Top-Weld Manufacturing vs. ECED, S.A. (138 SCRA 118 [1985]) > Pari Delicto Doctrine
FACTS
Petitioner Top-weld Manufacturing, Inc. (Top-weld) is a Philippine corporation engaged in the business of manufacturing and selling welding supplies and equipment.
The petitioner entered into separate contracts with two different foreign entities. One contract, entitled a "LICENSE AND TECHNICAL ASSISTANCE AGREEMENT" was entered into with IRTI, S.A., (IRTI), a corporation organized and existing under the laws of Switzerland with principal office at Fribourg, Switzerland.
The other contract was a "DISTRIBUTOR AGREEMENT" dated January 1, 1975 entered into with ECED, S.A., (ECED), a company organized and existing under the laws of Panama with principal office at Apartado 1903, Panama I, City of Panama.
Upon learning that the two foreign entities were negotiating with another group to replace the petitioner as their licensee and distributor, the latter instituted on June 16, 1975, Civil Case against IRTI, ECED, another corporation named EUTECTIC Corporation, organized under the laws of the State of New York, U.S.A., and an individual named Victor C. Gaerlan, a Filipino citizen alleged to be the representative and employee of these three corporations.
On June 17, 1975, the lower court issued a restraining order against the corporation pending the hearing on the issuance of a writ of preliminary injunction.
On July 25,1975, IRTI and ECED wrote Top-weld separate notices about the termination of their respective contracts.
On September 3,1975, Top-weld filed an amended complaint together with a supplemental complaint which embodied a new application for a preliminary mandatory injunction to compel ECED to ship and deliver various items covered by the distributorship contract, and to prohibit the corporations from importing into the Philippines directly or indirectly any EUTECTIC materials, supplies or equipment except to and/or through the petitioner.
On October 9, 1975, the trial court issued an order granting the petitioner's application for preliminary injunction and its application for a writ of mandatory preliminary injunction embodied in the supplemental complaint,
The corporations filed with the trial court a motion for reconsideration. DENIED.
On appeal, CA set aside the questioned orders.
ISSUE:
Whether or not respondent corporations can be considered as "doing business" in the Philippines and, therefore, subject to the provisions of R.A. No. 5455.
WoN the principle of in pari delicto can be applied in this case.
HELD:
YES. There is no dispute that respondents are foreign corporations not licensed to do business in the Philippines. More important, however, there is no serious objection interposed by the respondents as to their amenability to the jurisdiction of our courts.
There is no general rule or governing principle laid down as to what constitutes "doing" or engaging in" or "transacting" business in the Philippines. Each case must be judged in the light of its peculiar circumstances. (Mentholatum Co. V. Mangaliman, 72 Phil. 524).
When the respondents entered into the disputed contracts with the petitioner, they were carrying out the purposes for which they were created, i.e. to manufacture and market welding products and equipment. The terms and conditions of the contracts as well as the respondents' conduct indicate that they established within our country a continuous business, and not merely one of a temporary character. This fact is even more strengthened by the admission of the respondents that they are negotiating with another group for the transfer of the distributorship and franchising rights from the petitioner.
Respondents' acts enabled them to enter into the mainstream of our economic life in competition with our local business interests. This necessarily brings them under the provisions of R.A. No. 5455.
The Court upheld the appellate court's finding that "IRTI AND ECED were doing business and engaging in economic activity in the Philippines ... as a prerequisite to which they should have first secured a written certificate from the Board of Investments."
YES. The parties are charged with knowledge of the existing law at the time they enter into the contract and at the time it is to become operative. (Twiehaus v. Rosner, 245 SW 2d 107; Hall v. Bucher, 227 SW 2d 98).
Moreover, a person is presumed to be more knowledgeable about his own state law than his alien or foreign contemporary.
In this case, the record shows that, at least, petitioner had actual knowledge of the applicability of R.A. No. 5455 at the time the contract was executed and at all times thereafter. This conclusion is compelled by the fact that the same statute is now being propounded by the petitioner to bolster its claim.
The Court, therefore, sustained the appellate court's view that "it was incumbent upon TOP-WELD to know whether or not IRTI and ECED were properly authorized to engage in business in the Philippines when they entered into the licensing and distributorship agreements."
The very purpose of the law was circumvented and evaded when the petitioner entered into said agreements despite the prohibition of R.A. No. 5455.
The parties in this case being equally guilty of violating R.A, No. 5455, they are in pari delicto, in which case it follows as a consequence that petitioner is not entitled to the relief prayed for in this case.
In Bough v. Cantiveros (40 Phil. 210): "The rule of pari delicto is expressed in the maxims "ex dolo malo non eritur actio" and "in pari delicto potior est conditio defedentis." The law will not aid either party to an illegal agreement. It leaves the parties where it finds them."
No remedy could be afforded to the parties because of their presumptive knowledge that the transaction was tainted with illegality. (Soriano v. Ong Hoo, 103 Phil. 829). Equity cannot lend its aid to the enforcement of an alleged right claimed by virtue of an agreement entered into in contravention of law.
Petition DISMISSED. CA Decision AFFIRMED.
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