*February 25 Pril Lecture

PLACE OF INCORPORATION - applicable law in RP
X:
1. Times of war - pierced corporate veil to see who controls the corporation (determines the policy of the corporation)
2. Statutory and constitutional limitations
-areas of public interest reserved to Filipinos
PALTING CASE: application of grandfather rule (but not really much help, principle of reasonableness was actually used to rule ifo of Palting) GRANDFATHER RULE: look at subsequent ownership to determine who controls the corporation
HERE: reasonable extent was used
*difficulty: reasonableness subjective
NEDA: looks at WON a corporation has been used as a vehicle to circumvent restrictions of the constitution
JURISDICTION OVER FOREIGN CORPORATIONS
Are all foreign corporation allowed to sue in RP? NO
Foreign corporation allowed to sue:
GR: if licensed to do business
X:
*purpose of license requirement: establish existence of the corporation in RP
-allows the state to regulate the conduct of states in RP and to allow only corporation which had complied with its restrictions to access our courts?
-simply for RP courts to acquire jurisdiction over the foreign corporation
HOME INSURANCE COMPANY V. EASTERN SHIPPING
F: HIC, though no license yet, entered a contract with domestic corporations for insurance of its goods. Because it was not paid, it sued before RTC courts (and now has acquired license in RP).
H: Subsequent acquisition of license in RP cured the defect of the contract entered w/o license
-registration requirement only affects the capacity to sue, not the capacity to contract
*object of acquiring license: for the courts to acquire jurisdiction of foreign corporations
Exceptions to the license requirement:
1. Isolated transactions
2. Protection of TM through filing of unfair competition
3. Transactions outside RP
4. Petition merely corollary defense
ISOLATED TRANSACTIONS
-occassional, incidental, casual
-not of a character to indicate purpose to engage in business
EASTBOARD NAVIGATION V. JUAN YSMAEL
F: Eastboard, a Toronto based corporation, sues Juan Ysmael. JYC alleged Eastboard no license to do business in RP
H: NO license required if only isolated instances
*not required that it be only 1 transaction
ACTION TO PROTECT TRADEMARK, TRADE NAME, GOODWILL, PATENT FOR UNFAIR COMPETITION
-even w/o license to sue
LEVITON INDUSTRIES V. SALVADOR
F: Leviton Intl sues Leviton Industries for unfair competition (uses Leviton's Int'l's TM for its products).
H: If suing for unfair competition, foreign corp should still allege in its complaint the condition precedent in RA 166 (owner/user of TM + comity)
*old decision: now IP Code does not require that the foreign corporation is a registered TM holder in RP
*why we allow it now: protect its name, property right…goodwill protected
AGREEMENTS FULLY TRANSACTED OUTSIDE RP
Ratio: policy of stablizing commercial transactions
UNIVERSAL SHIPPING LINES V. IAC: otherwise, our country would be a heaven for unprincipled businessmen
HANG LUNG BANK V. SAULOG
F: Chinese corporation transacted w/ RP corporation in HK. But since RP Corporation did not comply with agreement, Chinese corporation sued RP Corporation in RP. MTD: no capacity to sue but denied
H: GR is that foreign corporation should first obtain license in RP to sue;
X: if the transaction based on was transacted "WHOLLY or FULLY" outside RP (don't leave it out!)
Ratio: growth and development of business relations between Filipinos and foreign nationals
….or else, we would be allowing law to serve as a protective shield for unscrupulous Filipinos
PETITION IS MERELY A COROLLARY DEFENSE IN A SUIT AGAINST IT
DEFINITION OF TRANSACTING BUSINESS IN RP
--see Foreign Business Registration Act and Foreign Investments Act of 1991
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 foreignentity 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.
Effect of failure to secure license
*penal sanctions
*can be sued but cannot sue
TOP WELD MANUFACTURING V. ECED
F: foreign corporation initially wanted to procure business with Top Weld, a domestic corportion. When foreign corporation was about to breach its contract with Top Weld so the latter sued foreign corporation not to transact with other corporations, or else it was dealing or doing business w/o a license.
H: In pari delicto. Top Weld knew that foreign corporation had no license.
MERRIL LYNCH FUTURES INC (MLFI) V. CA
F: Lara spouses contracted with MLFI but owed the corporation so MLFI sued them. MTD based on no capacity to sue.
H: Even if no license and doing business in RP, Lara spouses are now estopped from denying corporate existence of the corporation
*so what's the difference bet Top Weld and MLFI?  

TOP WELD	MLFI
In pari delicto	Corporation by estoppel
But here, none was able to recover	Foreign corporation was allowed to recover

*so SC Inconsistent!!!!
CRITICISM about estoppel rule: Foreign corporation allowed to recover even if it should not have been granted relief by the RP Court
---so is there even corporation by estoppel in MLFI?
Both parties knew that MLFI did not have license in RP
So Lara's can't now alleged that it is not okay with them that MLFI did not have license
*trend today though is corporation by estoppel
FOR A FOREIGN CORPORATION TO BE DOING BUSINESS IN RP, IS IT REQUIRED TO HAVE ENTERED INTO MORE THAN ONE TRANSACTION?
NO. rule is that even if the corporation has merely transacted an isolated transaction, if that transaction is not casual (it is w/n their normal course of business) + intent to establish business in RP = doing business
SPECIAL CORPORATIONS
1. RELIGIOUS SOCIETES AND THE CORPORATION SOLE: A corporation composed of a single entity
-how to determine nationality
Ung Siu Si Temple: nationality of controlling SH; the community who is the beneficiary of the corporation sole
ROMAN CATHOLIC APOSTOLIC ADMINISTRATOR of DAVAO: the community who is the beneficiary of the corporation sole - not the nationality of the incumbent
*but if control test used, the incumbent who holds the money in trust is a foreigner so the corporation sole would have had a nationality of the foreigner
*Ma'am: it should not be automatic - would depend