books and records of a corporation organized under the laws of said State, and during the
M.E GRAY V. INSULAR LUMBER CO.
No. 45144 April 3, 1939
Philippine corporation laws were basically patterned after American corporation and
enterprise laws. Consequently, it is no wonder that when unique situations confront
Philippine courts, resort to American laws and jurisprudence is made to resolve them.
FACTS: Insular Lumber Company is a corporation organized and existing under the
laws of the State of New York, licensed to engage in business in the Philippines, with
offices in the City of Manila, in Fabrica, Occidental Negros, in New York and in
Philadelphia. M. E Gray is the owner and possessor of 6, shares of the capital stock of the
defendant corporation. The dispute arises when he asked the offices of insular lumber in
Manila and in Fabrica to permit him to examine the books and records of the business of
said defendant, but he was not allowed to do so.
According to Insular Lumber, applying the law of New York, the rights of a stockholder
to examine the books and records of a corporation organized under the laws of that State,
have been, during the entire period material to this action, only those provided in section
77 of the Stock Corporation Law which substantially provides that only stockholder
owning at least three percent of the capital stock has the right to examine the books and
records of the corporation. M.E Gray, not being a stockholder owning at least three
percent of the capital stock has not right to examine.
M.E Gray, contends that under our Corporation code, under which insular lumber
company was registered to do business in the Philippines, he is entitled, as stockholder, to
inspect the record of the transactions of the defendant corporation (sec. 51, Act No.
1459), and this right, which is recognized in the common law, has not been altered by
section 77 of the Stock Corporation Law of New.
Lower Courts Decision: The petition for mandamus compelling the company to allow
him examine the books and records was denied.
ISSUE:
1. Whether the M.E Gray is entitled, as stockholder of the Insular Lumber Company, to
inspect and examine the books and records of the transactions of said company.
HELD: No.
The decision of the CFI was affirmed denying the mandamus against the company and
absolving it from the complaint.
1. The stipulation of facts is binding upon both parties and cannot be altered by either of
them> On the strength of that principle M.E Gray is bound to adhere to the agreement
made by him with the Insular Lumber Co. in paragraph four of the stipulation of facts, to
the effect that the rights of a stockholder, under the law of New York, to examine the
entire period material to this action, are only those provided in section 77 of the Stock
Corporation Law of New York. Under this law, plaintiff has the right to be furnished by
the treasurer or other fiscal officer of the corporation with a statement of its affairs
embracing a particular account of all its assets and liabilities.
The right under the common law cannot be granted by insular lumber in the present case,
since the same can only be granted at the discretion of the court, under certain conditions,
to wit: Xavier Henry Lopez Zamora Private International Law
2 (a) That the stockholder of a corporation in New York has the right to inspect its books
and records if it can be shown that he seeks information for an honest purpose (b) That
said right to examine and inspect the books of the corporation must be exercised in good
faith, for a specific and honest purpose, and not to gratify curiosity, or for speculative or
vexatious purposes. The M.E Gray has made no effort to prove or even allege that the
information he desired to obtain through the examination and inspection of defendants
books was necessary to protect his interests as stockholder of the corporation, or that it
was for a specific and honest purpose, and not to gratify curiosity, nor for speculative or
vexatious purposes.
PALTING V. SAN JOSE PETROLEUM, INC.
No. L-14441 December 17, 1966
FACTS: In 1956, San Jose Petroleum, Inc. (SJP), a mining corporation organized under
the laws of Panama, was allowed by the Securities and Exchange Commission (SEC) to
sell its shares of stocks in the Philippines. Apparently, the proceeds of such sale shall be
invested in San Jose Oil Company, Inc. (SJO), a domestic mining corporation. Pedro
Palting opposed the authorization granted to SJP because said tie up between SJP and
SJO is violative of the constitution; that SJO is 90% owned by SJP; that the other 10% is
owned by another foreign corporation; that a mining corporation cannot be interested in
another mining corporation. SJP on the other hand invoked that under the parity rights
agreement (Laurel-Langley Agreement), SJP, a foreign corporation, is allowed to invest
in a domestic corporation.
ISSUE:
1. Whether or not the "tie-up" between the respondent SAN JOSE PETROLEUM, a
foreign corporation, and SAN JOSE OIL COMPANY, INC., a domestic mining
corporation, is violative of the Constitution, the Laurel-Langley Agreement, the
Petroleum Act of 1949, and the Corporation Law.
HELD: Yes
The case is remanded to the Securities and Exchange Commission for appropriate action
in consonance with this decision allowing the registration of the respondents securities
and licensing their sale in the Philippines.
1. The parity rights agreement is not applicable to SJP. The parity rights are only granted
to American business enterprises or enterprises directly or indirectly controlled by US
citizens. SJP is a Panamanian corporate citizen. The other owners of SJO are Venezuelan
corporations, not Americans. SJP was not able to show contrary evidence. Further, the
Supreme Court emphasized that the stocks of these corporations are being traded in
stocks exchanges abroad which renders their foreign ownership subject to change from
time to time. This fact renders a practical impossibility to meet the requirements under
the parity rights. Hence, the tie up between SJP and SJO is illegal, SJP not being a
domestic corporation or an American business enterprise contemplated under the Laurel-
Langley Agreement.
Filipinas Compania De Seguros V. Christern Henefeld And Co. (1951)
G.R. No. L-2294 May 25, 1951
Lessons Applicable: Disqualification: Public Enemy (Insurance)
FACTS:
October 1, 1941: Christern Huenefeld and co., inc. (Christern), a company whose major stockholders
are German, paid P1M and obtained a fire policy from Filipinas Cia. de Seguros (Filipinas)
December 10, 1941: U.S. declared a war against Germany
February 27, 1942 (during the japanese occupation): the building and insured merchandise were
burned their claimed from Filipinas and the salvage goods were auctioned for P92,650 who refused
since Christen was organized under the Philippine laws, it was under American jurisdiction which is an
enemy of the Germans
April 9, 1943: The Director of Bureau of Financing ordered Filipinas to pay the P92,650 to Christen
and it did.
Filipinas filed with the CFI the P92,650 paid to Christern
CA affirmed CFI: dismissed the action
Filed a petition for certiorari
ISSUE: W/N Christern is a public enemy and therefore ceased to be insured
HELD: YES. Ordered to pay Filipinas P77,208.33, Philippine currency, less the amount of the premium,
in Philippine currency, that should be returned by the Filipinas for the unexpired term of the policy in
question, beginning December 11, 1941
Philippine Insurance Law (Act No. 2427, as amended,) in section 8, provides that "anyone except a
public enemy may be insured
Effect of war, generally. All intercourse between citizens of belligerent powers which is
inconsistent with a state of war is prohibited by the law of nations. Such prohibition includes all
negotiations, commerce, or trading with the enemy; all acts which will increase, or tend to increase,
its income or resources; all acts of voluntary submission to it; or receiving its protection; also all acts
concerning the transmission of money or goods; and all contracts relating thereto are thereby
nullified. It further prohibits insurance upon trade with or by the enemy, upon the life or lives of
aliens engaged in service with the enemy; this for the reason that the subjects of one country cannot
be permitted to lend their assistance to protect by insurance the commerce or property of
belligerent, alien subjects, or to do anything detrimental to their country's interest. The purpose of
war is to cripple the power and exhaust the resources of the enemy, and it is inconsistent that one
country should destroy its enemy's property and repay in insurance the value of what has been so
destroyed, or that it should in such manner increase the resources of the enemy, or render it aid, and
the commencement of war determines, for like reasons, all trading intercourse with the enemy,
which prior thereto may have been lawful. All individuals therefore, who compose the belligerent
powers, exist, as to each other, in a state of utter exclusion, and are public enemies
In the case of an ordinary fire policy, which grants insurance only from year, or for some other
specified term it is plain that when the parties become alien enemies, the contractual tie is broken
and the contractual rights of the parties, so far as not vested.
However, elementary rules of justice (in the absence of specific provision in the Insurance Law)
require that the premium paid by the respondent for the period covered by its policy from December
11, 1941, should be returned by the petitioner
STATE INVESTMENT HOUSE, INC. V. CITIBANK
NOS. 79926-27 October 17, 1991
Foreign Corporations doing business in the Philippines is a Resident
FACTS: Consolidated Mines, Inc. (CMI) obtained loans from Citibank, Bank of America
and HSBC, all foreign corporations but with branches in the Philippines. Meanwhile,
State Investment House, Inc. (SIHI) and State Financing Center, Inc. (SFCI), also
creditors of CMI, filed collection suits against the latter with writs of preliminary
attachment. Subsequently, the three banks jointly filed with the court a petition for
involuntary insolvency of CMI. SHI and SFCI opposed the petition on the ground that the
petitioners are not resident creditors in contemplation of the Insolvency Law.
ISSUE:
1. Whether or not a foreign corporation with a branch in the Philippines and doing
business therein can be considered a resident.
HELD: Yes.
1. Foreign corporations duly licensed to do business in the Philippines are considered
residents of the Philippines, as the word is understood in Sec. 20 of the Insolvency
Law, authorizing at least three resident creditors of the Philippines to file a petition to
declare a corporation insolvent. The Tax Code declares that the term resident foreign
corporation applies to foreign corporation engaged in trade or business within the
Philippines as distinguished from a non-resident foreign corporation which is not
engaged in trade or business within the Philippines. The Offshore Banking Law states
that: Branches, subsidiaries, affiliates, extension offices or any other units of corporation
or juridical person organized under the laws of any foreign country operating in the
Philippines shall be considered residents of the Philippines. The General Banking Act
places branches and agencies in the Philippines of foreign banks in the category as
commercial banks, rural banks, stock savings and loan association making no distinction
between the former ad the latter in so far as the terms banking institutions and banks
are used in said Act.
HOME INSURANCE COMPANY V. EASTERN SHIPPING LINES
No. L-34382 July 20, 1983
The primary purpose of our statute is to compel a foreign corporation desiring to do
business within the state to submit itself to the jurisdiction of the courts of this state. The
statute was not intended to exclude foreign corporations from the state.
FACTS: On or about January 13, 1967, S. Kajikita & Co. on board the SS Eastern
Jupiter, which is owned by the respondent, from Osaka, Japan coils of Black Hot
Rolled Copper Wires Rods. The shipment was covered by Bill of Lading with arrival
notice to the Phelps Dodge Copper Products Corporation, the consignee. It was also
insured with the plaintiff against all risks in the amount of P1,580,105.06.The coils
discharged from the vessel were in bad order, consignee under insurance the amount of
P3,260.44 for the loss/damage suffered by the cargo. Plaintiff, a foreign insurance
company duly authorized to do business in the Philippines, made demands for payment of
the aforesaid amount against the carrier and transportation company for reimbursement of
the aforesaid amount, but each refused to pay the same. The Eastern Shipping Lines filed
its answer and denied the allegations which refer to the plaintiffs capacity to sue for lack
of knowledge or information sufficient to form a belief as to the truth thereof. Angel Jose
Transportation, on the other hand, admitted the jurisdictional averments 3 of the heading
parties.
Lower Courts Decision: The complaint was dismissed on the ground that the Home
Insurance had failed to prove its capacity to sue.
ISSUE:
1. Whether or not Home Insurance, a foreign corporation licensed to do business in the
Philippines, at the time of filing of the case, has the capacity to sue for claims on
contracts made when it has no license yet to do business in the Philippines.
HELD: Yes. The decision of the lower court was reversed.
1 As early as 1924, the Supreme Court ruled in the leading case of Marshall Wells Co. v.
Henry W. Elser & Co. (46 Phil. 70) that the object of Sections 68 and 69 of the
Corporation Law was to subject the foreign corporation doing business in the Philippines
to the jurisdiction of Philippine courts. The Corporation Law must be given a reasonable,
not an unduly harsh, interpretation which does not hamper the development of trade
relations and which fosters friendly commercial intercourse among countries. The
objectives enunciated in the 1924 decision are even more relevant today when we
commercial relations are viewed in terms of a world economy, when the tendency is to
re-examine the political boundaries separating one nation from another insofar as they
define business requirements or restrict marketing conditions.
The court distinguished between the denial of the right to take remedial action
and the penal sanction for non-registration. Insofar as transacting business without a
license is concerned, Section 69 of the Corporation Law imposed a penal sanction
imprisonment for not less than 6 months nor more than 2 years or payment of a fine not
less than P200.00 nor more than P1,000.00 or both in the discretion of the court. There is
a penalty for transacting business without registration. And insofar as litigation is
concerned, the foreign corporation or its assignee may not maintain any suit for the
recovery of any debt, claim, or demand whatever. The Corporation Law is silent on
whether or not the contract executed by a foreign corporation with no capacity to sue is
null and void ab initio. Still, there is no question that the contracts are enforceable. The
requirement of registration affects only the remedy. Significantly, Batas Pambansa 68,
the Corporation Code of the Philippines has corrected the ambiguity caused by the
wording of Section 69 of the old Corporation Law. Section 133 of the present
Corporation Code provides that "No foreign corporation transacting business in the
Philippines without a license, or its successors or assigns, shall be permitted to maintain
or intervene in any action, suit or proceeding in any court or administrative agency in the
Philippines; but such corporation may be sued or proceeded against before Philippine
courts or administrative tribunals on any valid cause of action recognized under
Philippine laws." The old Section 69 has been reworded in terms of non-access to courts
and administrative agencies in order to maintain or intervene in any action or proceeding.
The prohibition against doing business without first securing a license is now given penal
sanction which is also applicable to other violations of the Corporation Code under the
general provisions of Section 144 of the Code. It is, therefore, not necessary to declare
the contract null and void even as against the erring foreign corporation. The penal
sanction for the violation and the denial of access to Philippine courts and administrative
bodies are sufficient from the viewpoint of legislative policy. Herein, the lack of capacity
at the time of the execution of the contracts was cured by the subsequent registration is
also strengthened by the procedural aspects of these cases. Home Insurance averred in its
complaints that it is a foreign insurance company, that it is authorized to do business in
the Philippines, that its agent is Mr. Victor H. Bello, and that its office address is the
Oledan Building at Ayala Avenue, Makati. These are all the averments required by
Section 4, Rule 8 of the Rules of Court. Home Insurance sufficiently alleged its capacity
to sue.
G.R. No. L-18961 August 31, 1966
ATLANTIC MUTUAL INSURANCE COMPANY and CONTINENTAL INSURANCE COMPANY,
plaintiffs and
appellants,
vs.
CEBU STEVEDORING CO., INC., defendant and appellee.
Facts: Appellants Atlantic Mutual Insurance Company and Continental Insurance Company
are both foreign corporations existing under the laws of the United States. They sued the Cebu
Stevedoring Co., Inc., a domestic corporation, for recovery of a sum of money on the following
allegations: that defendant, a common carrier, undertook to carry a shipment of copra for deliver
to Procter & Gamble Company, at Cebu City; that upon discharge, a portion of the copra was
found damaged; that since the copra had been previously insured with plaintiffs they paid the
shipper and/or consignee, upon proper claim and assessment of the damage; and that as
subrogee to the shipper's and/or consignee's rights, plaintiffs demanded, without success,
settlement from defendant by reason of its failure to comply with its obligation, as carrier, to
deliver the copra in good order.
Defendant moved to dismiss on two grounds: (a) that plaintiffs had "no legal personality to
appear before
Philippine courts and with no capacity to sue;" and (b) that the complaint did not state a cause of
action. Both grounds were based upon failure of the complaint to allege compliance with section
69 of the Corporation Law.
Issue: Whether or not plaintiffs had "legal personality to appear before Philippine courts
and with capacity to sue.
Ruling: No. The Law simply means that no foreign corporation shall be permitted to transact
business in the Philippines, unless it shall have the license required by law, and, until it complies
with this law, shall not be permitted to maintain any suit in the local courts. The object of the
statute was to 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 in 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, and in connection with
the spirit of the entire law."
To be sure, under the Rules of Court (Section 11, Rule 15) in force prior to the promulgation of
the Revised Rules on January 1, 1964, it was not necessary to aver the capacity of a party to sue
except to the extent required to show jurisdiction of the court. In our opinion, however, such rule
does not apply in all situations and under all circumstances. The theory behind a similar rule in
the United States is "that capacity ... of a party for purpose of suit is not in dispute in the great bulk
of cases, and that pleading and proof can be simplified by a rule that an averment of such matter
is not necessary, except to show jurisdiction." But where as in the present case, the law denies to
a foreign corporation the right to maintain suit unless it has previously complied with a certain
requirement, then such compliance, or the fact that the suing corporation is exempt therefrom,
becomes a necessary averment in the complaint. These are matters peculiarly within the
knowledge of appellants alone, and it would be unfair to impose upon appellee the burden of
asserting and proving the contrary. It is enough that foreign corporations are allowed by law to
seek redress in our courts under certain conditions: the interpretation of the law should not go
so far as to include, in effect, an inference that those conditions have been met from the mere fact
that the party suing is a foreign corporation.
LEVITON INDUSTRIES V. SALVADOR
G.R. No. L-40163. June 19, 1982
Old Rule: If suing for unfair competition, foreign corp should still allege in its complaint
the condition precedent in RA 166 (owner/user of TM + comity)
New Rule: The IP Code does not require that the foreign corporation is a registered TM
holder in RP.
Why we allow it now: To protect its name, property rightgoodwill protected
Ratio: Policy of stabilizing commercial transactions
FACTS: Leviton Manufacturing Co. Inc. filed a complaint for unfair competition against
Leviton Industries before the CFI of Rizal, presided by respondent Judge Serafin
Salvador. The complaint substantially alleges that plaintiff (Leviton Manufacturing) is a
foreign corporation organized and existing under the laws of the State of New York,
United States of America. Leviton Industries is a partnership organized and existing
under the laws of the Philippines. The plaintiff, founded in 1906 by Isidor Leviton, is the
largest manufacturer of electrical wiring devices in the United States under the trademark
Leviton, which various electrical wiring devices bearing the trademark Leviton and trade
name Leviton Manufacturing Co., Inc. had been exported to the Philippines since 1954;
that due to the superior quality and widespread use of its products by the public, the same
are well known to Filipino consumers under the trade name Leviton Manufacturing Co.,
Inc. and trademark Leviton; that long subsequent to the use of plaintiffs trademark and
trade name in the Philippines, defendants (Leviton Industries) began manufacturing and
selling electrical ballast, fuse and oval buzzer under the trademark Leviton and trade
name Leviton Industries Co.
The dispute arises when the partner and general manager of partnership, had
registered with the Philippine Patent Office the trademarks Leviton Label and Leviton
with respect to ballast and fuse which registration was contrary to paragraphs (d) and (e)
of Section 4 of RA 166, as amended, and violative of plaintiffs right over the trademark
Leviton; the defendants not only used the trademark Leviton but likewise copied the
design used by plaintiff in distinguishing its trademark; and the use thereof by defendants
of its products would cause confusion in the minds of the consumers and likely to deceive
them as to the source of origin, thereby enabling defendants to pass off their products as
those of plaintiffs. Invoking the provisions of Section 21-A of Republic Act No. 166,
plaintiff prayed for damages. It also sought the issuance of a writ of injunction to prohibit
defendants from using the trade name Leviton Industries, Co. and the trademark Leviton.
Defendants moved to dismiss the complaint for failure to state a cause of action, drawing
attention to the plaintiffs failure to allege therein its capacity to sue under Section 21-A
of Republic Act No. 166, as amended. After the filing of the plaintiffs opposition and the
defendants reply, the respondent judge denied the motion on the ground that the same
did not appear to be indubitable.
Lower Courts Decision: The motion and supplemental motion of petitioners to dismiss
the complaint as well as their motion for reconsideration was denied. It sustained the
legal capacity of Leviton manufacturing.
ISSUE:
1. Whether or Not Leviton manufacturing has capacity to sue before Philippine Courts.
HELD: No.
1. Leviton Manufacturing failed to allege the essential facts bearing upon its capacity to
sue before Philippine courts.
Leviton Manufacturing has chosen to anchor its action under the Trademark Law
of the Philippines, a law which, as pointed out, explicitly sets down the conditions
precedent for the successful prosecution thereof. It is therefore incumbent upon private
respondent to comply with these requirements or aver its exemption therefrom, if such be
the case. It may be that private respondent has the right to sue before Philippine courts,
but our rules on pleadings require that the necessary qualifying circumstances which
clothe it with such right be affirmatively pleaded. And the reason therefor, as enunciated
in Atlantic Mutual Insurance Co., et al. versus Cebu Stevedoring Co., Inc. is that
these are matters peculiarly within the knowledge of appellants alone, and it would be
unfair to impose upon appellees the burden of asserting and proving the contrary. It is
enough that foreign corporations are allowed by law to seek redress in our courts under
certain conditions: the interpretation of the law should not go so far as to include, in
effect, an inference that those conditions had been met from the mere fact that the party
sued is a foreign corporation.
It was indeed in the light of this and other considerations that this Court has seen
fit to amend the former rule by requiring in the revised rules (Section 4, Rule 8) that
facts showing the capacity of a party to sue or be sued or the authority of a party to sue
or be sued in a representative capacity or the legal existence of an organized association
of persons that is made a party, must be averred,
HANG LUNG BANK V. SAULOG
G.R. No. 73765 August 26, 1991
General Rule Foreign Corporation should first obtain license in RP to sue;
Exception If the transaction based on was transacted "wholly or fully" outside RP
Ratio Growth and development of business relations between Filipinos and foreign
nationals.
FACTS: Hang Lung Bank, which was not doing business in the Philippines, entered into
two continuing guarantee agreements with Cordova Chin San in Hongkong whereby the
latter agreed to pay on demand all sums of money which may be due the bank from
Worlder Enterprises to the extent of the total amount of two hundred fifty thousand
Hongkong dollars.
Worlder Enterprises having defaulted in its payment, petitioner filed in the Supreme
Court of Hongkong a collection suit against Worlder Enterprises and Chin San.
Summonses were allegedly served upon Worlder Enterprises and Chin San at their
addresses in Hongkong but they failed to respond thereto. Consequently, the Supreme
Court of Hongkong ruled that Worlder Enterprises and Cordova Chin san liable. A
demand letter to Chin San at his Philippine address was sent but no response was made
thereto triggering the petitioner to institute in the Philippine court an action seeking "the
enforcement of its just and valid claims against private respondent, who is a local
resident, for a sum of money based on a transaction which was perfected, executed and
consummated abroad." In his answer to the complaint, Chin San raised as affirmative
defenses: lack of cause of action, incapacity to sue and improper venue.
Lower Courts Decision: The case was dismissed for lack of jurisdiction.
Court of Appeals Decision: The MR was denied for lack of merit.

ISSUE:
1. Whether or not the foreign banking corporation has the capacity to file action.

HELD: Yes.
A foreign corporation may sue in this jurisdiction for infringement of trademark and
unfair competition although it is not doing business in the Philippines 13 because the
Philippines was a party to the Convention of the Union of Paris for the Protection of
Industrial Property.
We even went further to say that a foreign corporation not licensed to do business in the
Philippines may not be denied the right to file an action in our courts for an isolated
transaction in this country.
Since petitioner Foreign Banking Corporation was not doing business in the Philippines,
it may not be denied the privilege of pursuing its claims against private respondent for a
contract which was entered into and consummated outside the Philippines. Otherwise we
will be hampering the growth and development of business relations between Filipino
citizens and foreign nationals. Worse, we will be allowing the law to serve as a protective
shield for unscrupulous Filipino citizens who have business relationships abroad.