of section 113 of the Code of Civil Procedure.

Furthermore, in so far as the service of notice is concerned, we adhere to the rule laid down in
Whalen v. Pasig Iron Works (13 Phil., 417), where this court held that." . . claims against a
corporation in the hands of a receiver should not be approved and paid without some formal and
15
  REPUBLIC V. MARSMAN, 44 SCRA 418
NOTES:
REPUBLIC v MARSMAN
- Immaterial to impose corp taxes held by the liquidators

Defendant corporation was a timber license holder with concessions in Camarines Norte.

Investigations led to the discovery that certain taxes were due on it.

BIR assessed Marsman 3 times for unpaid taxes. Atty. Moya, in behalf of the corporation, received
the first 2 assessments. He requested for reinvestigation.

As a result, corporation failed to pay within the prescribed period.

Numerous BIR warnings were given. After 3 years of futile notifications, BIR sued the corporation.

ISSUE: WON present action is barred by prescription, in light of the fact that the corporation
law allows corporations to continue only for 3 years after its dissolution, for the purpose of
presenting or defending suits by or against it, and to settle its affairs.

RULING:

NO.
Although Marsman was extra-judicially dissolved, with the 3-year rule, nothing however bars
an action for recovery of corporate debts against the liquidators.

In fact, the 1st assessment was given before dissolution, while the 2nd and 3rd assessments
were given just 6 months after dissolution (within the 3-year rule).

Such facts definitely established that the Government was a creditor of the corporation for
whom the liquidator was supposed to hold assets of the corporation.

RATIO:
Code provides for a 3-year period for continuation of the corporate existence for purposes of
liquidation, BUT there is nothing in the provision which bars an action for recovery of debts
of the corporation against the liquidator himself, after the lapse of the 3-year period rule.

16
REPUBLIC OF THE PHILIPPINES vs. MARSMAN DEVELOPMENT COMPANY persons enumerated in Section 78, including its creditors, among whom is the Government, for the
taxes herein involved. To assume otherwise would render the extra-judicial dissolution illegal and
FACTS: Marsman Development Company was a timber licensee holding Timber Licensee void, since, according to Section 62 of the Corporation Law, such kind of dissolution is permitted only
Agreement No. 37-A, with concessions in the Municipality of Basud and Mondazo, Camarines Norte. when it "does not affect the rights of any creditor having a claim against the corporation."
An investigation was conducted on the business operations and activities of the said
corporation leading to the discovery that certain tax discrepancies. Hence, a notice of assessment It is immaterial that the present action was filed after the expiration of three years after April
was made (a total of 3 assessments). Demand were made for the corporation to settle its tax 23, 1954, for at the very least, and assuming that judicial enforcement of taxes may not be
deficiencies, however, they failed to accede to such. That why a warrant of distraint and levy were initiated after said three years despite the fact that the actual liquidation has not been
issued against them which subsequently becomes final and executory. terminated and the one in charge thereof is still holding the assets of the corporation,
obviously for the benefit of all the creditors thereof, the assessment aforementioned, made
The corporation contends that the present action is already barred under section 77 of the within the three years, definitely established the Government as a creditor of the corporation
Corporation Law, Act No. 1459, as amended, which allows the corporate existence of a corporation for whom the liquidator is supposed to hold assets of the corporation.
to continue only for three years after its dissolution, for the purpose of presenting or defending suits
by or against it, and to settle and close its affairs. And since the suit at bar is only for the collection of taxes finally assessed against the corporation
within the three years invoked by appellants, their fourth assignment of error cannot be sustained. As
They point out that inasmuch as the Marsman Development Co. was extra-judicially dissolved on
to the allegation that appellant Burgess has not in fact received any property or asset of the
April 23, 1954, a fact admitted in the amended complaint, the filing of both the original complaint on
corporation, that is a matter that can well be taken care of in the execution of the judgment which
September 8, 1958 and the amended complaint on August 26, 1956 was beyond the aforesaid three-
may be rendered herein, albeit it seems some kind of fraud would be perceptible, if the corporation
year period.
had been dissolved without leaving any assets whatsoever with the liquidator.
ISSUE: W/N the present action is already barred under section 77 of the Corporation Law, Act No.
1459, as amended.

HELD: The record shows that the filing of the amended complaint was intended, among others, to
include as a party defendant, in an alternative capacity, Mr. F.H. Burgess, who is the liquidator of the
Marsman Development Co.

Although it is an admitted fact that the defendant corporation was extrajudicially dissolved on April
23, 1954, there is no claim that the affairs of said corporation had already been finally liquidated or
settled. Evidently, Mr. F.H. Burgess is still continuing in his aforesaid capacity as liquidator of the
Marsman Development Co. While section 77 of the Corporation Law provides for a three-year period
for the continuation of the corporate existence of the corporation for purposes of liquidation, there is
nothing in said provision which bars an action for the recovery of the debts of the corporation against
the liquidator thereof, after the lapse of the said three-year period.

It is to be recalled that the assessments against appellant corporation for deficiency taxes due for its
operations since 1947 were made by the BIR on October 15, 1953, September 13, 1954 and
November 8, 1954, such that the first was before its dissolution and the last two not later than six
months after such dissolution.

Thus, in whatever way the matter may be viewed, the Government became the creditor of the
corporation before the completion of its dissolution by the liquidation of its assets. Appellant F.H.
Burgess, whom it chose as liquidator, became in law the trustee of all its assets for the benefit of all
17
  ALHAMBRA SUGAR V. SEC, 24 SCRA 269 On July 15, 1963, at a special meeting, Alhambra's BODs resolved to amend paragraph "Fourth" of it
articles of incorporation to extend its corporate life for an additional 50 yrs. On Aug. 26, 1963,
NOTES: Alhambra's SHs, voted to approve the foregoing resolution. On Oct. 28, 1963, Alhambra's articles of
ALHAMBRA SUGAR v SEC incorporation as so amended, were filed with respondent SEC.
- Upon liquidation of the corp; it may not extend its life ISSUE:
DISSOLUTION has 3yr period to liquidate: ONLY for
W/N a corporation may extend its life by amendment of its articles of incorporation effected
PURPOSES OF LIQUIDATION
during the three-year statutory period for liquidation when its original term of existence had
- Corp cannot exercise powers of corp (may exercise some but already expired.
only for liquidation)
HELD:
- Corp has no juridical person
- A transfer is needed: BOL is constituted for the dissolution of No. SEC ruling is AFFIRMED. From July 15 to Oct. 28, 1963, when Alhambra made its attempt to
the corporation extend its corporate existence, its original term of 50 yrs had already expired.; it was in the midst of
*** sometimes 3 yrs is not enough; that is the reason why transfer of the 3-year grace period statutorily fixed in Sec. 77 of the Corporation Law.
the property is needed either: Plain from the language of the provision is its meaning: continuance of a "dissolved"
- RECEIVER: court appointed corporation as a body corporate for 3 yrs has for its purpose the final closure of its affairs,
TRUSTEE: by contract and no other, the corporation is specifically enjoined from "continuing the business for which
it was established."
ALHAMBRA CIGAR & CIGARETTE MANUFACTURING COMPANY, INC. vs. SECURITIES &
EXCHANGE COMMISSION The liquidation of the corporation's affairs set forth in Sec. 77 became necessary precisley
FACTS: because its life had ended.

Petitioner was duly incorporated under Philippine Laws (Jan. 15, 1912). By its corporate articles, it For this reason alone, the corporate existence and juridical personality of that corporation to
was to exist for 50 yrs from incorporation. do business may no longer be extended.

Its term of existence expired on Jan. 15, 1962. On that date, it ceased transacting business and
entered into a state of liquidation.

Thereafter, a new corporation - Alhambra Industries, Inc.- was formed to carry on the business of
Alhambra.

On May 1, 1962, Alhambra's SHs, by resolution, named Angel Gamboa trustee to take charge of its
liquidation.

On June 20, 1963, within Alhambra's 3 year statutory period for liquidation, R.A. 3531 was enacted
into law. It amended Sec. 18 of the Corporation Law; it empowered domestic private corporations to
extend their corporate life beyond the period fixed by the articles of incorporation for a term not to
exceed 50 yrs in any one instance. Previous to R.A. 3531, the maximum non-extendible term f such
corporations was 50 yrs.

18
 d. RULES FOR NON-STOCK CORP. pursuant to this Chapter.

RULES ON FOUNDATIONS (SECS. 94 AND 95 OF

Sec. 95. Plan of distribution of assets. – A plan providing for the
THE CORP. CODE) distribution of assets, not inconsistent with the provisions of this Title, may
Sec. 94. Rules of distribution. – In case dissolution of a non-stock be adopted by a non-stock corporation in the process of dissolution in the
corporation in accordance with the provisions of this Code, its assets shall following manner:
be applied and distributed as follows:

The board of trustees shall, by majority vote, adopt a resolution

1. All liabilities and obligations of the corporation shall be paid, recommending a plan of distribution and directing the submission thereof
satisfied and discharged, or adequate provision shall be made to a vote at a regular or special meeting of members having voting rights.
therefore. Written notice setting forth the proposed plan of distribution or a summary
thereof and the date, time and place of such meeting shall be given to
each member entitled to vote, within the time and in the manner provided
2. Assets held by the corporation upon a condition requiring return, in this Code for the giving of notice of meetings to members. Such plan of
transfer or conveyance, and which condition occurs by reason of distribution shall be adopted upon approval of at least two- thirds (2/3) of
the dissolution, shall be returned, transferred or conveyed in the members having voting rights present or represented by proxy at
accordance with such requirements. such meeting.

3. Assets received and held by the corporation subject to limitations Distribution of assets of non-stock corporations to the members on
permitting their use only for charitable, religious, benevolent,
dissolution is not forbidden, unless it holds its assets upon some trust,
educational or similar purposes, but not held upon a condition
requiring return, transfer or conveyance by reason of the public or private, in which case the claims of the state, the beneficiaries,
dissolution, shall be transferred or conveyed to one or more or of the founder and his successors may have to be considered.
corporations, societies or organizations engaged in activities in the
Philippines substantially similar to those of the dissolving A non-stock (non-profit) corporation may not ordinarily organize as a stock
corporation according to a plan of distribution adopted pursuant to corporation, authorized to issue shares of stock, but may issue membership
this Chapter. certificates which do not entitle to the holder to dividends.

Assets other than those mentioned in the preceding paragraphs, if In the event of dissolution of a non-stock corporation, its
any, shall be distributed in accordance with the provisions of the assets shall be distributed in accordance with the rules as
articles of incorporation or the by-laws, to the extent that the articles provided for under Secs. 94 and 95 of Corporation Code. Unless, it
of incorporation or the by-laws, determine the distributive rights of is so provided in the Articles of Incorporation or By-Laws, the
members, or any class or classes of members, or provide for members are not entitled to any beneficial or vested interest over
distribution. the assets of the non-stock corporation. In other words, non-stock,
non-profit corporations hold their funds in trust for the
carrying out of the objectives and purposes expressed in its
4. In any other case, assets may be distributed to such persons, charter. (SEC Opinion dated 24 February 2003; SEC Opinion dated
societies, organizations or corporations, whether or not organized 13 May 1992).
for profit, as may be specified in a plan of distribution adopted
19
 e. RIGHT TO PROPORTIONATE SHARE OF REMAINING NOTES:
ASSETS UPON DISSOLUTION AVON INSURANCE v CA
Rationale for requiring foreign corp to obtain license from the SEC;
is to subject them to the jurisdiction of the court
V. FOREIGN CORPORATION - Foreign corps not doing business in the Phils, are not required to
obtain SEC license: foreign corp only existed upon the
a. DEFINITION (SEC. 123 OF THE CORP. CODE) sovereignty of the country
Section 123. Definition and rights of foreign corporations. – For
the purposes of this Code, a foreign corporation is one formed, AVON Insurance PLC vs. CA
organized or existing under any laws other than those of the
Philippines and whose laws allow Filipino citizens and corporations to Respondent Yupangco Cotton Mills filed a complaint against several foreign reinsurance companies
do business in its own country or state. It shall have the right to (among which are petitioners) to collect their alleged percentage liability under contract treaties
transact business in the Philippines after it shall have obtained a between the foreign insurance companies and the international insurance broker C.J. Boatright,
license to transact business in this country in accordance with this acting as agent for respondent Worldwide Surety and Insurance Company. Inasmuch as petitioners
Code and a certificate of authority from the appropriate government are not engaged in business in the Philippines with no offices, places of business or agents in the
agency. Philippines, the reinsurance treaties having been entered abroad, service of summons upon motion
of respondent Yupangco, was made upon petitioners through the Office of the Insurance
Commissioner. Petitioners, by counsel on special appearance, seasonably filed motions to dismiss
Definition disputing the jurisdiction of respondent Court and the extra-territorial service of summons.
Respondent Yupangco filed its opposition to the motions to dismiss, petitioners filed their reply, and
Foreign Corporation is one formed, organized or existing under any respondent Yupangco filed its rejoinder. Respondent Court denied the motions to dismiss and
laws other than those of the Philippines and whose laws allow directed petitioners to file their answer. Then, petitioners filed their notice of appeal which was
Filipino citizens and corporations to do business in its own country or denied.
state.
As fate would have it, within the respective effectivity periods of Policies 20719 and 25896, the
A foreign corporation is one which owes its existence to the laws of properties therein insured were razed by fire, thereby giving rise to the obligation of the insurer to
another state, and generally, has no legal existence within the state in indemnify the Yupangco Cotton Mills. Partial payments were made by Worldwide Surety and
which it is foreign. Avon Insurance PLC v. Court of Appeals, 278 Insurance and some of the reinsurance companies.
SCRA 312 (1997)
Worldwide Surety and Insurance, in a Deed of Assignment, acknowledged a remaining balance still
A fundamental rule of international jurisdiction is that no state can due Yupangco Cotton Mills, and assigned to the latter all reinsurance proceeds still collectible from
by its laws, and no court which is only a creature of the state, can by its all the foreign reinsurance companies. Thus, in its interest as assignee and original insured,
judgments and decrees, directly bind or affect property or persons Yupangco Cotton Mills instituted this collection suit against the petitioners.
beyond the limits of that state. Times, Inc. v. Reyes, 39 SCRA 303
(1971). Issue: Whether or not the respondent Court has no jurisdiction over the petitioners being a foreign
corporations not doing business in the Philippines with no office, place of business or agents in the
Philippines
 AVON INSURANCE PLC V. CA (GR NO.
Ruling:
97642, 1997)
20
In the decisions of the courts below, there is much left to speculation and conjecture as to whether or foreign corporations are allowed such privileges, subject to certain restrictions, arising from the
not the petitioners were determined to be "doing business in the Philippines" or not. state's sovereign right of regulation.

To qualify the petitioners' business of reinsurance within the Philippine forum, resort must be made to The same danger does not exist among foreign corporations that are indubitably not doing business
the established principles in determining what is meant by "doing business in the Philippines." In in the Philippines. Indeed, if a foreign corporation does not do business here, there would be no
Communication Materials and Design, Inc. et. al. vs. Court of Appeals, 8 it was observed that. reason for it to be subject to the State's regulation. As we observed, in so far as the State is
concerned, such foreign corporation has no legal existence. Therefore, to subject such corporation to
There is no exact rule or governing principle as to what constitutes doing or engaging in or the courts' jurisdiction would violate the essence of sovereignty.
transacting business. Indeed, such case must be judged in the light of its peculiar circumstances,
upon its peculiar facts and upon the language of the statute applicable. The true test, however, As we have found, there is no showing that petitioners had performed any act in the country that
seems to be whether the foreign corporation is continuing the body or substance of the business or would place it within the sphere of the court's jurisdiction.
enterprise for which it was organized.
It is also argued that having filed a motion to dismiss in the proceedings before the trial court,
A single act or transaction made in the Philippines, however, could qualify a foreign corporation to be petitioners have thus acquiesced to the court's jurisdiction, and they cannot maintain the contrary at
doing business in the Philippines, if such singular act is not merely incidental or casual, but indicates this juncture. This argument is at the most, flimsy.
the foreign corporation's intention to do business in the Philippines. 10

There is no sufficient basis in the records which would merit the institution of this collection suit in the b. CONCEPT OF DOING BUSINESS (SEC. 44 OF THE CORP.
Philippines. More specifically, there is nothing to substantiate the private respondent's submission
that the petitioners had engaged in business activities in this country. This is not an instance where CODE)
the erroneous service of summons upon the defendant can be cured by the issuance and service of (SEC. 1 (F) OF THE IMPLEMENTING RULES OF THE
alias summons, as in the absence of showing that petitioners had been doing business in the
country, they cannot be summoned to answer for the charges leveled against them. OMNIBUS INVESTMENTS CODE)
As it is, private respondent has made no allegation or demonstration of the existence of petitioners'
o APPLICATION FOR LICENSE (SEC. 124 AND 125
domestic agent, but avers simply that they are doing business not only abroad but in the Philippines OF THE CORPORATION CODE)
as well. It does not appear at all that the petitioners had performed any act which would give the
general public the impression that it had been engaging, or intends to engage in its ordinary and
usual business undertakings in the country. The reinsurance treaties between the petitioners and Section 124. Application to existing foreign corporations. – Every
Worldwide Surety and Insurance were made through an international insurance broker, and not foreign corporation which on the date of the effectivity of this Code is
through any entity or means remotely connected with the Philippines. Moreover, there is authority to authorized to do business in the Philippines under a license therefore issued
the effect that a reinsurance company is not doing business in a certain state merely because the
to it, shall continue to have such authority under the terms and condition of
its license, subject to the provisions of this Code and other special laws.
property or lives which are insured by the original insurer company are located in that state. 12 The
reason for this is that a contract of reinsurance is generally a separate and distinct arrangement from
the original contract of insurance, whose contracted risk is insured in the reinsurance agreement. 13 A foreign corporation can have no legal existence beyond the bounds of the
Hence, the original insured has generally no interest in the contract of reinsurance. 14 state or sovereignty by which it is created. It exists only in contemplation of
A foreign corporation, is one which owes its existence to the laws of another state, 15 and generally, law and by force of the law, and where that law ceases to operate, the
has no legal existence within the state in which it is foreign. In Marshall Wells Co. vs. Elser, 16 it was corporation can have no existence. It must dwell in the place of its
held that corporations have no legal status beyond the bounds of the sovereignty by which they are creation, and cannot migrate to another sovereignty.
created. Nevertheless, it is widely accepted that foreign corporations are, by reason of state comity,
allowed to transact business in other states and to sue in the courts of such fora. In the Philippines Foreign corporations may do business in the Philippines either by directly
entering into transactions with resident persons, firms or corporations or by
21
creating a domestic subsidiary corporation which would have its own distinct number of shares which the corporation has authority to issue,
personality. itemized by classes, par value of shares, shares without par value,
and series, if any.

Licensed foreign corporations is authorized to do business in the Philippines

shall continue to have such authority under the terms and condition of its 8. A statement of its outstanding capital stock and the aggregate
license, subject to the provisions of the Code and other special laws. number of shares which the corporation has issued, itemized by
classes, par value of shares, shares without par value, and series, if
any.
Section 125. Application for a license. – A foreign corporation applying
for a license to transact business in the Philippines shall submit to the
Securities and Exchange Commission a copy of its articles of incorporation 9. A statement of the amount actually paid in.
and by-laws, certified in accordance with law, and their translation to an
official language of the Philippines, if necessary. The application shall be
under oath and, unless already stated in its articles of incorporation, shall 10. Such additional information as may be necessary or appropriate in
specifically set forth the following: order to enable the Securities and Exchange Commission to
determine whether such corporation is entitled to a license to
transact business in the Philippines, and to determine and assess
1. The date and term of incorporation. the fees payable.
2. The address, including the street number, of the principal office of
the corporation in the country or state of incorporation.
3. The name and address of its resident agent authorized to accept Attached to the application for license shall be a duly executed certificate
summons and process in all legal proceedings and, pending the under oath by the authorized official or officials of the jurisdiction of its
establishment of a local office, all notices affecting the corporation. incorporation, attesting to the fact that the laws of the country or state of the
applicant allow Filipino citizens and corporations to do business therein,
and that the applicant is an existing corporation in good standing. If such
4. The place in the Philippines where the corporation intends to certificate is in a foreign language, a translation thereof in English
operate. under oath of the translator shall be attached thereto.

5. The specific purpose or purposes which the corporation intends to The application for a license to transact business in the Philippines shall
pursue in the transaction of its business in the Philippines: likewise be accompanied by a statement under oath of the president or
Provided, That said purpose or purposes are those specifically any other person authorized by the corporation, showing to the
stated in the certificate of authority issued by the appropriate satisfaction of the Securities and Exchange Commission and other
government agency. governmental agency in the proper cases that the applicant is solvent and
in sound financial condition, and setting forth the assets and liabilities of the
corporation as of the date not exceeding one (1) year immediately prior to
6. The names and addresses of the present directors and officers of the filing of the application.
the corporation.
Foreign banking, financial and insurance corporations shall, in addition to
7. A statement of its authorized capital stock and the aggregate the above requirements, comply with the provisions of existing laws

22
 applicable to them. In the case of all other foreign corporations, no deposited. The Securities and Exchange Commission may at its discretion
application for license to transact business in the Philippines shall be release part of the additional securities deposited with it if the gross
accepted by the Securities and Exchange Commission without previous income of the licensee has decreased, or if the actual market value of
authority from the appropriate government agency, whenever required by the total securities on deposit has increased, by more than ten (10%)
law. percent of the actual market value of the securities at the time they
o ISSUANCE OF A LICENSE o(SEC. 126 OF THE were deposited. The Securities and Exchange Commission may, from
time to time, allow the licensee to substitute other securities for those
CORP. CODE) already on deposit as long as the licensee is solvent. Such licensee shall
Section 126. Issuance of a license. – If the Securities and Exchange be entitled to collect the interest or dividends on the securities deposited.
Commission is satisfied that the applicant has complied with all the In the event the licensee ceases to do business in the Philippines, the
requirements of this Code and other special laws, rules and regulations, the securities deposited as aforesaid shall be returned, upon the licensee’s
Commission shall issue a license to the applicant to transact business in application therefor and upon proof to the satisfaction of the Securities
the Philippines for the purpose or purposes specified in such license. Upon and Exchange Commission that the licensee has no liability to Philippine
issuance of the license, such foreign corporation may commence to transact residents, including the Government of the Republic of the Philippines.
business in the Philippines and continue to do so for as long as it retains its
authority to act as a corporation under the laws of the country or state of its
incorporation, unless such license is sooner surrendered, revoked, suspended Definition
or annulled in accordance with this Code or other special laws. Transacting business means the carrying on of the operations of the
corporation, or some portion of them, in the usual and regular course of the
prosecution of the corporate enterprise for profit.
Within sixty (60) days after the issuance of the license to transact
business in the Philippines, the license, except foreign banking or
insurance corporation, shall deposit with the Securities and Exchange The Corporation Code outlines the procedural requirements for the
Commission for the benefit of present and future creditors of the licensee application and issuance of a license before a foreign corporation may
in the Philippines, securities satisfactory to the Securities and transact business in the Philippines. Except in the case of foreign banking,
Exchange Commission, consisting of bonds or other evidence of financial and insurance corporations and other subject to special laws, rules
indebtedness of the Government of the Philippines, its political and regulations, if the applicant foreign corporation has complied with all
subdivisions and instrumentalities, or of government-owned or controlled the requirements of issuance of a license, the SEC shall issue such
corporations and entities, shares of stock in “registered enterprises” as license and thereafter the foreign corporation may transact business in the
this term is defined in Republic Act No. 5186, shares of stock in Philippines.
domestic corporations registered in the stock exchange, or shares of
stock in domestic insurance companies and banks, or any combination
of these kinds of securities, with an actual market value of at least one Republic Act No. 5455. Regulates the entry of foreign investments
hundred thousand (P100,000.) pesos; Provided, however, That within six whenever foreign equity participation exceeds 30 percent of the capital
(6) months after each fiscal year of the licensee, the Securities and stock.
Exchange Commission shall require the licensee to deposit additional
securities equivalent in actual market value to two (2%) percent of the
amount by which the licensee’s gross income for that fiscal year Under Republic Act no. 5455 “doing business includes”:
exceeds five million (P5,000,000.00) pesos. The Securities and Exchange a. Soliciting orders, purchases, service contracts, opening offices
Commission shall also require deposit of additional securities if the actual whether called liaison offices or branches.
market value of the securities on deposit has decreased by at least ten b. Appointing representatives or distributors who are domiciled in the
(10%) percent of their actual market value at the time they were Philippines or who in any calendar year stay in the Philippines for a
23
 period or periods totalling one hundred eighty days or more. development, exploitation or utilization of such lands owned, held or controlled
c. Participating in the management, supervision, or control of any by such citizens or corporations.
domestic business firm, entity, or corporation in the Philippines.
d. Any other act or acts that imply a continuity of commercial
dealings or arrangements, and contemplates to that extent the (ART. 49 OF THE IMPLEMENTING RULES OF THE
performance of acts or works, or the exercise of some of the
function normally incident to, and in progressive prosecution of, OMNIBUS INVESTMENTS CODE)
commercial gain or of the purpose and object of the business o AMENDMENT OF LICENSE (SEC. 131 OF THE
organization.
CORP. CODE)
The Board of Investments requires license not only of corporations
organized abroad but also of domestic corporations, if more than 40% of Section 131. Amended license. – A foreign corporation authorized to transact
its voting shares are owned and held by aliens or more than 30% of its business in the Philippines shall obtain an amended license in the event it
total capitalization is in the hands of aliens. changes its corporate name, or desires to pursue in the Philippines other or
additional purposes, by submitting an application therefor to the Securities and
Guidelines for issuance of certificate of authority to do business under BOI Exchange Commission, favorably endorsed by the appropriate government
(Rep. Act No.5455) agency in the proper cases.

1. That the operation or activity is not inconsistent with the

Investment Priorities Plan.
2. That the business or economic activity will contribute to the
sound and balanced development of the national economy on a
self-sustaining basis.
3. That the activity will not conflict with the Constitution and laws
of the Philippines.
4. That the nosiness or economic activity is not one (1) adequately
exploited by Philippine Nationals.
5. That the entry of the applicant will not pose a clear and present
danger of promoting monopolies or combination in restraint of
trade.

Presidential Decree No. 151 allows citizens of the Philippines or corporations

which have acquired lands of the public domain or which or any other law, to
enter into service contracts for financial, technical, management or other
forms of assistance with any foreign person or entity whenever and wherever
such contracts are vital to achieve sound and more expeditious exploration,

24
  COLUMBIA PICTURES INC. V. CA, In fine, the supposed pronouncement in said case regarding the necessity for the presentation of the
master tapes of the copy-righted films for the validity of search warrants should at most be
GR NO. 110318, 1996) understood to merely serve as a guidepost in determining the existence of probable cause in copy-
right infringement cases where there is doubt as to the true nexus between the master tape and the
NOTES: pirated copies. An objective and careful reading of the decision in said case could lead to no other
conclusion than that said directive was hardly intended to be a sweeping and inflexible requirement
in all or similar copyright infringement cases.
COLUMBIA PICTURES
- What is barred are those FC that are doing business in the phils,
that must obtain a license; but those corp who is NOT DOING
BUSINESS in the Phils. Can actually maintain a suit even without
obtaining a license (with a valid cause and reason)

Intellectual Property – Law on Copyright – Requirements Before a Search Warrant May Be Issued in
Copyright Cases – Piracy
Political Law – Constitutional Law – Bill of Rights – Search Warrants
In 1986, the Videogram Regulatory Board (VRB) applied for a warrant against Jose Jinco (Jingco),
owner of Showtime Enterprises for allegedly pirating movies produced and owned by Columbia
Pictures and other motion picture companies. Jingco filed a motion to quash the search warrant but
the same was denied in 1987. Subsequently, Jinco filed an Urgent Motion to Lift the Search Warrant
and Return the Articles Seized. In 1989, the RTC judge granted the motion. The judge ruled that
based on the ruling in the 1988 case of 20th Century Fox Film Corporation vs CA, before a search
warrant could be issued in copyright cases, the master copy of the films alleged to be pirated must
be attached in the application for warrant.
ISSUE: Whether or not the 20th Century Fox ruling may be applied retroactively in this case.
HELD: No. In 1986, obviously the 1988 case of 20th Century Fox was not yet promulgated. The lower
court could not possibly have expected more evidence from the VRB and Columbia Pictures in their
application for a search warrant other than what the law and jurisprudence, then existing and
judicially accepted, required with respect to the finding of probable cause.
The Supreme Court also revisited and clarified the ruling in the 20th Century Fox Case. It is evidently
incorrect to suggest, as the ruling in 20th Century Fox may appear to do, that in copyright
infringement cases, the presentation of master tapes of the copyright films is always necessary to
meet the requirement of probable cause for the issuance of a search warrant. It is true that such
master tapes are object evidence, with the merit that in this class of evidence the ascertainment of
the controverted fact is made through demonstration involving the direct use of the senses of the
presiding magistrate. Such auxiliary procedure, however, does not rule out the use of testimonial or
documentary evidence, depositions, admissions or other classes of evidence tending to prove
the factum probandum, especially where the production in court of object evidence would result in
delay, inconvenience or expenses out of proportion to is evidentiary value.

25
 Held:
 GRANGER ASSOCIATES V.
MICROWAVE SYSTEMS, 189 SCRA Although the Court found that many agreements entered into dealt on other matters as to constitute
doing business, the Court went on to hold that “even if it be assumed for the sake of argument that
631 the subject matter of the first contract is of the same kind as that of the subsequent agreements, that
NOTES: 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
GRANGER ASSOC v MICROWAVE SYSTEMS
of the foreign company’s regular products that company shall be deemed as doing business in the
- Can a single act be deemed doing business? Philippines.
- Any act within the primary purpose is within business;
therefore even a single act will be deemed doing The Court also found that Granger Associates saw to it that it was assured of at least one seat in the
board of directors of the local company, “without prejudice to the right of Granger to request
business
additional seats as its interest may require.”
Investment is doing business if the purpose is to secure a seat in the board: 1
seat is enough The fact that it was directly involved in the business of the local company was also manifested in
another stipulation where Granger Associates “acknowledged and confirmed” the transfer of a block
of stocks from one shareholder to another group of investors. Such approval was considered by the
Granger Associates vs. Microwave Systems, Inc. (Amendment of License) Court as not normally given except by a stockholder enjoying substantial participation in the
management of the business of the company.
Facts:
Although the rules and regulations of the Board of Investments provide that mere investment in a
Granger Associates, an American corporation with no license to do business in the local company by a foreign corporation should not be construed as doing business in the Philippines,
Philippines, entered into a series of agreements with the local company, Microwave Systems, however the court in Granger Associates found that the investment of the foreign company was quite
Inc., principally constituting the local company as the licensee to manufacture and sell the licensor’s substantial, “enabling it to participate in the actual management and control of MSI [and] it appointed
products in the Philippines, together with a loan extended to the licensee.
a representative in the board of directors to protect its interest, and this director was so influential
An action was later on brought by Granger Associates, having done business in the Philippines that, at his request, the regular board meeting was converted into an annual stockholder’s meeting to
without obtaining a license, has no authority to maintain the suit. take advantage of his presence.”

Granger Associates argued that the various transactions with the local company “were mere facets of Noteworthy are the statements of the Court that “At any rate, the administrative regulation, which is
the basic agreement licensing MSI to manufacture and sell Granger’s products in the Philippines and intended only to supplement the law, cannot prevail against the law itself as the court has interpreted
all subsequent agreements were merely auxiliary to the first contract and should not be considered it. It is axiomatic that the delegate, in exercising the power to promulgate implementing regulations,
separate transactions coming within the concept of doing business in the Philippines.” 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
Issue: place and avoid as much as possible any construction that would annul them as an invalid exercise
of legislative power.”
Whether or not Granger Associates, having done business in the Philippines without obtaining a
license has no authority to maintain the suit. On the argument that a foreign corporation must be shown to have dealt with the public in general to
be considered as transacting business in the Philippines, the Court held that “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.”

26
FACTS: Granger Associates is a foreign corporation which was organized in the United States and We are convinced from an examination of the terms and conditions of the contracts and agreements
has no license to do business in the Philippines. 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
Microwave Systems, Inc., is a domestic corporation which has been sued for recovery of a sum not constitute only one isolated transaction, as the petitioner contends, but a succession of acts
equivalent to US$900,633.30 allegedly due from it to the petitioner. signifying the intent of Granger to extend its operations in the Philippines.
The claim arose from a series of agreements concluded between the two parties, giving MSI The purpose of the rule requiring foreign corporations to secure a license to do business in the
the license to manufacture and sell its products in the Philippines and extended to the latter Philippines is to enable us to exercise jurisdiction over them for the regulation of their activities in this
certain loans, equipment and parts. country, If a foreign corporation operates in the Philippines without submitting to our laws, it is only
Payment of these contracts not having been made as agreed upon, Granger filed a complaint against just that it not be allowed to invoke them in our courts when it should need them later for its own
MSI and the other private respondents in the Regional Trial Court. 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
MSI alleged the affirmative defense that the plaintiff had no capacity to sue, being an unlicensed Philippine law in proper cases, as in the one at bar.
foreign corporation, and moved to dismiss.

Motion to dismiss was granted by RTC which was affirmed by the CA.

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.

ISSUE: Whether or not Granger Associates was doing business in the Philippines?

RULING:

YES. 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.

There is also a showing 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.

27
 GRANGER merely auxiliary to the first.

As long as it could be shown that the parties entered into a

series of agreements, as in successive sales of the company’s regular
FACTS: Granger Associates is a foreign corporation which was organized in the United States and products, that company shall be deemed as doing business.
has no license to do business in the Philippines.
The stipulations show that Granger had extended its personality
Microwave Systems, Inc., is a domestic corporation which has been sued for recovery of a sum
in the Phils, and would receive orders for it products and discharge its
equivalent to US$900,633.30 allegedly due from it to the petitioner. warranty obligations through MSI as agent. It would even appear that
The claim arose from a series of agreements concluded between the two parties, giving MSI Granger intended to transact business through MSI not only for the sale
and warranty of its products but also to act as representative in the
the license to manufacture and sell its products in the Philippines and extended to the latter
development of possible markets for Granger products.
certain loans, equipment and parts.

Payment of these contracts not having been made as agreed upon, Granger filed a complaint against There is also a showing that the investment of Granger in MSI is quite substantial, enabling it
MSI and the other private respondents in the Regional Trial Court. 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
MSI alleged the affirmative defense that the plaintiff had no capacity to sue, being an unlicensed influential that, at his request, the regular board meeting was converted into an annual
foreign corporation, and moved to dismiss. stockholder's meeting to take advantage of his presence.
Motion to dismiss was granted by RTC which was affirmed by the CA.

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
Also, Granger saw to it that it was assured at least one seat in the BoD of MSI.
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
Although Granger cites the regulations of the Board of Investments that mere
MSI covered only one isolated transaction for which it did not have to secure a license to be able to
investment in a local company by a foreign corp should not be construed as doing
file its complaint.
business in the Phils., it cannot be denied that the investment was quite substantial
ISSUE: Whether or not Granger Associates was doing business in the Philippines? (30%), enabling it to participate in the actual mgt and control.

Held:
Granger was doing business. Without a license, it cannot sue.

Doing business includes: a) soliciting orders, purchase, service contracts, opening

offices, whether called ‘liaison’ offices or branches; b) appointing reps or
distributors domiciled in the Phils who stays more than 180 days at least; c)
participation in the mgt, supervision or control of any domestic business firm,
entity or corp in the Phils; and d) any other act implying continuity of
commercial dealings.
The different agreements entered into were considered a series of
agreements showing that Granger was doing business.

Even if the subject matter of the different agreements were all the
same, that alone would not necessarily signify that all such agreements are
28
 2. Whether Marubeni Corporation is a resident or non-resident foreign corporation.

 MARUBENI V. TENSUAN, 190 SCRA

Marubeni Corporation is a non-resident foreign corporation, with respect to the transaction. Marubeni
105 Corporation’s head office in Japan is a separate and distinct income taxpayer from the branch in the
Philippines. The investment on Atlantic Gulf and Pacific Co. was made for purposes peculiarly
NOTES: germane to the conduct of the corporate affairs of Marubeni Corporation in Japan, but certainly not of
MARUBENI v TENSUAN the branch in the Philippines.
Even if the contract is perfected or serviced abroad, if the FC solicits orders
from the PHIls or appoint a rep in the Phils- is deemed doing business
3. At what rate should Marubeni be taxed?

The dividends received by Marubeni Corporation from Atlantic Gulf and Pacific Co. are not income 15%. The applicable provision of the Tax Code is Section 24(b)(1)(iii) in conjunction with the
arising from the business activity in which Marubeni Corporation is engaged. Accordingly, said Philippine-Japan Tax Treaty of 1980. As a general rule, it is taxed 35% of its gross income from all
dividends if remitted abroad are not considered branch profits subject to Branch Profit Remittance sources within the Philippines. However, a discounted rate of 15% is given to Marubeni Corporation
Tax. on dividends received from Atlantic Gulf and Pacific Co. on the condition that Japan, its domicile
state, extends in favor of Marubeni Corporation a tax credit of not less than 20% of the dividends
Facts: received. This 15% tax rate imposed on the dividends received under Section 24(b)(1)(iii) is easily
within the maximum ceiling of 25% of the gross amount of the dividends as decreed in Article
Marubeni Corporation is a Japanese corporation licensed to engage in business in the Philippines. 10(2)(b) of the Tax Treaty.
When the profits on Marubeni’s investments in Atlantic Gulf and Pacific Co. of Manila were declared,
a 10% final dividend tax was withheld from it, and another 15% profit remittance tax based on the
remittable amount after the final 10% withholding tax were paid to the Bureau of Internal Revenue. Note: Each tax has a different tax basis.
Marubeni Corp. now claims for a refund or tax credit for the amount which it has allegedly overpaid Under the Philippine-Japan Tax Convention, the 25% rate fixed is the maximum rate, as reflected in
the BIR. the phrase “shall not exceed.” This means that any tax imposable by the contracting state
concerned hould not exceed the 25% limitation and said rate would apply only if the tax imposed by
our laws exceeds the same
Issues and Ruling:
1. Whether or not the dividends Marubeni Corporation received from Atlantic Gulf and Pacific Co. are
effectively connected with its conduct or business in the Philippines as to be considered branch
profits subject to 15% profit remittance tax imposed under Section 24(b)(2) of the National Internal
Revenue Code.
NO. Pursuant to Section 24(b)(2) of the Tax Code, as amended, only profits remitted abroad by a
branch office to its head office which are effectively connected with its trade or business in the
Philippines are subject to the 15% profit remittance tax. The dividends received by Marubeni
Corporation from Atlantic Gulf and Pacific Co. are not income arising from the business activity in
which Marubeni Corporation is engaged. Accordingly, said dividends if remitted abroad are not
considered branch profits for purposes of the 15% profit remittance tax imposed by Section 24(b)(2)
of the Tax Code, as amended.

29
  FACILITIES MANAGEMENT V. DELA exemplified with illustrations, among them being as follows: ""(1) Soliciting orders, purchases (sales)
or service contracts. Concrete and specific solicitations by a foreign firm, not acting independently of
OSA, 89 SCRA 131 the foreign firm, amounting to negotiation or fixing of the terms and conditions of sales or service
NOTES: contracts, regardless of whether the contracts are actually reduced to writing, shall constitute doing
business even if the enterprise has no office or fixed place of business in the Philippines; (2)
FACILITIES MANGT v DELA ROSA
appointing a representative or distributor who is domiciled in the Philippines, unless said
- If a FC not doing business in the Phils can sue, can it also be representative or distributor has an independent status, i.e., it transacts business in its name and for
sued? its own account, and not in the name or for the account of the principal; xxx (4) Opening offices,
NO, it cannot be sued; because jurisdiction is not acquired: no presence of an whether called 'liaison' offices, agencies or branches, unless proved otherwise. xxx (10) Any other
agent 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,
Facilities Management Corporation vs. de la Osa or in the progressive prosecution of, commercial gain or of the purpose and objective of the business
organization."
Facts: Facilities Management Corporation and J. S. Dreyer are domiciled in Wake Island while J. V.
Catuira is an employee of FMC stationed in Manila. Leonardo dela Osa was employed by FMC in Issue [2]: Whether FMC has been "doing business in the Philippines" so that the service of summons
Manila, but rendered work in Wake Island, with the approval of the Department of Labor of the upon its agent in the Philippines vested the Court of First Instance of Manila with jurisdiction.
Philippines. De la Osa was employed as (1) painter with an hourly rate of $1.25 from March 1964 to
November 1964, inclusive; (2) houseboy with an hourly rate of $1.26 from December 1964 to Held [2]: FMC may be considered as "doing business in the Philippines" within the scope of Section
November 1965, inclusive; (3) houseboy with an hourly rate of $1.33 from December 1965 to August 14 (Service upon private foreign corporations), Rule 14 of the Rules of Court which provides that "If
1966, inclusive; and (4) cashier with an hourly rate of $1.40 from August 1966 to March 27 1967, the defendant is a foreign corporation, or a non-resident joint stock company or association, doing
inclusive. He further averred that from December, 1965 to August, 1966, inclusive, he rendered business in the Philippines, service may be made on its resident agent designated in accordance
overtime services daily, and that this entire period was divided into swing and graveyard shifts to with law for that purpose or, if there be no such agent, on the government official designated by law
which he was assigned, but he was not paid both overtime and night shift premiums despite his to that effect, or on any of its officers or agents within the Philippines." Indeed, FMC, in compliance
repeated demands from FMC, et al. In a petition filed on 1 July 1967, dela Osa sought his with Act 2486 as implemented by Department of Labor Order IV dated 20 May 1968 had to appoint
reinstatement with full backwages, as well as the recovery of his overtime compensation, swing shift Jaime V. Catuira, 1322 A. Mabini, Ermita, Manila "as agent for FMC with authority to execute
and graveyard shift differentials. Subsequently on 3 May 1968, FMC, et al. filed a motion to dismiss Employment Contracts and receive, in behalf of that corporation, legal services from and be bound
the subject petition on the ground that the Court has no jurisdiction over the case, and on 24 May by processes of the Philippine Courts of Justice, for as long as he remains an employee of FMC." It
1968, de la Osa interposed an opposition thereto. Said motion was denied by the Court in its Order is a fact that when the summons for FMC was served on Catuira he was still in the employ of the
issued on 12 July 1968. Subsequently, after trial, the Court of Industrial Relations, in a decision dated FMC. Hence, if a foreign corporation, not engaged in business in the Philippines, is not barred from
14 February 1972, ordered FMC, et al. to pay de la Osa his overtime compensation, as well as his seeking redress from courts in the Philippines (such as in earlier cases of Aetna Casualty & Surety
swing shift and graveyard shift premiums at the rate of 50% per cent of his basic salary. FMC, et al. Company, vs. Pacific Star Line, etc. [GR L-26809], In Mentholatum vs. Mangaliman, and Eastboard
filed the petition for review on certiorari. Navigation vs. Juan Ysmael & Co.), a fortiori, that same corporation cannot claim exemption from
being sued in Philippine courts for acts done against a person or persons in the Philippines.
Issue [1]: Whether the mere act by a non-resident foreign corporation of recruiting Filipino workers for
its own use abroad, in law doing business in the Philippines. Hence, the petition for review of petitioner corporation is denied.

Held [1]: In its motion to dismiss, FMC admits that Mr. Catuira represented it in the Philippines "for
the purpose of making arrangements for the approval by the Department of Labor of the employment
of Filipinos who are recruited by the Company as its own employees for assignment abroad." In
effect, Mr. Catuira was alleged to be a liaison officer representing FMC in the Philippines. Under the
rules and regulations promulgated by the Board of Investments which took effect 3 February 1969,
implementing RA 5455, which took effect 30 September 1968, the phrase "doing business" has been
30
  TOP WELD V. ECER, 138 SCRA 118, Upon learning that the two foreign entities were negotiating with another group to replace the
petitioner as their licensee and distributor, the latter instituted on June 16, 1975, Civil Case No.
GR NO. 44944 (1985) 21409 against IRTI, ECED another corporation named EUTECTIC Corporation, organized under the
NOTES: laws of the State of New York, U.S.A., and an individual named Victor C. Gaerlan, a Filipino citizen
alleged to be the representative and employee of these three corporations.
TOPWELD V ECER
- When the FC already aware of the applicability of the law at the Among others, the petitioner invoked the provisions of No. 9. Section 4 of Republic Act 5455 on alien
time of the execution of the contract, therefore, both FC and DC firms doing business in the Philippines.
are equally guilty The respondent corporation further alleged that Section 4 (9) of R.A. No. 5455 cannot possibly apply
- Commercial broker: doing business to the instant case, which provides that:

Section 4. Licenses to do business.-No alien, and no firm, association, partnership, corporation, or

any other form of business organization formed, organized, chartered or existing under any laws
G.R. No. L-44944 August 9, 1985 other than those of the Philippines, or which is not a Philippine National, or more than thirty per cent
of the outstanding capital of which is owned or controlled by aliens shall do business or engage in
TOP-WELD MANUFACTURING, INC., petitioner, any economic activity in alien the Philippines, or be registered, licensed, or permitted by the
Securities and Exchange Commission, or by any other bureau, office, agency, political subdivision, or
vs.
instrumentality of the government, to do business, or engage in an economic activity in the
ECED, S.A., IRTI, S.A., EUTECTIC CORPORATION, VICTOR C. GAERLAN, and THE HON. Philippines without first securing a written certificate from the Board of Investments to the effect ... .
COURT OF APPEALS, respondents.
Issue:
FACTS:
Whether or not respondent corporations can be considered as "doing business" in the Philippines
Petitioner Top-weld Manufacturing, Inc. (Top-weld) is a Philippine corporation engaged in the and, therefore, subject to the provisions of R.A. No. 5455.
business of manufacturing and selling welding supplies and equipment.
Held:
In pursuance of its business, the petitioner entered into separate contracts with two different foreign
There is no dispute that respondents are foreign corporations not licensed to do business in the
entities. One contract, entitled a "LICENSE AND TECHNICAL ASSISTANCE AGREEMENT" and
Philippines. More important, however, there is no serious objection interposed by the respondents as
dated January 2, 1972 was entered into with IRTI, S.A., (IRTI), a corporation organized and existing
to their amenability to the jurisdiction of our courts.
under the laws of Switzerland with principal office at Fribourg, Switzerland. By virtue of this
agreement, the petitioner was constituted a licensee of IRTI to manufacture welding products under There is no general rule or governing principle laid down as to what constitutes "doing" or engaging
certain specifications, with raw materials to be purchased by the former from suppliers designated by in" or "transacting" business in the Philippines. Each case must be judged in the light of its peculiar
IRTI, for a period of three (3) years or up to January 1, 1975. This contract was later extended up to circumstances.
December 31, 1975 in a subsequent agreement.
The acts of these corporations should be distinguished from a single or isolated business transaction
The other contract was a "DISTRIBUTOR AGREEMENT" dated January 1, 1975 entered into with or occasional, incidental and casual transactions which do not come within the meaning of the law.
ECED, S.A., (ECED), a company organized and existing under the laws of Panama with principal Where a single act or transaction, however, is not merely incidental or casual but indicates the
office at Apartado 1903, Panama I, City of Panama. Under this agreement, the petitioner was foreign corporation's intention to do other business in the Philippines, said single act or transaction
designated as ECED's distributor in the Philippines of certain welding products and equipment. By its constitutes "doing" or "engaging in" or "transacting" business in the Philippines.
terms, the contract was to remain effective until terminated by either party upon giving six (6) months
or 180 days written notice to the other. We agree with the Court of Appeals in considering the respondents as "doing business" in the
Philippines. When the respondents entered into the disputed contracts with the petitioner, they

31
were carrying out the purposes for which they were created, i.e. to manufacture and market
welding products and equipment. The terms and conditions of the contracts as well as the
respondents' conduct indicate that they established within our country a continuous
business, and not merely one of a temporary character. This fact is even more strengthened by
the admission of the respondents that they are negotiating with another group for the transfer of
the distributorship and franchising rights from the petitioner.

Respondents' acts enabled them to enter into the mainstream of our economic life in competition with
our local business interests. This necessarily brings them under the provisions of R.A. No. 5455.

We uphold the appellate court's finding that "IRTI AND ECED were doing business and engaging in
economic activity in the Philippines ... as a prerequisite to which they should have first secured a
written certificate from the Board of Investments."

We agree, however, that there is a more compelling reason behind the finding that the "corporations
are not bound by the requirement on termination, and TOP-WELD cannot invoke the same against
the former."

As between the parties themselves, R.A. No. 5455 does not declare as void or invalid the contracts
entered into without first securing a license or certificate to do business in the Philippines. Neither
does it appear to intend to prevent the courts from enforcing contracts made in contravention of its
licensing provisions. There is no denying, though, that an "illegal situation," as the appellate court
has put it, was created when the parties voluntarily contracted without such license.

The parties are charged with knowledge of the existing law at the time they enter into the contract
and at the time it is to become operative. Moreover, a person is presumed to be more knowledgeable
about his own state law than his alien or foreign contemporary. In this case, the record shows that, at
least, petitioner had actual knowledge of the applicability of R.A. No. 5455 at the time the contract
was executed and at all times thereafter. This conclusion is compelled by the fact that the same
statute is now being propounded by the petitioner to bolster its claim. We, therefore, sustain the
appellate court's view that "it was incumbent upon TOP-WELD to know whether or not IRTI and
ECED were properly authorized to engage in business in the Philippines when they entered into the
licensing and distributorship agreements." The very purpose of the law was circumvented and
evaded when the petitioner entered into said agreements despite the prohibition of R.A. No. 5455.
The parties in this case being equally guilty of violating R.A, No. 5455, they are in pari delicto, in
which case it follows as a consequence that petitioner is not entitled to the relief prayed for in this
case.

32
 Held:
 SCHMID V. OBERLY, 116 SCRA 186

NOTES: As to the first issue, the SC held it to be an indent transaction. An indentor is a middlemen in the
SCHMID v OBERLY same class as commercial brokers and commission merchants. A broker is generally defined as one
who is engaged, for others, on a commission, negotiating contracts relative to property with the
- Inventor middleman: not doing business
custody of which he has no concern; the negotiator between other parties, never acting in his own
name but in the name of those who employed him; he is strictly a middleman and for some purpose
SCHMID & OBERLY, INC. vs. RJL MARTINEZ FISHING CORPORATION the agent of both parties. There are 3 parties to an indent transaction, (1) buyer, (2) indentor, and (3)
G.R. No. 75198 October 18, 1988 supplier who is usually a non-resident manufacturer residing in the country where the goods are to
be bought. The chief feature of a commercial broker and a commercial merchant is that in effecting a
Cortes, J. sale, they are merely intermediaries or middle-men, and act in a certain sense as the agent of both
parties to the transaction.

Facts:
RJL MARTINEZ admitted that the generators were purchased “through indent order.” RJL admitted
RJL Martinez Fishing Corporation is engaged in deep-sea fishing. In the course of its business, it in its demand letter previously sent to SCHMID that 12 of 15 generators “were purchased through
needed electrical generators for the operation of its business. Schmid and Oberly sells electrical your company, by indent order and three (3) by direct purchase.” The evidence also show that RJL
generators with the brand of “Nagata”, a Japanese product. D. Nagata Co. Ltd. of Japan was MARTINEZ paid directly NAGATA CO, for the generators, and that the latter company itself invoiced
Schmid’s supplier. Schmid advertised the 12 Nagata generators for sale and RJL purchased 12 the sale and shipped the generators directly to the former. The only participation of Schmid was to
brand new generators. Through an irrevocable line of credit, Nagata shipped to the Schmid the act as an intermediary or middleman between Nagata and RJL, by procuring an order from RJL and
generators and RJL paid the amount of the purchase price. (First sale = 3 generators; Second sale = forwarding the same to Nagata for which the company received a commission from Nagata.
12 generators).

Later, the generators were found to be factory defective. RJL informed the Schmid that it shall return
the 12 generators. 3 were returned. Schmid replaced the 3 generators subject of the first sale with Even as SCHMID was merely an indentor, there was nothing to prevent it from voluntarily warranting
generators of a different brand. As to the second sale, 3 were shipped to Japan and the remaining 9 that twelve (12) generators subject of the second transaction are free from any hidden defects. In
were not replaced. other words, SCHMID may be held answerable for some other contractual obligation, if indeed it had
so bound itself. As stated above, an indentor is to some extent an agent of both the vendor and the
RJL sued the defendant on the warranty, asking for rescission of the contract and that Schmid be vendee. As such agent, therefore, he may expressly obligate himself to undertake the obligations of
ordered to accept the generators and be ordered to pay back the purchase money as well as be his principal.
liable for damages. Schmid opposes such liability averring that it was merely the indentor in the sale
between Nagata Co., the exporter and RJL Martinez, the importer. As mere indentor, it avers that is
not liable for the seller’s implied warranty against hidden defects, Schmid not having personally
assumed any such warranty.

Issue:

1) WON the second transaction between the parties was a sale or an indent transaction?

2) Even is Schmid is merely an indentor, may it still be liable for the warranty?

33
  MENTHOLATUM V. MANGALIMAN, it has substantially retired from it and turned it over to another. The term implies a continuity of
commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or
72 PHIL 525 works or the exercise of some of the functions normally incident to, and in progressive prosecution
NOTES: of, the purpose and object of its organization. Herein, Mentholatum Co., through its agent, the
Philippine-American Drug Co., Inc., has been doing business in the Philippines by selling its products
MENTHOLATUM v MANGALIMAN
here since the year 1929, at least. Whatever transactions the Philippine-American Drug Co., Inc.,
- FC is doing business in PH: they did not comply with the reqs to had executed in view of the law, the Mentholatum Co., Inc., being a foreign corporation doing
obtain a license; therefore they cannot sue 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
The Mentholatum Co. Inc. vs. Mangaliman features of the agent being his representative character and derivative authority, it cannot now, to the
Facts: The Mentholatum Co., Inc., is a Kansas corporation which manufactures "Mentholatum," a advantage of its principal, claim an independent standing in court. Further, the recognition of the
medicament and salve adapted for the treatment of colds, nasal irritations, chapped skin, insect legal status of a foreign corporation is a matter affecting the policy of the forum, and the distinction
bites, rectal irritation and other external ailments of the body. The Philippine-American Drug Co., Inc., drawn in Philippine Corporation Law is an expression of the policy. The general statement made in
is its exclusive distributing agent in the Philippines authorized by it to look after and protect its Western Equipment and Supply Co. vs. Reyes regarding the character of the right involved should
interests. On 26 June 1919 and on 21 January 1921, the Mentholatum Co., Inc., registered with the not be construed in the derogation of the policy-determining authority of the State. The right of
Bureau of Commerce and Industry the word, "Mentholatum", as trade mark for its products. The Mentholatum conditioned upon compliance with the requirement of section 69 of the Corporation Law
Mangaliman brothers prepared a medicament and salve named "Mentholiman" which they sold to the to protect its rights, is reserved.
public packed in a container of the same size, color and shape as "Mentholatum." As a consequence
of these acts of the Mangalimans, Mentholatum, etc. suffered damages from the diminution of their
sales and the loss of goodwill and reputation of their product in the market. On 1 October 1935, the
Mentholatum Co., Inc., and the Philippine-American Drug, Co., Inc. instituted an action in the Court of
First Instance (CFI) of Manila against Anacleto Mangaliman, Florencio Mangaliman and the Director
of the Bureau of Commerce for infringement of trade mark and unfair competition (Civil case 48855).
Mentholatum, etc. 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. After a protracted trial, featured by the dismissal of the
case on 9 March 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 29 October 1937, rendered judgment in favor
of Mentholatum, etc. In the Court of Appeals (CA-GR 46067), the decision of the trial court was, on
29 June 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 suit. Mentholatum, etc. filed the petition for certiorari.

Issue: Whether Mentholatum, etc. could prosecute the instant action without having secured the
license required in section 69 of the Corporation Law.

Held: 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

34
  AETNA CASUALTY V. PACIFIC STAR and turned it over to another. he 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
LINE, 80 SCRA 635 functions normally incident to, and in progressive prosecution of, the purpose and object of its
NOTES: organization."
AETNA v PACIFIC Based on the rulings laid down in the foregoing cases, it cannot be said that the Aetna Casualty &
- The filing or money claim or collection suit by the FC does not Surety Company is transacting business of insurance in the P ' Philippines for which it must have a
need to be doing business in the Phils; plaintiff not barred to file license. The contract of insurance was entered into in New York, U.S.A., and payment was made to
the consignee in its New York branch. It appears from the list of cases issued by the Clerk of Court of
a suit
the Court of First Instance of Manila that all the actions, except two (2) cases filed by Smith, Bell &
- It is an isolated transaction; the fc not doing business in PH; Co., Inc. against the Aetna Casualty & Surety Company, are claims against the shipper and the
entered into a contract (consummated and perfected in another arrastre operators just like the case at bar.
country) with an individual even not doing business
Consequently, since the appellant Aetna Casualty & Surety Company is not engaged in the
business of insurance in the Philippines but is merely collecting a claim assigned to it by the
consignee, it is not barred from filing the instant case although it has not secured a license to
transact insurance business in the Philippines.
AETNA CASUALTY & SURETY CO. V PACIFIC STAR LINE

FACTS: Defendant Paciifc Star Line, was operating the vessel SS Ampal on a commercial run
between US and Phil. port.; defendant The Bradman Co. Inc. was the ship agent in the Phils of
Pacific Star Line and its vessel and that Manila Railroad Co. Inc. and Manila Port Service were the
arrastre operators in the port of Manila. A cargo of Linen & Cotton Piece Goods was sent through SS
Ampal and was damaged due to the negligence of defendant Pacific Star Line &/or SS Ampal. The
said shipment was insured by I. Shalom & Co. Inc. and plaintiff Aetna Casualty & Surety Co. Despite
repeated demands, none of the defendants has been willing to accept liability for the claim of the
plaintiffs, hence, the filing of this complaint.

The defendant contends that they have exercised due care and diligence in handling and
delivering of the cargoes consigned in the Phils. and alleged that plainntiff is a foreign corp. not duly
licensed to do business in the Phils. and therefore, without capacity to sue and be sued.

ISSUE: WON plaintiff Aetna Casualty & Surety Co. has been doing business in the Phils.

HELD: The SC held that 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.

As held in Mentholatum Co., Inc. et al. vs. Mangaliman, et al., "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
35
  AGILENT TECHNOLOGIES Issue: W/N Agilent's is doing business in the Phils without a license which thereby disqualifies him
from seeking redress from our courts.
SINGAPORE V. (PTE) LTD. V.
Held: SC held that the acts enumerated in VAASA do not constitute “doing business” in the
INTERGRATED SILICON Philippines since it is only confined to maintaining a stock of goods for the purpose of having the
TECHNOLOGY PILIPINAS same processed by IS and consignment of equipment. Therefore, as a foreign corporation not doing
business in the Phils, it needed no license before it can sue before our courts. To constitute doing
CORPORATION business, the activity to be undertaken in the Philippines is one that is for profit-making.
NOTES:
AGILENT v INTEGRATED SILICON
 EFFECTS OF FAILURE TO OBTAIN LICENSE
- A FC no license to do business in the PH
- The acts enumerated is only for maintaining stock of goods and (SEC. 133 OF THE CORP. CODE)
consigning raw materials; and those acts are not considered as
doing business Section 133. Doing business without a license. – No foreign
- Therefore the FC may still sue before our courts corporation transacting business in the Philippines without a license, or its
RULES: successors or assigns, shall be permitted to maintain or intervene in
any action, suit or proceeding in any court or administrative agency of the
1. If a corp does business in the PH without license: cannot sue Philippines; but such corporation may be sued or proceeded against before
before PH courts Philippine courts or administrative tribunals on any valid cause of action
2. If a corp not doing business in PH, no need for license, and may recognized under Philippine laws.
sue before PH courts
3. If a corp does biz in PH without a license; a PH citizen or entity Unlicensed foreign corporations doing business in the Philippine do not
which contracted and benefited from the said corp, is barred from have the capacity to sue before the local court is well-established.
challenging the FC
If a corp does biz in PH with license it can sue before PH courts, on any
A foreign corporation which is not licensed to transact business therein
transaction can maintain an action in the courts of the Philippines for the purpose of
protecting its reputation, corporate name and goodwill.
Agilent Technologies Singapore vs. Integrated Silicon Corporation Facts: HP Singapore and
Integrated Silicon entered in to a Value Added Assembly Services Agreement (VAASA). Under the
A foreign corporation doing business in the Philippines without a license may
terms of VAASA, Integrated Silicon (IS) was to locally manufacture and assemble fiber optics for
export and HP was to consign raw materials to Integrated Silicon and pay the purchase price of the maintain suit in the Philippines against a domestic corporation or person
finished products. VAASA also has a provision providing for annual renewal by mutual written who is party to a contract as the domestic corporation or person is deemed
consent of the parties. HP assigned all its rights and obligations to Agilent. Integrated Silicon filed an estopped from challenging the personality of the foreign corporation.
action for Specific Performance and Damages alleging that Agilent breached the parties oral
agreement to extend the term of VAASA. Agilent filed a separate complaint against Integrated Silicon
praying that a writ of replevin be issued ordering Integrated Silicon to return its equipment and
machineries left in IS's plant. IS filed a motion to dismiss on the ground that Agilent has no legal
capacity to sue since it is an unlicensed foreign corporation doing business in the Phils.

36
  COMMISSIONER V. KMK GANI, 182 Consequently, Atty. Padilla, K.M.K. and INDRAPAL, appealed the order to the Commissioner. of
Customs.
SCRA 591
The Commissioner of Customs affirmed the finding of the Collector of Customs of the presence of
NOTES: the intention to import the said goods in violation of the Dangerous Drugs Act and the Tariff and
Customs Code. The Commissioner concluded that there was an "intent to unlade" in Manila, thus, an
attempt to smuggle goods into the country.
COMMISSIONER v KMK
- What must be alleged by FC not doing in the PH in the Atty. Armando S. Padilla, again as counsel of the consignees K.M.K. and Indrapal, appealed to the
complaint? respondent Court of Tax Appeals (CTA). He argued in the CTA that K.M.K. and INDRAPAL were
- That they are suing based on an isolated transaction "entitled to the release of their cargoes for transshipment to Singapore so manifested and covered by
the Airway bills as in transit, ... contending that the goods were never intended importations into the
Philippines and the same suffer none of any affiliating breaches allegedly found attributable to the
THE COMMISSIONER OF CUSTOMS vs. K.M.K. GANI, INDRAPAL & CO., and the HONORABLE other shipments under the Customs and related laws." The CTA reversed the decision of the
COURT OF TAX APPEALS Commissioner of Customs. Hence this petition.
FACTS: ISSUE:
Two (2) containers loaded with 103 cartons of merchandise covered by eleven (11) airway bills of W/N a foreign corporation which does not have a license to engage in business in this country can
several supposedly Singapore-based consignees arrived at the Manila International Airport on board seek redress in Philippine courts boils down as to whether it is doing business or merely entered into
Philippine Air Lines (PAL) from Hongkong. The cargoes were consigned to these different entities: an isolated transaction in the Philippines.
K.M.K. Gani (hereafter referred to as K.M.K.) and Indrapal and Company (hereafter referred to as
INDRAPAL), the private respondents in the petition before us; and Sin Hong Lee Trading Co., Ltd., W/N the private respondents failed to establish their personality to sue in a representative capacity,
AAR TEE Enterprises, and C. Ratilal all purportedly based in Singapore. hence making their action dismissable.

While the cargoes were at the Manila International Airport, a "reliable source" tipped off the Bureau of HELD:
Customs that the said cargoes were going to be unloaded in Manila. The Suspected Cargo and Anti- Petition GRANTED. CTA decision is SET ASIDE. The law is clear: "No foreign corporation
Narcotics (SCAN) of the BoC, dispatched an agent to verify the information. Upon arriving at the transacting business in the Philippines without a license, or its successors or assigns, shall be
airport, the SCAN agent saw an empty PAL van parked directly alongside the plane's belly from permitted to maintain or intervene in any action, suit or proceeding in any court or administrative
which cargoes were being unloaded. When the SCAN agent asked the van's driver why he was at agency of the Philippines; but such corporation may be sued or proceeded against before Philippine
the site, the driver drove away in his vehicle. The SCAN agent then sequestered the unloaded courts or administrative tribunals on any valid cause of action recognized under Philippine laws."
cargoes.
However, the Court in a long line of cases has held that a foreign corporation not engaged in
The seized cargoes "contained Mogadon and Mandrax tablets, Sony T.V., Sony Betamax, Cassette business in the Philippines may not be denied the right to file an action in the Philippine courts for an
Stereos with Headphone (ala walkman), Casio Calculators, Pioneer Car Stereos, Yamaha Watches, isolated transaction.
Eyeglass Frames, Sunglasses, Plastic Utility Bags, Perfumes, etc." These goods were transferred to
the International Cargo Terminal under Warrant of Seizure and Detention and thereafter subjected to The fact that a foreign corporation is not doing business in the Philippines must be disclosed if it
Seizure and Forfeiture proceedings for "technical smuggling.” desires to sue in Philippine courts under the "isolated transaction rule." Without this disclosure, the
court may choose to deny it the right to sue.
At the hearing, Atty. Armando S. Padilla entered his appearance for the consignees K.M.K. and
INDRAPAL. Atty. Padilla moved for the transshipment of the cargoes consigned to his clients. The In the case at bar, the private respondents K.M.K. and INDRAPAL aver that they are "suing upon a
Solicitor General avers that K.M.K. and INDRAPAL did not present any testimonial or documentary singular and isolated transaction." But they failed to prove their legal existence or juridical personality
evidence. The, collector of Customs, ruled for the forfeiture of all the cargoes in the said containers. as foreign corporations.

37
We are cognizant of the fact that under the "isolated transaction rule," only foreign corporations and
not just any business organization or entity can avail themselves of the privilege of suing before
Philippine courts even without a license. Counsel Armando S. Padilla stated before the respondent
Court of Tax Appeals that his clients are "suing upon a singular and isolated transaction." But there is
no proof to show that K.M.K. and INDRAPAL are indeed what they are represented to be. It has been
simply stated by Attorney Padilla that K.M.K. Gani is "a single proprietorship," while INDRAPAL is "a
firm," and both are "doing business in accordance with the laws of Singapore ... ," with specified
addresses in Singapore. In cases of this nature, these allegations are not sufficient to clothe a
claimant of suspected smuggled goods of juridical personality and existence. The "isolated
transaction rule" refers only to foreign corporations. Here the petitioners are not foreign corporations.
They do not even pretend to be so. The first paragraph of their petition before the Court, containing
the allegation of their identities, does not even aver their corporate character. On the contrary, K.M.K.
alleges that it is a "single proprietorship" while INDRAPAL hides under the vague identification as a
"firm," although both describe themselves with the phrase "doing business in accordance with the
laws of Singapore."

Absent such proof that the private respondents are corporations (foreign or not), the respondent
Court of Tax Appeals should have barred their invocation of the right to sue within Philippine
jurisdiction under the "isolated transaction rule" since they do not qualify for the availment of such
right.

38
  MARSHAL WELLS V. ELSER, 46 PHIL and in connection with the spirit of the entire law. The noncompliance of a foreign corporation with
the statute may be pleaded as an affirmative defense. Thereafter, it must appear from the evidence,
71 first, that the plaintiff is a foreign corporation, second, that it is doing business in the Philippines, and
third, that it has not obtained the proper license as provided by the statute.
NOTES:
MARSHAL WELLS v ELSER The literal terminology of Section 69 of the Corporation Law is as follows:
1. FC is an affirmative defense: No foreign corporation or corporation formed, organized, or existing under any laws other than those
of the
2. FC doing biz in PH
Philippine Islands shall be permitted to transact business in the Philippine Islands or maintain by
3. FC not doing PH; may still sue under Sec 133 itself or assignee any suit for the recovery of any debt, claim, or demand whatever, unless it shall
*** if FC not doing PH and sued in PH: file a motion to dismiss (special have the license prescribed in the section immediately preceding. Any officer, director, or agent of
appearance for the purpose of dismissing the jxdn) the 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
G.R. No. 22015 September 1, 1924 such imprisonment and fine, in the discretion of the court.
MARSHALL-WELLS COMPANY, plaintiff-appellant,
vs.
HENRY W. ELSER & CO., INC., defendant-appellee.

Facts: Marshall-Wells Company, an Oregon corporation, sued Henry W. Elser & Co., Inc., a
domestic corporation, in the Court of First Instance of Manila, for the unpaid balance of a bill of goods
sold by plaintiff to defendant and for which plaintiff holds accepted drafts. Defendant demurred to the
complaint on the statutory ground that the plaintiff has not legal capacity to sue. In the demurrer,
counsel stated that "The said complaint does not show that the plaintiff has complied with the laws of
the Philippine Islands in that which is required of foreign corporations desiring to do business in the
Philippine Islands, neither does it show that it was authorized to do business in the Philippine
Islands." The demurrer was sustained by the trial judge. Inasmuch as the plaintiff could not allege
compliance with the statute, the order was allowed to become final and an appeal was perfected.

Issue: Is the obtaining of the license prescribed in section 68, as amended, of the Corporation
Law a condition precedent to the maintaining of any kind of action in the courts of the
Philippine Islands by a foreign corporation?

Ruling: Yes. The object of the statute was to subject the foreign corporation doing business in the
Philippines to the jurisdiction of its courts. The object of the statute 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. The
implication of the law is that 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, and thus, in effect, to permit persons to avoid their
contracts made with such foreign corporations. The effect of the statute preventing foreign
corporations from doing business and from bringing actions in the local courts, except on compliance
with elaborate requirements, must not be unduly extended or improperly applied. It should not be
construed to extend beyond the plain meaning of its terms, considered in connection with its object,

39
  WESTERN EQUIPMENT V. REYES, maintain an action in the Philippines to restrain the residents and inhabitants from organizing a
corporation bearing the same name as the foreign corporation.
51 PHIL 115
It supported the doctrine that foreign corporation can bring an action in the Philippines to protect its
reputation , corporate name and goodwill which have been established through the natural
NOTES: development of its trade over a long period of years, in the doing of which it does not seek to enforce
any legal or contract rights arising from, or growing out of, any business which it has transacted in
WESTERN EQUIPMENT v REYES
the Philippines.
- FC not doing biz: an in rem right that can be protected by the
courts and any other courts; trademark shall be protected and no c. APPLICATIONS AND EFFECT OF LOCAL LAW ON THE
limitations as to jxdn
RIGHT OF A FOREIGN CORP TO SUE (SCRA
*** Intellectual Property: a patent convention; if registered pursuant to the
convention such corp may enforce a claim against any jxdn in which is a ANNOTATION 114 SCRA 429)
signatory to the convention

d. RESIDENT AGENT (SECS. 127 AND 128 OF THE CORP.

Western Equipment vs. Reyes (Effects of Failure to Obtain License)
CODE)
Facts:

In 1925, Western Equipment and Supply Co. applied for the issuance of a license to engage in Section 127. Who may be a resident agent. - A resident agent may be either an
business in the Philippines. On the other hand, Western Electric Co. has never been licensed to individual residing in the Philippines or a domestic corporation lawfully
engage in business, nor has it ever engaged in business in the Philippines. Western Equipment,
transacting business in the Philippines: Provided, That in the case of an
since the issuance of its license, engaged in the importation and sale of electrical and telephone
apparatus and supplies manufactured by Western Electric. A local corporation, Electric Supply Co. individual, he must be of good moral character and of sound financial standing.
Inc. has been importing the same products in the Philippines. In 1926, Electric Supply’s president,
Henry Herman, along with other persons sought to organize a corporation to be known as Western
Electric Co. Inc. Western Equipment, et al. filed against Herman to prevent them from organizing said Section 128. Resident agent; service of process. – The Securities and
corporation. The trial court ruled in favor of Western Equipment, holding that the purpose of the Exchange Commission shall require as a condition precedent to the
incorporation of the proposed corporation is illegal or void. issuance of the license to transact business in the Philippines by any
foreign corporation that such corporation file with the Securities and
Issue:
Exchange Commission a written power of attorney designating some person
Whether the foreign corporation Western Electric Co. Inc. has right of action to prevent an officer of who must be a resident of the Philippines, on whom any summons and
the government from issuing a certificate of incorporation to Philippine residents who attempt to other legal processes may be served in all actions or other legal
pirate the corporate name of the foreign corporation and engage in the same business. proceedings against such corporation, and consenting that service upon
such resident agent shall be admitted and held as valid as if served upon
Held: the duly authorized officers of the foreign corporation at its home office.
Any such foreign corporation shall likewise execute and file with the
A foreign corporation which has never done any business in the Philippines and which is unlicensed Securities and Exchange Commission an agreement or stipulation, executed
and unregistered to do business here, but is widely used and favorably known in the Philippines by the proper authorities of said corporation, in form and substance as
through the use therein of its products bearing its corporate and trade name, has a legal right to follows:
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 e. APPLICABLE LAWS TO FOREIGN CORPS. (SEC. 129 OF
“The (name of foreign corporation) does hereby stipulate and agree, in THE CORP. CODE)
consideration of its being granted by the Securities and Exchange
Commission a license to transact business in the Philippines, that if at any
time said corporation shall cease to transact business in the Philippines, or Section 129. Law applicable. – Any foreign corporation lawfully doing
shall be without any resident agent in the Philippines on whom any business in the Philippines shall be bound by all laws, rules and
summons or other legal processes may be served, then in any action or regulations applicable to domestic corporations of the same class, except
proceeding arising out of any business or transaction which occurred in such only as provide for the creation, formation, organization or
the Philippines, service of any summons or other legal process may be dissolution of corporations or those which fix the relations, liabilities,
made upon the Securities and Exchange Commission and that such responsibilities, or duties of stockholders, members, or officers of
service shall have the same force and effect as if made upon the duly- corporations to each other or to the corporation.
authorized officers of the corporation at its home office.”

Licensed foreign corporations lawfully doing business in the Philippines

Whenever such service of summons or other process shall be made shall be subject to our laws just like domestic corporations of the same
upon the Securities and Exchange Commission, the Commission shall, class.
within ten (10) days thereafter, transmit by mail a copy of such summons
or other legal process to the corporation at its home or principal office.
The sending of such copy by the Commission shall be necessary part of Philippine laws will not apply when it refers to the creation, formation,
and shall complete such service. All expenses incurred by the Commission organization or dissolution of corporations or such as fux the relations,
for such service shall be paid in advance by the party at whose instance the liabilities, responsibilities, or duties of stockholders, members, or officers of
service is made.
In case of a change of address of the resident agent, it shall be his or its
corporations to each other or to the corporation.
duty to immediately notify in writing the Securities and Exchange
Commission of the new address.

The SEC 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 SEC, a written power of attorney designating some
person 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.

41
  GREY V. INSULAR LIFE, 67 PHIL 129 laws, as amended, indicating clearly in capital letters or by underscoring
the change or changes made, duly certified by the authorized official or
Sec 129 officials of the country or state of incorporation. The filing thereof shall not
NOTES: of itself enlarge or alter the purpose or purposes for which such
corporation is authorized to transact business in the Philippines.
GREY v INSULAR LIFE
- Right to inspect; is governed by the laws where the FC has
been constituted g. MERGER AND CONSOLIDATION (SEC. 132 OF THE
**all PH laws apply; except creation, formation, organization, or dissolution of CORP. CODE)
corp; or those nature, liab, and responsibilities of the corp.

Section 132. Merger or consolidation involving a foreign corporation

licensed in the Philippines. – One or more foreign corporations authorized
Grey v. Insular Lumber Co. (Applicable Laws to Foreign Corporations) to transact business in the Philippines may merge or consolidate with any
Facts: domestic corporation or corporations if such is permitted under
Philippine laws and by the law of its incorporation: Provided, That the
The foreign corporation doing business in the Philippines was organized under the laws of New York.
requirements on merger or consolidation as provided in this Code are
According to the then Stock Corporation Law of New York, only stockholder owning at least 3% of
the shares of the corporation may inspect the books and records of a corporation. followed.

Issue:

Whether or not the intramural matters are governed by the laws where the corporation was Whenever a foreign corporation authorized to transact business in the
incorporated. Philippines shall be a party to a merger or consolidation in its home
country or state as permitted by the law of its incorporation, such foreign
Held: corporation shall, within sixty (60) days after such merger or consolidation
becomes effective, file with the Securities and Exchange Commission, and
The Supreme Court held that intramural matters such as the qualification to inspect corporate
in proper cases with the appropriate government agency, a copy of the
records are governed by the laws where the corporation was incorporated.
articles of merger or consolidation duly authenticated by the proper official
or officials of the country or state under the laws of which merger or
f. AMENDMENT OF THE ART. OF INC. (SEC. 130 OF THE consolidation was effected: Provided, however, That if the absorbed
corporation is the foreign corporation doing business in the Philippines, the
CORP. CODE) latter shall at the same time file a petition for withdrawal of it license in
accordance with this Title.
Section 130. Amendments to articles of incorporation or by-laws of
foreign corporations. – Whenever the articles of incorporation or by-laws Section 132 covers two legal situations:
of a foreign corporation authorized to transact business in the Philippines 1. The merger of a licensed foreign corporation with a domestic
are amended, such foreign corporation shall, within sixty (60) days after corporation.
the amendment becomes effective, file with the Securities and Exchange  Must be accomplished by complying with the provisions of the
Commission, and in the proper cases with the appropriate government Corporation Code.
agency, a duly authenticated copy of the articles of incorporation or by-
42
 2. The merger of a licensed foreign corporation with another corporation 6. Transacting business in the Philippines outside of the purpose or
in its country of origin which is not doing business in the Philippines. purposes for which such corporation is authorized under its license.
 If the licensed foreign corporation is absorbed by merger or 7. Transacting business in the Philippines as agent of or acting for and
consolidation, it must withdraw its license to do business in the in behalf of any foreign corporation or entity not duly licensed to do
Philippines. business in the Philippines.
Nevertheless, if the foreign absorbing corporation desire to continue the 8. Any other ground as would render it unfit to transact business in the
business of the absorbed corporation in the Philippines, it has to file an Philippines.
application for a license to do business pursuant to the requirements of
Philippines law on the matter. Sec. 135. Issuance of certificate of revocation. – Upon the revocation of any
such license to transact business in the Philippines, the Securities and
h. REVOCATION OF LICENSE (SECS. 134 AND 135 OF THE Exchange Commission shall issue a corresponding certificate of revocation,
furnishing a copy thereof to the appropriate government agency in the proper
CORP. CODE) cases. The Securities and Exchange Commission shall also mail to the
corporation at its registered office in the Philippines a notice of such revocation
Section 134. Revocation of license. – Without prejudice to other accompanied by a copy of the certificate of revocation.
grounds provided by special laws, the license of a foreign corporation
to transact business in the Philippines may be revoked or suspended by
the Securities and Exchange Commission upon any of the following i. WITHDRAWAL OF FOREIGN CORP (SEC. 136 OF THE
grounds:
CORP CODE)
Sec. 136. Withdrawal of foreign corporations. – Subject to existing laws and
1. Failure to file its annual report or pay any fees as required by this regulations, a foreign corporation licensed to transact business in the
Code.
Philippines may be allowed to withdraw from the Philippines by filing a petition
2. Failure to appoint and maintain a resident agent in the Philippines
as required by this Title. for withdrawal of license. No certificate of withdrawal shall be issued by the
3. Failure, after change of its resident agent or of his address, to Securities and Exchange Commission unless all the following requirements are
submit to the Securities and Exchange Commission a statement of met:
such change as required by this Title. 1. All claims which have accrued in the Philippines have been paid,
Failure to submit to the Securities and Exchange Commission an compromised or settled.
authenticated copy of any amendment to its articles of incorporation or
by-laws or of any articles of merger or consolidation within the time
prescribed by this Title. 2. All taxes, imposts, assessments, and penalties, if any, lawfully
4. A misrepresentation of any material matter in any application, report, due to the Philippine Government or any of its agencies or
affidavit or other document submitted by such corporation pursuant political subdivisions have been paid.
to this Title.
5. Failure to pay any and all taxes, imposts, assessments or
penalties, if any, lawfully due to the Philippine Government or any The petition for withdrawal of license has been published once a week for
of its agencies or political subdivisions. three (3) consecutive weeks in a newspaper of general circulation in the
Philippines.
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