MR Holdings, Ltd. vs. Bajar (G.R. No. 138104, April 11, 2002)
FACTS:
On 04 November 1992, a Principal Loan Agreement and Complementary Loan Agreement, was executed between Asian Development Bank (ADB), and Marcopper Mining Corporation (Marcopper) to extend a loan to the latter in the aggregate amount of US$40,000,000.00 to finance the latter’s mining project at Sta. Cruz, Marinduque.
To secure the loan, Marcopper executed in favor of ADB a Deed of Real Estate and Chattel Mortgage covering substantially all of its (Marcoppers) properties and assets in Marinduque.
When Marcopper defaulted in the payment of its loan obligation, Placer Dome [a foreign corporation which owns 40% of Marcopper, which executed a Support and Standby Credit Agreement whereby the latter agreed to provide Marcopper with cash flow support for the payment of its obligations to ADB] in fulfilment of its undertaking assumed Marcopper’s obligation to ADB in the amount of US$ 18,453,450.02.
On December 8, 1997, Marcopper assigns, transfers, cedes and conveys to petitioner, its assigns and/or successors-in-interest all of its (Marcoppers) properties, mining equipment and facilities.
Meanwhile, it appeared that on May 7, 1997, Solidbank Corporation (Solidbank) obtained a Partial Judgment against Marcopper from the RTC, Branch 26, Manila.
Upon Solidbank’s motion, the RTC of Manila issued a writ of execution pending appeal directing Carlos P. Bajar, respondent sheriff, to require Marcopper to pay the sums of money to satisfy the Partial Judgment.
Respondent Bajar issued two notices of levy on Marcoppers personal and real properties, and over all its stocks of scrap iron and unserviceable mining equipment, setting the public auction sale of the levied properties on August 27, 1998 at the Marcopper mine site.
Having learned of the scheduled auction sale, petitioner served an Affidavit of Third-Party Claim upon respondent sheriffs on August 26, 1998, asserting its ownership over all Marcoppers mining properties, equipment and facilities by virtue of the Deed of Assignment.
Upon the denial of its Affidavit of Third-Party Claim by the RTC of Manila, petitioner commenced with the RTC of Boac, Marinduque presided by Judge Leonardo P. Ansaldo which was denied on the ground, among others, that petitioner has no legal capacity to sue, it being a foreign corporation doing business in the Philippines without license.
CA affirmed.
ISSUE:
Whether or not Petitioner has legal capacity to sue and seek redress from Philippine Courts?
RULING:
YES.
The Court of Appeals categorized as doing business petitioners participation under the Assignment Agreement and the Deed of Assignment. This is simply untenable.
At this early stage and with petitioner’s acts or transactions limited to the assignment contracts, it cannot be said that it had performed acts intended to continue the business for which it was organized.
Being a mere assignee does not constitute “doing business” in the Philippines.
MR Holdings, a foreign corporation, cannot be said to be doing business simply because it became an assignee of Marcopper. MR Holdings was not doing anything else other than being a mere assignee.
The only time that MR Holdings is considered to be doing business here is that if it continues the business of Marcopper – which it did not.
Therefore, since it is not doing business here, pursuant to the rules above, it can sue without any license before Philippine courts on an isolated transaction or on a cause of action entirely independent of any business transaction.
Indeed, the Court of Appeals holding that petitioner was determined to be doing business in the Philippines is based mainly on conjectures and speculation.
Absent overt acts of petitioner from which we may directly infer its intention to continue Marcopper’s business, the Court said it cannot give its concurrence.
The Court was convinced that petitioner was engaged only in isolated acts or transactions. Single or isolated acts, contracts, or transactions of foreign corporations are not regarded as a doing or carrying on of business.
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The Court enumerated the principles governing a foreign corporation’s right to sue in local courts as settled in our Corporation Law, to wit:
if a foreign corporation does business in the Philippines without a license, it cannot sue before the Philippine courts;
if a foreign corporation is not doing business in the Philippines, it needs no license to sue before Philippine courts on an isolated transaction or on a cause of action entirely independent of any business transaction; and,
if a foreign corporation does business in the Philippines with the required license, it can sue before Philippine courts on any transaction.
Apparently, it is not the absence of the prescribed license but the doing (of) business in the Philippines without such license which debars the foreign corporation from access to our courts.
The Corporation Code of the Philippines, is silent as to what constitutes doing or transacting business in the Philippines.
Fortunately, jurisprudence has supplied the deficiency and has held that the term implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of, the purpose and object for which the corporation was organized.
Republic Act No. 7042, otherwise known as the Foreign Investment Act of 1991, defines doing business as follows:
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 eight(y) (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. (Emphasis supplied)
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