SECOND DIVISION

[ G.R. No. 168266, March 05, 2010 ]

DECISION
CARPIO, J.:
The Case

This petition for review[1] assails the 26 May 2005 Decision[2] of the Court of Appeals in CA-G.R. CV No. 48447.

The Facts

Petitioner Cargill, Inc. (petitioner) is a corporation organized and existing under the laws of the State of Delaware,
United States of America. Petitioner and Northern Mindanao Corporation (NMC) executed a contract dated 16 August
1989 whereby NMC agreed to sell to petitioner 20,000 to 24,000 metric tons of molasses, to be delivered from 1
January to 30 June 1990 at the price of $44 per metric ton. The contract provides that petitioner would open a Letter
of Credit with the Bank of Philippine Islands. Under the "red clause" of the Letter of Credit, NMC was permitted to
draw up to $500,000 representing the minimum price of the contract upon presentation of some documents.

The contract was amended three times: first, on 11 January 1990, increasing the purchase price of the molasses to
$47.50 per metric ton;[3] second, on 18 June 1990, reducing the quantity of the molasses to 10,500 metric tons and
increasing the price to $55 per metric ton;[4] and third, on 22 August 1990, providing for the shipment of 5,250 metric
tons of molasses on the last half of December 1990 through the first half of January 1991, and the balance of 5,250
metric tons on the last half of January 1991 through the first half of February 1991. [5] The third amendment also
required NMC to put up a performance bond equivalent to $451,500, which represents the value of 10,500 metric
tons of molasses computed at $43 per metric ton. The performance bond was intended to guarantee NMC's
performance to deliver the molasses during the prescribed shipment periods according to the terms of the amended
contract.

In compliance with the terms of the third amendment of the contract, respondent Intra Strata Assurance Corporation
(respondent) issued on 10 October 1990 a performance bond[6] in the sum of P11,287,500 to guarantee NMC's
delivery of the 10,500 tons of molasses, and a surety bond [7] in the sum of P9,978,125 to guarantee the repayment of
downpayment as provided in the contract.

NMC was only able to deliver 219.551 metric tons of molasses out of the agreed 10,500 metric tons. Thus, petitioner
sent demand letters to respondent claiming payment under the performance and surety bonds. When respondent
refused to pay, petitioner filed on 12 April 1991 a complaint[8] for sum of money against NMC and respondent.

Petitioner, NMC, and respondent entered into a compromise agreement, [9] which the trial court approved in its
Decision[10] dated 13 December 1991. The compromise agreement provides that NMC would pay petitioner
P3,000,000 upon signing of the compromise agreement and would deliver to petitioner 6,991 metric tons of molasses
from 16-31 December 1991. However, NMC still failed to comply with its obligation under the compromise agreement.
Hence, trial proceeded against respondent.

On 23 November 1994, the trial court rendered a decision, the dispositive portion of which reads:

WHEREFORE, judgment is rendered in favor of plaintiff [Cargill, Inc.], ordering defendant INTRA STRATA
ASSURANCE CORPORATION to solidarily pay plaintiff the total amount of SIXTEEN MILLION NINE HUNDRED
NINETY-THREE THOUSAND AND TWO HUNDRED PESOS (P16,993,200.00), Philippine Currency, with interest at
the legal rate from October 10, 1990 until fully paid, plus attorney's fees in the sum of TWO HUNDRED THOUSAND
PESOS (P200,000.00), Philippine Currency and the costs of the suit.

The Counterclaim of Intra Strata Assurance Corporation is hereby dismissed for lack of merit.

SO ORDERED.[11]

On appeal, the Court of Appeals reversed the trial court's decision and dismissed the complaint. Hence, this petition.

The Court of Appeals' Ruling

The Court of Appeals held that petitioner does not have the capacity to file this suit since it is a foreign corporation
doing business in the Philippines without the requisite license. The Court of Appeals held that petitioner's purchases
of molasses were in pursuance of its basic business and not just mere isolated and incidental transactions.

The Issues

Petitioner raises the following issues:

1. Whether petitioner is doing or transacting business in the Philippines in contemplation of the law and established
jurisprudence;
2. Whether respondent is estopped from invoking the defense that petitioner has no legal capacity to sue in the
Philippines;

3. Whether petitioner is seeking a review of the findings of fact of the Court of Appeals; and

4. Whether the advance payment of $500,000 was released to NMC without the submission of the supporting
documents required in the contract and the "red clause" Letter of Credit from which said amount was drawn.[12]

The Ruling of the Court

We find the petition meritorious.

Doing Business in the Philippines and Capacity to Sue

The principal issue in this case is whether petitioner, an unlicensed foreign corporation, has legal capacity to sue
before Philippine courts. Under Article 123[13] of the Corporation Code, a foreign corporation must first obtain a
license and a certificate from the appropriate government agency before it can transact business in the Philippines.
Where a foreign corporation does business in the Philippines without the proper license, it cannot maintain any action
or proceeding before Philippine courts as provided under Section 133 of the Corporation Code:

Sec. 133. Doing business without a license. - No foreign corporation transacting business in the Philippines without a
license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in
any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before
Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws.

Thus, the threshold question in this case is whether petitioner was doing business in the Philippines. The Corporation
Code provides no definition for the phrase "doing business." Nevertheless, Section 1 of Republic Act No. 5455 (RA
5455),[14] provides that:

x x x the phrase "doing business" shall include soliciting orders, purchases, service contracts, opening offices,
whether called `liaison' offices or branches; appointing representatives or distributors who are domiciled in the
Philippines or who in any calendar year stay in the Philippines for a period or periods totalling one hundred eighty
days or more; participating in the management, supervision or control of any domestic business firm, entity or
corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or
arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of
the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and
object of the business organization. (Emphasis supplied)

This is also the exact definition provided under Article 44 of the Omnibus Investments Code of 1987.

Republic Act No. 7042 (RA 7042), otherwise known as the Foreign Investments Act of 1991, which repealed Articles
44-56 of Book II of the Omnibus Investments Code of 1987, enumerated not only the acts or activities which
constitute "doing business" but also those activities which are not deemed "doing business." Section 3(d) of RA 7042
states:

[T]he phrase "doing business" shall include "soliciting orders, service contracts, opening offices, whether called
`liaison' offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any
calendar year stay in the country for a period or periods totalling one hundred eighty (180) days or more; participating
in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and
any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent
the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive
prosecution of, commercial gain or of the purpose and object of the business organization: Provided, however, That
the phrase `doing business' shall not be deemed to include mere investment as a shareholder by a foreign entity in
domestic corporations duly registered to do business, and/or the exercise of rights as such investor; nor having a
nominee director or officer to represent its interests in such corporation; nor appointing a representative or distributor
domiciled in the Philippines which transacts business in its own name and for its own account.

Since respondent is relying on Section 133 of the Corporation Code to bar petitioner from maintaining an action in
Philippine courts, respondent bears the burden of proving that petitioner's business activities in the Philippines were
not just casual or occasional, but so systematic and regular as to manifest continuity and permanence of activity to
constitute doing business in the Philippines. In this case, we find that respondent failed to prove that petitioner's
activities in the Philippines constitute doing business as would prevent it from bringing an action.

The determination of whether a foreign corporation is doing business in the Philippines must be based on the facts of
each case.[15] In the case of Antam Consolidated, Inc. v. CA,[16] in which a foreign corporation filed an action for
collection of sum of money against petitioners therein for damages and loss sustained for the latter's failure to deliver
coconut crude oil, the Court emphasized the importance of the element of continuity of commercial activities to
constitute doing business in the Philippines. The Court held:

In the case at bar, the transactions entered into by the respondent with the petitioners are not a series of commercial
dealings which signify an intent on the part of the respondent to do business in the Philippines but constitute an
isolated one which does not fall under the category of "doing business." The records show that the only reason why
the respondent entered into the second and third transactions with the petitioners was because it wanted to recover
the loss it sustained from the failure of the petitioners to deliver the crude coconut oil under the first transaction and in
order to give the latter a chance to make good on their obligation. x x x

x x x The three seemingly different transactions were entered into by the parties only in an effort to fulfill the basic
agreement and in no way indicate an intent on the part of the respondent to engage in a continuity of transactions
with petitioners which will categorize it as a foreign corporation doing business in the Philippines. [17]

Similarly, in this case, petitioner and NMC amended their contract three times to give a chance to NMC to deliver to
petitioner the molasses, considering that NMC already received the minimum price of the contract. There is no
showing that the transactions between petitioner and NMC signify the intent of petitioner to establish a continuous
business or extend its operations in the Philippines.

The Implementing Rules and Regulations of RA 7042 provide under Section 1(f), Rule I, that "doing business" does
not include the following acts:

1. Mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business,
and/or the exercise of rights as such investor;

2. Having a nominee director or officer to represent its interests in such corporation;

3. Appointing a representative or distributor domiciled in the Philippines which transacts business in the
representative's or distributor's own name and account;

4. The publication of a general advertisement through any print or broadcast media;

5. Maintaining a stock of goods in the Philippines solely for the purpose of having the same processed by another
entity in the Philippines;

6. Consignment by a foreign entity of equipment with a local company to be used in the processing of products for
export;

7. Collecting information in the Philippines; and

8. Performing services auxiliary to an existing isolated contract of sale which are not on a continuing basis, such as
installing in the Philippines machinery it has manufactured or exported to the Philippines, servicing the same, training
domestic workers to operate it, and similar incidental services.

Most of these activities do not bring any direct receipts or profits to the foreign corporation, consistent with the ruling
of this Court in National Sugar Trading Corp. v. CA[18] that activities within Philippine jurisdiction that do not create
earnings or profits to the foreign corporation do not constitute doing business in the Philippines. [19] In that case, the
Court held that it would be inequitable for the National Sugar Trading Corporation, a state-owned corporation, to
evade payment of a legitimate indebtedness owing to the foreign corporation on the plea that the latter should have
obtained a license first before perfecting a contract with the Philippine government. The Court emphasized that the
foreign corporation did not sell sugar and derive income from the Philippines, but merely purchased sugar from the
Philippine government and allegedly paid for it in full.

In this case, the contract between petitioner and NMC involved the purchase of molasses by petitioner from NMC. It
was NMC, the domestic corporation, which derived income from the transaction and not petitioner. To constitute
"doing business," the activity undertaken in the Philippines should involve profit-making.[20] Besides, under Section
3(d) of RA 7042, "soliciting purchases" has been deleted from the enumeration of acts or activities which constitute
"doing business."

Other factors which support the finding that petitioner is not doing business in the Philippines are: (1) petitioner does
not have an office in the Philippines; (2) petitioner imports products from the Philippines through its non-exclusive
local broker, whose authority to act on behalf of petitioner is limited to soliciting purchases of products from suppliers
engaged in the sugar trade in the Philippines; and (3) the local broker is an independent contractor and not an agent
of petitioner.[21]

As explained by the Court in B. Van Zuiden Bros., Ltd. v. GTVL Marketing Industries, Inc.:[22]

An exporter in one country may export its products to many foreign importing countries without performing in the
importing countries specific commercial acts that would constitute doing business in the importing countries. The
mere act of exporting from one's own country, without doing any specific commercial act within the territory of the
importing country, cannot be deemed as doing business in the importing country. The importing country does not
require jurisdiction over the foreign exporter who has not yet performed any specific commercial act within the
territory of the importing country. Without jurisdiction over the foreign exporter, the importing country cannot compel
the foreign exporter to secure a license to do business in the importing country.

Otherwise, Philippine exporters, by the mere act alone of exporting their products, could be considered by the
importing countries to be doing business in those countries. This will require Philippine exporters to secure a
business license in every foreign country where they usually export their products, even if they do not perform any
specific commercial act within the territory of such importing countries. Such a legal concept will have deleterious
effect not only on Philippine exports, but also on global trade.

To be doing or "transacting business in the Philippines" for purposes of Section 133 of the Corporation
Code, the foreign corporation must actually transact business in the Philippines, that is, perform specific
business transactions within the Philippine territory on a continuing basis in its own name and for its own
account. Actual transaction of business within the Philippine territory is an essential requisite for the
Philippines to to acquire jurisdiction over a foreign corporation and thus require the foreign corporation to
secure a Philippine business license. If a foreign corporation does not transact such kind of business in the
Philippines, even if it exports its products to the Philippines, the Philippines has no jurisdiction to require such foreign
corporation to secure a Philippine business license.[23] (Emphasis supplied)

In the present case, petitioner is a foreign company merely importing molasses from a Philipine exporter. A foreign
company that merely imports goods from a Philippine exporter, without opening an office or appointing an agent in
the Philippines, is not doing business in the Philippines.

Review of Findings of Fact

The Supreme Court may review the findings of fact of the Court of Appeals which are in conflict with the findings of
the trial court.[24] We find that the Court of Appeals' finding that petitioner was doing business is not supported by
evidence.

Furthermore, a review of the records shows that the trial court was correct in holding that the advance payment of
$500,000 was released to NMC in accordance with the conditions provided under the "red clause" Letter of Credit
from which said amount was drawn. The Head of the International Operations Department of the Bank of Philippine
Islands testified that the bank would not have paid the beneficiary if the required documents were not complete. It is a
requisite in a documentary credit transaction that the documents should conform to the terms and conditions of the
letter of credit; otherwise, the bank will not pay. The Head of the International Operations Department of the Bank of
Philippine Islands also testified that they received reimbursement from the issuing bank for the $500,000 withdrawn
by NMC.[25] Thus, respondent had no legitimate reason to refuse payment under the performance and surety bonds
when NMC failed to perform its part under its contract with petitioner.

WHEREFORE , we GRANT the petition. We REVERSE the Decision dated 26 May 2005 of the Court of Appeals in
CA-G.R. CV No. 48447. We REINSTATE the Decision dated 23 November 1994 of the trial court.

SO ORDERED.
 THIRD DIVISION
[ G.R. No. 171995, April 18, 2012 ]
STEELCASE, INC., PETITIONER, VS. DESIGN INTERNATIONAL SELECTIONS, INC.,
RESPONDENT.

DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 assailing the March 31, 2005 Decision [1] of the Court of
Appeals (CA) which affirmed the May 29, 2000 Order[2] of the Regional Trial Court, Branch 60, Makati City (RTC),
dismissing the complaint for sum of money in Civil Case No. 99-122 entitled “Steelcase, Inc. v. Design International
Selections, Inc.”

The Facts

Petitioner Steelcase, Inc. (Steelcase) is a foreign corporation existing under the laws of Michigan, United States of
America (U.S.A.), and engaged in the manufacture of office furniture with dealers worldwide. [3] Respondent Design
International Selections, Inc. (DISI) is a corporation existing under Philippine Laws and engaged in the furniture
business, including the distribution of furniture.[4]

Sometime in 1986 or 1987, Steelcase and DISI orally entered into a dealership agreement whereby Steelcase
granted DISI the right to market, sell, distribute, install, and service its products to end-user customers within the
Philippines. The business relationship continued smoothly until it was terminated sometime in January 1999 after the
agreement was breached with neither party admitting any fault. [5]

On January 18, 1999, Steelcase filed a complaint[6] for sum of money against DISI alleging, among others, that DISI
had an unpaid account of US$600,000.00. Steelcase prayed that DISI be ordered to pay actual or compensatory
damages, exemplary damages, attorney’s fees, and costs of suit.

In its Answer with Compulsory Counterclaims[7] dated February 4, 1999, DISI sought the following: (1) the issuance of
a temporary restraining order (TRO) and a writ of preliminary injunction to enjoin Steelcase from selling its products in
the Philippines except through DISI; (2) the dismissal of the complaint for lack of merit; and (3) the payment of actual,
moral and exemplary damages together with attorney’s fees and expenses of litigation. DISI alleged that the
complaint failed to state a cause of action and to contain the required allegations on Steelcase’s capacity to sue in
the Philippines despite the fact that it (Steelcase) was doing business in the Philippines without the required license
to do so. Consequently, it posited that the complaint should be dismissed because of Steelcase’s lack of legal
capacity to sue in Philippine courts.

On March 3, 1999, Steelcase filed its Motion to Admit Amended Complaint [8] which was granted by the RTC, through
then Acting Presiding Judge Roberto C. Diokno, in its Order[9] dated April 26, 1999. However, Steelcase sought to
further amend its complaint by filing a Motion to Admit Second Amended Complaint [10] on March 13, 1999.

In his Order[11] dated November 15, 1999, Acting Presiding Judge Bonifacio Sanz Maceda dismissed the complaint,
granted the TRO prayed for by DISI, set aside the April 26, 1999 Order of the RTC admitting the Amended
Complaint, and denied Steelcase’s Motion to Admit Second Amended Complaint. The RTC stated that in requiring
DISI to meet the Dealer Performance Expectation and in terminating the dealership agreement with DISI based on its
failure to improve its performance in the areas of business planning, organizational structure, operational
effectiveness, and efficiency, Steelcase unwittingly revealed that it participated in the operations of DISI. It then
concluded that Steelcase was “doing business” in the Philippines, as contemplated by Republic Act (R.A.) No. 7042
(The Foreign Investments Act of 1991), and since it did not have the license to do business in the country, it was
barred from seeking redress from our courts until it obtained the requisite license to do so. Its determination was
further bolstered by the appointment by Steelcase of a representative in the Philippines. Finally, despite a showing
that DISI transacted with the local customers in its own name and for its own account, it was of the opinion that any
doubt in the factual environment should be resolved in favor of a pronouncement that a foreign corporation was doing
business in the Philippines, considering the twelve-year period that DISI had been distributing Steelcase products in
the Philippines.

Steelcase moved for the reconsideration of the questioned Order but the motion was denied by the RTC in its May
29, 2000 Order.[12]

Aggrieved, Steelcase elevated the case to the CA by way of appeal, assailing the November 15, 1999 and May 29,
2000 Orders of the RTC. On March 31, 2005, the CA rendered its Decision affirming the RTC orders, ruling that
Steelcase was a foreign corporation doing or transacting business in the Philippines without a license. The CA stated
that the following acts of Steelcase showed its intention to pursue and continue the conduct of its business in the
Philippines: (1) sending a letter to Phinma, informing the latter that the distribution rights for its products would be
established in the near future and directing other questions about orders for Steelcase products to Steelcase
International; (2) cancelling orders from DISI’s customers, particularly Visteon, Phils., Inc. (Visteon); (3) continuing to
send its products to the Philippines through Modernform Group Company Limited (Modernform), as evidenced by an
Ocean Bill of Lading; and (4) going beyond the mere appointment of DISI as a dealer by making several impositions
on management and operations of DISI. Thus, the CA ruled that Steelcase was barred from access to our courts for
being a foreign corporation doing business here without the requisite license to do so.

Steelcase filed a motion for reconsideration but it was denied by the CA in its Resolution dated March 23, 2006. [13]

Hence, this petition.

The Issues

Steelcase filed the present petition relying on the following grounds:

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT FOUND THAT STEELCASE HAD
BEEN “DOING BUSINESS” IN THE PHILIPPINES WITHOUT A LICENSE.

II

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT FINDING THAT RESPONDENT WAS
ESTOPPED FROM CHALLENGING STEELCASE’S LEGAL CAPACITY TO SUE, AS AN AFFIRMATIVE
DEFENSE IN ITS ANSWER.

The issues to be resolved in this case are:

(1) Whether or not Steelcase is doing business in the Philippines without a license; and

(2) Whether or not DISI is estopped from challenging the Steelcase’s legal capacity to sue.

The Court’s Ruling

The Court rules in favor of the petitioner.

Steelcase is an unlicensed foreign

Anent the first issue, Steelcase argues that Section 3(d) of R.A. No. 7042 or the Foreign Investments Act of
1991 (FIA) expressly states that the phrase “doing business” excludes the appointment by a foreign corporation of a
local distributor domiciled in the Philippines which transacts business in its own name and for its own account.
Steelcase claims that it was not doing business in the Philippines when it entered into a dealership agreement with
DISI where the latter, acting as the former’s appointed local distributor, transacted business in its own name and for
its own account. Specifically, Steelcase contends that it was DISI that sold Steelcase’s furniture directly to the end-
users or customers who, in turn, directly paid DISI for the furniture they bought. Steelcase further claims that DISI, as
a non-exclusive dealer in the Philippines, had the right to market, sell, distribute and service Steelcase products in its
own name and for its own account. Hence, DISI was an independent distributor of Steelcase products, and not a
mere agent or conduit of Steelcase.

On the other hand, DISI argues that it was appointed by Steelcase as the latter’s exclusive distributor of Steelcase
products. DISI likewise asserts that it was not allowed by Steelcase to transact business in its own name and for its
own account as Steelcase dictated the manner by which it was to conduct its business, including the management
and solicitation of orders from customers, thereby assuming control of its operations. DISI further insists that
Steelcase treated and considered DISI as a mere conduit, as evidenced by the fact that Steelcase itself directly sold
its products to customers located in the Philippines who were classified as part of their “global accounts.” DISI cited
other established circumstances which prove that Steelcase was doing business in the Philippines including the
following: (1) the sale and delivery by Steelcase of furniture to Regus, a Philippine client, through Modernform, a Thai
corporation allegedly controlled by Steelcase; (2) the imposition by Steelcase of certain requirements over the
management and operations of DISI; (3) the representations made by Steven Husak as Country Manager of
Steelcase; (4) the cancellation by Steelcase of orders placed by Philippine clients; and (5) the expression by
Steelcase of its desire to maintain its business in the Philippines. Thus, Steelcase has no legal capacity to sue in
Philippine Courts because it was doing business in the Philippines without a license to do so.

The Court agrees with the petitioner.

The rule that an unlicensed foreign corporations doing business in the Philippine do not have the capacity to sue
before the local courts is well-established. Section 133 of the Corporation Code of the Philippines explicitly states:

Sec. 133. Doing business without a license. - No foreign corporation transacting business in the Philippines without a
license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in
any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before
Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws.

The phrase “doing business” is clearly defined in Section 3(d) of R.A. No. 7042 (Foreign Investments Act of 1991), to
wit:

d) The phrase “doing business” shall include soliciting orders, service contracts, opening offices, whether called
“liaison” offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any
calendar year stay in the country for a period or periods totalling one hundred eighty (180) days or more; participating
in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and
any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent
the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive
prosecution of, commercial gain or of the purpose and object of the business organization: Provided, however,
That the phrase “doing business” shall not be deemed to include mere investment as a shareholder by a foreign
entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; nor
having a nominee director or officer to represent its interests in such corporation; nor appointing a representative or
distributor domiciled in the Philippines which transacts business in its own name and for its own account;
(Emphases supplied)

This definition is supplemented by its Implementing Rules and Regulations, Rule I, Section 1(f) which elaborates on
the meaning of the same phrase:

f. “Doing business” shall include soliciting orders, service contracts, opening offices, whether liaison offices or
branches; appointing representatives or distributors, operating under full control of the foreign corporation, domiciled
in the Philippines or who in any calendar year stay in the country for a period totalling one hundred eighty [180] days or
more; participating in the management, supervision or control of any domestic business, firm, entity or corporation in
the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and
contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally
incident to and in progressive prosecution of commercial gain or of the purpose and object of the business
organization.

The following acts shall not be deemed “doing business” in the Philippines:

1. Mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business,
and/or the exercise of rights as such investor;

2. Having a nominee director or officer to represent its interest in such corporation;

3. Appointing a representative or distributor domiciled in the Philippines which transacts business in the
representative's or distributor's own name and account;

4. The publication of a general advertisement through any print or broadcast media;

5. Maintaining a stock of goods in the Philippines solely for the purpose of having the same processed by another
entity in the Philippines;

6. Consignment by a foreign entity of equipment with a local company to be used in the processing of products for
export;

7. Collecting information in the Philippines; and

8. Performing services auxiliary to an existing isolated contract of sale which are not on a continuing basis, such as
installing in the Philippines machinery it has manufactured or exported to the Philippines, servicing the same, training
domestic workers to operate it, and similar incidental services. (Emphases supplied)

From the preceding citations, the appointment of a distributor in the Philippines is not sufficient to constitute “doing
business” unless it is under the full control of the foreign corporation. On the other hand, if the distributor is an
independent entity which buys and distributes products, other than those of the foreign corporation, for its own name
and its own account, the latter cannot be considered to be doing business in the Philippines. [14] It should be kept in
mind that the determination of whether a foreign corporation is doing business in the Philippines must be judged in
light of the attendant circumstances.[15]

In the case at bench, it is undisputed that DISI was founded in 1979 and is independently owned and managed by the
spouses Leandro and Josephine Bantug.[16] In addition to Steelcase products, DISI also distributed products of other
companies including carpet tiles, relocatable walls and theater settings.[17] The dealership agreement between
Steelcase and DISI had been described by the owner himself as:

xxx basically a buy and sell arrangement whereby we would inform Steelcase of the volume of the products needed
for a particular project and Steelcase would, in turn, give ‘special quotations’ or discounts after considering the value
of the entire package. In making the bid of the project, we would then add out profit margin over Steelcase’s prices.
After the approval of the bid by the client, we would thereafter place the orders to Steelcase. The latter, upon our
payment, would then ship the goods to the Philippines, with us shouldering the freight charges and
taxes.[18] [Emphasis supplied]

This clearly belies DISI’s assertion that it was a mere conduit through which Steelcase conducted its business in the
country. From the preceding facts, the only reasonable conclusion that can be reached is that DISI was an
independent contractor, distributing various products of Steelcase and of other companies, acting in its own name
and for its own account.

The CA, in finding Steelcase to be unlawfully engaged in business in the Philippines, took into consideration the
delivery by Steelcase of a letter to Phinma informing the latter that the distribution rights for its products would be
established in the near future, and also its cancellation of orders placed by Visteon. The foregoing acts were
apparently misinterpreted by the CA. Instead of supporting the claim that Steelcase was doing business in the
country, the said acts prove otherwise. It should be pointed out that no sale was concluded as a result of these
communications. Had Steelcase indeed been doing business in the Philippines, it would have readily accepted and
serviced the orders from the abovementioned Philippine companies. Its decision to voluntarily cease to sell its
products in the absence of a local distributor indicates its refusal to engage in activities which might be construed as
“doing business.”

Another point being raised by DISI is the delivery and sale of Steelcase products to a Philippine client by Modernform
allegedly an agent of Steelcase. Basic is the rule in corporation law that a corporation has a separate and distinct
personality from its stockholders and from other corporations with which it may be connected. [19] Thus, despite the
admission by Steelcase that it owns 25% of Modernform, with the remaining 75% being owned and controlled by Thai
stockholders,[20] it is grossly insufficient to justify piercing the veil of corporate fiction and declare that Modernform
acted as the alter ego of Steelcase to enable it to improperly conduct business in the Philippines. The records are
bereft of any evidence which might lend even a hint of credence to DISI’s assertions. As such, Steelcase cannot be
deemed to have been doing business in the Philippines through Modernform.

Finally, both the CA and DISI rely heavily on the Dealer Performance Expectation required by Steelcase of its
distributors to prove that DISI was not functioning independently from Steelcase because the same imposed certain
conditions pertaining to business planning, organizational structure, operational effectiveness and efficiency, and
financial stability. It is actually logical to expect that Steelcase, being one of the major manufacturers of office
systems furniture, would require its dealers to meet several conditions for the grant and continuation of a
distributorship agreement. The imposition of minimum standards concerning sales, marketing, finance and operations
is nothing more than an exercise of sound business practice to increase sales and maximize profits for the benefit of
both Steelcase and its distributors. For as long as these requirements do not impinge on a distributor’s
independence, then there is nothing wrong with placing reasonable expectations on them.

All things considered, it has been sufficiently demonstrated that DISI was an independent contractor which sold
Steelcase products in its own name and for its own account. As a result, Steelcase cannot be considered to be doing
business in the Philippines by its act of appointing a distributor as it falls under one of the exceptions under R.A. No.
7042.

DISI is estopped from challenging

Regarding the second issue, Steelcase argues that assuming arguendo that it had been “doing business” in the
Philippines without a license, DISI was nonetheless estopped from challenging Steelcase’s capacity to sue in the
Philippines. Steelcase claims that since DISI was aware that it was doing business in the Philippines without a
license and had benefited from such business, then DISI should be estopped from raising the defense that Steelcase
lacks the capacity to sue in the Philippines by reason of its doing business without a license.

On the other hand, DISI argues that the doctrine of estoppel cannot give Steelcase the license to do business in the
Philippines or permission to file suit in the Philippines. DISI claims that when Steelcase entered into a dealership
agreement with DISI in 1986, it was not doing business in the Philippines. It was after such dealership was put in
place that it started to do business without first obtaining the necessary license. Hence, estoppel cannot work against
it. Moreover, DISI claims that it suffered as a result of Steelcase’s “doing business” and that it never benefited from
the dealership and, as such, it cannot be estopped from raising the issue of lack of capacity to sue on the part of
Steelcase.

The argument of Steelcase is meritorious.

If indeed Steelcase had been doing business in the Philippines without a license, DISI would nonetheless be
estopped from challenging the former’s legal capacity to sue.

It cannot be denied that DISI entered into a dealership agreement with Steelcase and profited from it for 12 years
from 1987 until 1999. DISI admits that it complied with its obligations under the dealership agreement by exerting
more effort and making substantial investments in the promotion of Steelcase products. It also claims that it was able
to establish a very good reputation and goodwill for Steelcase and its products, resulting in the establishment and
development of a strong market for Steelcase products in the Philippines. Because of this, DISI was very proud to be
awarded the “Steelcase International Performance Award” for meeting sales objectives, satisfying customer needs,
managing an effective company and making a profit. [21]

Unquestionably, entering into a dealership agreement with Steelcase charged DISI with the knowledge that
Steelcase was not licensed to engage in business activities in the Philippines. This Court has carefully combed the
records and found no proof that, from the inception of the dealership agreement in 1986 until September 1998, DISI
even brought to Steelcase’s attention that it was improperly doing business in the Philippines without a license. It
was only towards the latter part of 1998 that DISI deemed it necessary to inform Steelcase of the impropriety of the
conduct of its business without the requisite Philippine license. It should, however, be noted that DISI only raised the
issue of the absence of a license with Steelcase after it was informed that it owed the latter US$600,000.00 for the
sale and delivery of its products under their special credit arrangement.

By acknowledging the corporate entity of Steelcase and entering into a dealership agreement with it and even
benefiting from it, DISI is estopped from questioning Steelcase’s existence and capacity to sue. This is consistent
with the Court’s ruling in Communication Materials and Design, Inc. v. Court of Appeals [22] where it was written:

Notwithstanding such finding that ITEC is doing business in the country, petitioner is nonetheless estopped from
raising this fact to bar ITEC from instituting this injunction case against it.

A foreign corporation doing business in the Philippines may sue in Philippine Courts although not
authorized to do business here against a Philippine citizen or entity who had contracted with and benefited
by said corporation. To put it in another way, a party is estopped to challenge the personality of a
corporation after having acknowledged the same by entering into a contract with it. And the doctrine of
estoppel to deny corporate existence applies to a foreign as well as to domestic corporations. One who has dealt with
a corporation of foreign origin as a corporate entity is estopped to deny its corporate existence and capacity: The
principle will be applied to prevent a person contracting with a foreign corporation from later taking advantage of its
noncompliance with the statutes chiefly in cases where such person has received the benefits of the contract.

The rule is deeply rooted in the time-honored axiom of Commodum ex injuria sua non habere debet — no
person ought to derive any advantage of his own wrong. This is as it should be for as mandated by law,
“every person must in the exercise of his rights and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith.”

Concededly, corporations act through agents, like directors and officers. Corporate dealings must be characterized by
utmost good faith and fairness. Corporations cannot just feign ignorance of the legal rules as in most cases, they are
manned by sophisticated officers with tried management skills and legal experts with practiced eye on legal
problems. Each party to a corporate transaction is expected to act with utmost candor and fairness and, thereby allow
a reasonable proportion between benefits and expected burdens. This is a norm which should be observed where
one or the other is a foreign entity venturing in a global market.

xxx

By entering into the "Representative Agreement" with ITEC, petitioner is charged with knowledge that ITEC was not
licensed to engage in business activities in the country, and is thus estopped from raising in defense such incapacity
of ITEC, having chosen to ignore or even presumptively take advantage of the same. [23] (Emphases supplied)

The case of Rimbunan Hijau Group of Companies v. Oriental Wood Processing Corporation [24] is likewise instructive:

Respondent’s unequivocal admission of the transaction which gave rise to the complaint establishes the applicability
of estoppel against it. Rule 129, Section 4 of the Rules on Evidence provides that a written admission made by a
party in the course of the proceedings in the same case does not require proof. We held in the case of Elayda v.
Court of Appeals, that an admission made in the pleadings cannot be controverted by the party making such
admission and are conclusive as to him. Thus, our consistent pronouncement, as held in cases such as Merril Lynch
Futures v. Court of Appeals, is apropos:

The rule is that a party is estopped to challenge the personality of a corporation after having acknowledged
the same by entering into a contract with it. And the ‘doctrine of estoppel to deny corporate existence
applies to foreign as well as to domestic corporations;’ “one who has dealt with a corporation of foreign
origin as a corporate entity is estopped to deny its existence and capacity.” The principle “will be applied to
prevent a person contracting with a foreign corporation from later taking advantage of its noncompliance
with the statutes, chiefly in cases where such person has received the benefits of the contract . . .”

All things considered, respondent can no longer invoke petitioner’s lack of capacity to sue in this jurisdiction.
Considerations of fair play dictate that after having contracted and benefitted from its business transaction with
Rimbunan, respondent should be barred from questioning the latter’s lack of license to transact business in the
Philippines.

In the case of Antam Consolidated, Inc. v. CA, this Court noted that it is a common ploy of defaulting local companies
which are sued by unlicensed foreign corporations not engaged in business in the Philippines to invoke the latter’s
lack of capacity to sue. This practice of domestic corporations is particularly reprehensible considering that in
requiring a license, the law never intended to prevent foreign corporations from performing single or isolated acts in
this country, or to favor domestic corporations who renege on their obligations to foreign firms unwary enough to
engage in solitary transactions with them. Rather, the law was intended to bar foreign corporations from acquiring a
domicile for the purpose of business without first taking the steps necessary to render them amenable to suits in the
local courts. It was to prevent the foreign companies from enjoying the good while disregarding the bad.

As a matter of principle, this Court will not step in to shield defaulting local companies from the
repercussions of their business dealings. While the doctrine of lack of capacity to sue based on failure to
first acquire a local license may be resorted to in meritorious cases, it is not a magic incantation. It cannot be
called upon when no evidence exists to support its invocation or the facts do not warrant its application.In
this case, that the respondent is estopped from challenging the petitioners’ capacity to sue has been conclusively
established, and the forthcoming trial before the lower court should weigh instead on the other defenses raised by the
respondent.[25] (Emphases supplied)

As shown in the previously cited cases, this Court has time and again upheld the principle that a foreign corporation
doing business in the Philippines without a license may still sue before the Philippine courts a Filipino or a Philippine
entity that had derived some benefit from their contractual arrangement because the latter is considered to be
estopped from challenging the personality of a corporation after it had acknowledged the said corporation by entering
into a contract with it.[26]

In Antam Consolidated, Inc. v. Court of Appeals,[27] this Court had the occasion to draw attention to the common ploy
of invoking the incapacity to sue of an unlicensed foreign corporation utilized by defaulting domestic companies which
seek to avoid the suit by the former. The Court cannot allow this to continue by always ruling in favor of local
companies, despite the injustice to the overseas corporation which is left with no available remedy.

During this period of financial difficulty, our nation greatly needs to attract more foreign investments and encourage
trade between the Philippines and other countries in order to rebuild and strengthen our economy. While it is
essential to uphold the sound public policy behind the rule that denies unlicensed foreign corporations doing business
in the Philippines access to our courts, it must never be used to frustrate the ends of justice by becoming an all-
encompassing shield to protect unscrupulous domestic enterprises from foreign entities seeking redress in our
country. To do otherwise could seriously jeopardize the desirability of the Philippines as an investment site and
would possibly have the deleterious effect of hindering trade between Philippine companies and international
corporations.

WHEREFORE, the March 31, 2005 Decision of the Court of Appeals and its March 23, 2006 Resolution are
hereby REVERSED and SET ASIDE. The dismissal order of the Regional Trial Court dated November 15, 1999 is
hereby set aside. Steelcase’s Amended Complaint is hereby ordered REINSTATED and the case is REMANDED to
the RTC for appropriate action.

SO ORDERED.
 SECOND DIVISION
[ G.R. No. 185582, February 29, 2012 ]
TUNA PROCESSING, INC., PETITIONER, VS. PHILIPPINE KINGFORD, INC., RESPONDENT.

DECISION
PEREZ, J.:
Can a foreign corporation not licensed to do business in the Philippines, but which collects royalties from entities in
the Philippines, sue here to enforce a foreign arbitral award?

In this Petition for Review on Certiorari under Rule 45,[1] petitioner Tuna Processing, Inc. (TPI), a foreign corporation
not licensed to do business in the Philippines, prays that the Resolution [2] dated 21 November 2008 of the Regional
Trial Court (RTC) of Makati City be declared void and the case be remanded to the RTC for further proceedings. In
the assailed Resolution, the RTC dismissed petitioner’s Petition for Confirmation, Recognition, and Enforcement of
Foreign Arbitral Award[3] against respondent Philippine Kingford, Inc. (Kingford), a corporation duly organized and
existing under the laws of the Philippines,[4] on the ground that petitioner lacked legal capacity to sue.[5]

The Antecedents

On 14 January 2003, Kanemitsu Yamaoka (hereinafter referred to as the “licensor”), co-patentee of U.S. Patent No.
5,484,619, Philippine Letters Patent No. 31138, and Indonesian Patent No. ID0003911 (collectively referred to as the
“Yamaoka Patent”),[6] and five (5) Philippine tuna processors, namely, Angel Seafood Corporation, East Asia Fish
Co., Inc., Mommy Gina Tuna Resources, Santa Cruz Seafoods, Inc., and respondent Kingford (collectively referred to
as the “sponsors”/“licensees”)[7] entered into a Memorandum of Agreement (MOA),[8] pertinent provisions of which
read:

1. Background and objectives. The Licensor, co-owner of U.S.Patent No. 5,484,619, Philippine Patent No.
31138, and Indonesian Patent No. ID0003911 xxx wishes to form an alliance with Sponsors for purposes of
enforcing his three aforementioned patents, granting licenses under those patents, and collecting royalties.

The Sponsors wish to be licensed under the aforementioned patents in order to practice the processes claimed in
those patents in the United States, the Philippines, and Indonesia, enforce those patents and collect royalties in
conjunction with Licensor.

xxx

4. Establishment of Tuna Processors, Inc. The parties hereto agree to the establishment of Tuna Processors,
Inc. (“TPI”), a corporation established in the State of California, in order to implement the objectives of this
Agreement.

5. Bank account. TPI shall open and maintain bank accounts in the United States, which will be used exclusively
to deposit funds that it will collect and to disburse cash it will be obligated to spend in connection with the
implementation of this Agreement.

6. Ownership of TPI. TPI shall be owned by the Sponsors and Licensor. Licensor shall be assigned one share of
TPI for the purpose of being elected as member of the board of directors. The remaining shares of TPI shall be
held by the Sponsors according to their respective equity shares. [9]

xxx

The parties likewise executed a Supplemental Memorandum of Agreement [10] dated 15 January 2003 and an
Agreement to Amend Memorandum of Agreement[11] dated 14 July 2003.

Due to a series of events not mentioned in the petition, the licensees, including respondent Kingford, withdrew from
petitioner TPI and correspondingly reneged on their obligations. [12] Petitioner submitted the dispute for arbitration
before the International Centre for Dispute Resolution in the State of California, United States and won the case
against respondent.[13] Pertinent portions of the award read:

13.1 Within thirty (30) days from the date of transmittal of this Award to the Parties, pursuant to the terms of this
award, the total sum to be paid by RESPONDENT KINGFORD to CLAIMANT TPI, is the sum of ONE MILLION
SEVEN HUNDRED FIFTY THOUSAND EIGHT HUNDRED FORTY SIX DOLLARS AND TEN CENTS
($1,750,846.10).

(A) For breach of the MOA by not paying past due assessments, RESPONDENT KINGFORD shall pay CLAIMANT
the total sum of TWO HUNDRED TWENTY NINE THOUSAND THREE HUNDRED AND FIFTY FIVE DOLLARS
AND NINETY CENTS ($229,355.90) which is 20% of MOA assessments since September 1, 2005[;]

(B) For breach of the MOA in failing to cooperate with CLAIMANT TPI in fulfilling the objectives of the MOA,
RESPONDENT KINGFORD shall pay CLAIMANT the total sum of TWO HUNDRED SEVENTY ONE THOUSAND
FOUR HUNDRED NINETY DOLLARS AND TWENTY CENTS ($271,490.20)[;][14] and

(C) For violation of THE LANHAM ACT and infringement of the YAMAOKA 619 PATENT, RESPONDENT
KINGFORD shall pay CLAIMANT the total sum of ONE MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS
AND NO CENTS ($1,250,000.00). xxx

xxx[15]

To enforce the award, petitioner TPI filed on 10 October 2007 a Petition for Confirmation, Recognition, and
Enforcement of Foreign Arbitral Award before the RTC of Makati City. The petition was raffled to Branch 150
presided by Judge Elmo M. Alameda.

At Branch 150, respondent Kingford filed a Motion to Dismiss. [16] After the court denied the motion for lack of
merit,[17] respondent sought for the inhibition of Judge Alameda and moved for the reconsideration of the order
denying the motion.[18] Judge Alameda inhibited himself notwithstanding “[t]he unfounded allegations and
unsubstantiated assertions in the motion.”[19] Judge Cedrick O. Ruiz of Branch 61, to which the case was re-raffled,
in turn, granted respondent’s Motion for Reconsideration and dismissed the petition on the ground that the petitioner
lacked legal capacity to sue in the Philippines.[20]

Petitioner TPI now seeks to nullify, in this instant Petition for Review on Certiorari under Rule 45, the order of the trial
court dismissing its Petition for Confirmation, Recognition, and Enforcement of Foreign Arbitral Award.

Issue

The core issue in this case is whether or not the court a quo was correct in so dismissing the petition on the ground of
petitioner’s lack of legal capacity to sue.

Our Ruling

The petition is impressed with merit.

The Corporation Code of the Philippines expressly provides:

Sec. 133. Doing business without a license. - No foreign corporation transacting business in the Philippines
without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or
proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded
against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine
laws.

It is pursuant to the aforequoted provision that the court a quo dismissed the petition. Thus:

Herein plaintiff TPI’s “Petition, etc.” acknowledges that it “is a foreign corporation established in the State of
California” and “was given the exclusive right to license or sublicense the Yamaoka Patent” and “was assigned the
exclusive right to enforce the said patent and collect corresponding royalties” in the Philippines. TPI likewise admits
that it does not have a license to do business in the Philippines.

There is no doubt, therefore, in the mind of this Court that TPI has been doing business in the Philippines, but sans a
license to do so issued by the concerned government agency of the Republic of the Philippines, when it collected
royalties from “five (5) Philippine tuna processors[,] namely[,] Angel Seafood Corporation, East Asia Fish Co., Inc.,
Mommy Gina Tuna Resources, Santa Cruz Seafoods, Inc. and respondent Philippine Kingford, Inc.” This being the
real situation, TPI cannot be permitted to maintain or intervene in any action, suit or proceedings in any court or
administrative agency of the Philippines.” A priori, the “Petition, etc.” extant of the plaintiff TPI should be dismissed
for it does not have the legal personality to sue in the Philippines.[21]

The petitioner counters, however, that it is entitled to seek for the recognition and enforcement of the subject foreign
arbitral award in accordance with Republic Act No. 9285 (Alternative Dispute Resolution Act of 2004),[22] the
Convention on the Recognition and Enforcement of Foreign Arbitral Awards drafted during the United Nations
Conference on International Commercial Arbitration in 1958 (New York Convention), and the UNCITRAL Model Law
on International Commercial Arbitration (Model Law),[23] as none of these specifically requires that the party seeking
for the enforcement should have legal capacity to sue. It anchors its argument on the following:

In the present case, enforcement has been effectively refused on a ground not found in the [Alternative Dispute
Resolution Act of 2004], New York Convention, or Model Law. It is for this reason that TPI has brought this matter
before this most Honorable Court, as it [i]s imperative to clarify whether the Philippines’ international obligations and
State policy to strengthen arbitration as a means of dispute resolution may be defeated by misplaced technical
considerations not found in the relevant laws.[24]

Simply put, how do we reconcile the provisions of the Corporation Code of the Philippines on one hand, and
the Alternative Dispute Resolution Act of 2004, the New York Convention and the Model Law on the other?

In several cases, this Court had the occasion to discuss the nature and applicability of the Corporation Code of the
Philippines, a general law, viz-a-viz other special laws. Thus, in Koruga v. Arcenas, Jr.,[25] this Court rejected the
application of the Corporation Code and applied the New Central Bank Act. It ratiocinated:

Koruga’s invocation of the provisions of the Corporation Code is misplaced. In an earlier case with similar
antecedents, we ruled that:

“The Corporation Code, however, is a general law applying to all types of corporations, while the New Central Bank
Act regulates specifically banks and other financial institutions, including the dissolution and liquidation thereof. As
between a general and special law, the latter shall prevail – generalia specialibus non derogant.” (Emphasis
supplied)[26]

Further, in the recent case of Hacienda Luisita, Incorporated v. Presidential Agrarian Reform Council,[27] this Court
held:

Without doubt, the Corporation Code is the general law providing for the formation, organization and regulation of
private corporations. On the other hand, RA 6657 is the special law on agrarian reform. As between a general and
special law, the latter shall prevail—generalia specialibus non derogant.[28]

Following the same principle, the Alternative Dispute Resolution Act of 2004 shall apply in this case as the Act, as its
title - An Actto Institutionalize the Use of an Alternative Dispute Resolution System in the Philippines and to Establish
the Office for Alternative Dispute Resolution, and for Other Purposes - would suggest, is a law especially enacted “to
actively promote party autonomy in the resolution of disputes or the freedom of the party to make their own
arrangements to resolve their disputes.”[29] It specifically provides exclusive grounds available to the party opposing
an application for recognition and enforcement of the arbitral award. [30]

Inasmuch as the Alternative Dispute Resolution Act of 2004, a municipal law, applies in the instant petition, we do not
see the need to discuss compliance with international obligations under the New York Convention and the Model
Law. After all, both already form part of the law.

In particular, the Alternative Dispute Resolution Act of 2004 incorporated the New York Convention in the Act by
specifically providing:

SEC. 42. Application of the New York Convention. - The New York Convention shall govern the recognition and
enforcement of arbitral awards covered by the said Convention.

xxx

SEC. 45. Rejection of a Foreign Arbitral Award. - A party to a foreign arbitration proceeding may oppose an
application for recognition and enforcement of the arbitral award in accordance with the procedural rules to be
promulgated by the Supreme Court only on those grounds enumerated under Article V of the New York Convention.
Any other ground raised shall be disregarded by the regional trial court.

It also expressly adopted the Model Law, to wit:

Sec. 19. Adoption of the Model Law on International Commercial Arbitration. International commercial arbitration
shall be governed by the Model Law on International Commercial Arbitration (the “Model Law”) adopted by the United
Nations Commission on International Trade Law on June 21, 1985 xxx.”

Now, does a foreign corporation not licensed to do business in the Philippines have legal capacity to sue under the
provisions of the Alternative Dispute Resolution Act of 2004? We answer in the affirmative.

Sec. 45 of the Alternative Dispute Resolution Act of 2004 provides that the opposing party in an application for
recognition and enforcement of the arbitral award may raise only those grounds that were enumerated under Article V
of the New York Convention, to wit:

Article V

1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked,
only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:

(a) The parties to the agreement referred to in article II were, under the law applicable to them, under some
incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any
indication thereon, under the law of the country where the award was made; or

(b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of
the arbitration proceedings or was otherwise unable to present his case; or

(c) The award deals with a difference not contemplated by or not falling within the terms of the submission to
arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the
decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award
which contains decisions on matters submitted to arbitration may be recognized and enforced; or

(d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the
parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place;
or

(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent
authority of the country in which, or under the law of which, that award was made.

2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country
where recognition and enforcement is sought finds that:

(a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or
(b) The recognition or enforcement of the award would be contrary to the public policy of that country.

Clearly, not one of these exclusive grounds touched on the capacity to sue of the party seeking the recognition and
enforcement of the award.

Pertinent provisions of the Special Rules of Court on Alternative Dispute Resolution,[31] which was promulgated by the
Supreme Court, likewise support this position.

Rule 13.1 of the Special Rules provides that “[a]ny party to a foreign arbitration may petition the court to recognize
and enforce a foreign arbitral award.” The contents of such petition are enumerated in Rule 13.5.[32] Capacity to sue
is not included. Oppositely, in the Rule on local arbitral awards or arbitrations in instances where “the place of
arbitration is in the Philippines,”[33] it is specifically required that a petition “to determine any question concerning the
existence, validity and enforceability of such arbitration agreement” [34] available to the parties before the
commencement of arbitration and/or a petition for “judicial relief from the ruling of the arbitral tribunal on a preliminary
question upholding or declining its jurisdiction”[35] after arbitration has already commenced should state “[t]he facts
showing that the persons named as petitioner or respondent have legal capacity to sue or be sued.” [36]

Indeed, it is in the best interest of justice that in the enforecement of a foreign arbitral award, we deny availment
by the losing party of the rule that bars foreign corporations not licensed to do business in the Philippines from
maintaining a suit in our courts. When a party enters into a contract containing a foreign arbitration clause and,
as in this case, in fact submits itself to arbitration, it becomes bound by the contract, by the arbitration and by the
result of arbitration, conceding thereby the capacity of the other party to enter into the contract, participate in the
arbitration and cause the implementation of the result. Although not on all fours with the instant case, also worthy to
consider is the wisdom of then Associate Justice Flerida Ruth P. Romero in her Dissenting Opinion in Asset
Privatization Trust v. Court of Appeals,[37] to wit:

xxx Arbitration, as an alternative mode of settlement, is gaining adherents in legal and judicial circles here and
abroad. If its tested mechanism can simply be ignored by an aggrieved party, one who, it must be stressed,
voluntarily and actively participated in the arbitration proceedings from the very beginning, it will destroy the very
essence of mutuality inherent in consensual contracts.[38]

Clearly, on the matter of capacity to sue, a foreign arbitral award should be respected not because it is favored over
domestic laws and procedures, but because Republic Act No. 9285 has certainly erased any conflict of law question.

Finally, even assuming, only for the sake of argument, that the court a quo correctly observed that the Model Law, not
the New York Convention, governs the subject arbitral award,[39] petitioner may still seek recognition and enforcement
of the award in Philippine court, since the Model Law prescribes substantially identical exclusive grounds for refusing
recognition or enforcement.[40]

Premises considered, petitioner TPI, although not licensed to do business in the Philippines, may seek recognition
and enforcement of the foreign arbitral award in accordance with the provisions of the Alternative Dispute Resolution
Act of 2004.

II

The remaining arguments of respondent Kingford are likewise unmeritorious.

First. There is no need to consider respondent’s contention that petitioner TPI improperly raised a question of fact
when it posited that its act of entering into a MOA should not be considered “doing business” in the Philippines for the
purpose of determining capacity to sue. We reiterate that the foreign corporation’s capacity to sue in the Philippines
is not material insofar as the recognition and enforcement of a foreign arbitral award is concerned.

Second. Respondent cannot fault petitioner for not filing a motion for reconsideration of the assailed Resolution dated
21 November 2008 dismissing the case. We have, time and again, ruled that the prior filing of a motion for
reconsideration is not required in certiorari under Rule 45.[41]

Third. While we agree that petitioner failed to observe the principle of hierarchy of courts, which, under ordinary
circumstances, warrants the outright dismissal of the case,[42] we opt to relax the rules following the pronouncement
in Chua v. Ang,[43] to wit:

[I]t must be remembered that [the principle of hierarchy of courts] generally applies to cases involving conflicting
factual allegations. Cases which depend on disputed facts for decision cannot be brought immediately before us as
we are not triers of facts.[44] A strict application of this rule may be excused when the reason behind the rule is not
present in a case, as in the present case, where the issues are not factual but purely legal. In these types of
questions, this Court has the ultimate say so that we merely abbreviate the review process if we, because of the
unique circumstances of a case, choose to hear and decide the legal issues outright. [45]

Moreover, the novelty and the paramount importance of the issue herein raised should be seriously considered.[46]
Surely, there is a need to take cognizance of the case not only to guide the bench and the bar, but if only to
strengthen arbitration as a means of dispute resolution, and uphold the policy of the State embodied in the Alternative
Dispute Resolution Act of 2004, to wit:

Sec. 2. Declaration of Policy. - It is hereby declared the policy of the State to actively promote party autonomy in the
resolution of disputes or the freedom of the party to make their own arrangements to resolve their disputes. Towards
this end, the State shall encourage and actively promote the use of Alternative Dispute Resolution (ADR) as an
important means to achieve speedy and impartial justice and declog court dockets. xxx

Fourth. As regards the issue on the validity and enforceability of the foreign arbitral award, we leave its determination
to the court a quo where its recognition and enforcement is being sought.

Fifth. Respondent claims that petitioner failed to furnish the court of origin a copy of the motion for time to file petition
for review on certiorari before the petition was filed with this Court. [47] We, however, find petitioner’s reply in order.
Thus:

26. Admittedly, reference to “Branch 67” in petitioner TPI’s “Motion for Time to File a Petition for Review on Certiorari
under Rule 45” is a typographical error. As correctly pointed out by respondent Kingford, the order sought to be
assailed originated from Regional Trial Court, Makati City, Branch 61.

27. xxx Upon confirmation with the Regional Trial Court, Makati City, Branch 61, a copy of petitioner TPI’s motion
was received by the Metropolitan Trial Court, Makati City, Branch 67. On 8 January 2009, the motion was forwarded
to the Regional Trial Court, Makati City, Branch 61.[48]

All considered, petitioner TPI, although a foreign corporation not licensed to do business in the Philippines, is not, for
that reason alone, precluded from filing the Petition for Confirmation, Recognition, and Enforcement of Foreign
Arbitral Award before a Philippine court.

WHEREFORE, the Resolution dated 21 November 2008 of the Regional Trial Court, Branch 61, Makati City in
Special Proceedings No. M-6533 is hereby REVERSED and SET ASIDE. The case is REMANDED to Branch 61 for
further proceedings.

SO ORDERED.