Deutsche v. CA

Facts: Pursuant to an Agreement entered in 1999 by the Philppines with Germany in furtherance of an-other Agreement entered into by said parties 1971., the German government charged Petitioner Deustche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH, Eschborn, with the implementation of its contributions with SHINE-a project for the maintenance of health and health care of sustainable quality in the Philippines while the Philippines named DOH and PhilHealth for the implementation of SHINE.

Private respondents, were contract employees hired by GTZ to work for SHINE. However, when the new program manager, Anne Nikolay assumed her post, private respondents, became unhappy with her management of the program. Hence, they wrote her a letter raising several issues. At the end of the let-ter, respondents left with these ominous words, “We could no longer find any reason to stay with the project unless ALL of these issues be addressed immediately and appropriately.”

Nikolay wrote private respondents individually in which it states among others: “ You have firmly and unequivocally stated in the last paragraph of your 8th June 2000 letter that you and the five other staff "could no longer find any reason to stay with the project unless ALL of these issues be addressed immedi-ately and appropriately." Under the foregoing premises and circumstances, it is now imperative that I am to accept your resignation, which I expect to receive as soon as possible.”

Respondents clarified that their earlier letter was not intended as a resignation letter. After a series of clarifications and negotiations, each of the private respondents received a letter from Nicolay, informing them of the pre-termination of their contracts of employment on the grounds of "serious and gross in-subordination, among others, resulting to loss of confidence and trust.

Respondents filed a complaint for illegal dismissal against GTZ , the Director of its Manila office Hans Pe-ter Paulenz, its Assistant Project Manager Christian Jahn, and Nicolay before the NLRC.

GTZ filed a Motion to Dismiss on the ground that the Labor Arbiter had no jurisdiction over the case, as its acts were undertaken in the discharge of the governmental functions and sovereign acts of the Gov-ernment of the Federal Republic of Germany.

Issue: Whether GTZ is immune from suit.

Held: No.

The principle of state immunity from suit, whether a local state or a foreign state, is reflected in Section 9, Article XVI of the Constitution, which states that "the State may not be sued without its consent." Who or what consists of "the State"? For one, the doctrine is available to foreign States insofar as they are sought to be sued in the courts of the local State, necessary as it is to avoid "unduly vexing the peace of nations."

Counsel for GTZ characterizes GTZ as "the implementing agency of the Government of the Federal Re-public of Germany," a depiction similarly adopted by the OSG. Assuming that characterization is correct,

it does not automatically invest GTZ with the ability to invoke State immunity from suit. The distinction lies in whether the agency is incorporated or unincorporated. The following lucid discussion from Justice Isagani Cruz is pertinent:

Where suit is filed not against the government itself or its officials but against one of its entities, it must be ascertained whether or not the State, as the principal that may ultimately be held liable, has given its consent to be sued. This ascertainment will depend in the first instance on whether the government agency impleaded is incorporated or unincorporated.

An incorporated agency has a charter of its own that invests it with a separate juridical personality, like the Social Security System, the University of the Philippines, and the City of Manila. By contrast, the un-incorporated agency is so called because it has no separate juridical personality but is merged in the general machinery of the government, like the Department of Justice, the Bureau of Mines and the Gov-ernment Printing Office.

If the agency is incorporated, the test of its suability is found in its charter. The simple rule is that it is suable if its charter says so, and this is true regardless of the functions it is performing. Municipal corpo-rations, for example, like provinces and cities, are agencies of the State when they are engaged in gov-ernmental functions and therefore should enjoy the sovereign immunity from suit. Nevertheless, they are subject to suit even in the performance of such functions because their charter provides that they can sue and be sued.

State immunity from suit may be waived by general or special law. The special law can take the form of the original charter of the incorporated government agency. Jurisprudence is replete with examples of incorporated government agencies which were ruled not entitled to invoke immunity from suit, owing to provisions in their charters manifesting their consent to be sued.

GTZ’s own website elicits that petitioner is "federally owned," a "federal enterprise," and "founded in 1975 as a company under private law." GTZ clearly has a very meaningful relationship with the Federal Republic of Germany, which apparently owns it. At the same time, it appears that GTZ was actually orga-nized not through a legislative public charter, but under private law, in the same way that Philippine cor-porations can be organized under the Corporation Code even if fully owned by the Philippine govern-ment.

This self-description of GTZ in its own official website gives further cause for pause in adopting petition-ers’ argument that GTZ is entitled to immunity from suit because it is "an implementing agency." The above-quoted statement does not dispute the characterization of GTZ as an "implementing agency of the Federal Republic of Germany," yet it bolsters the notion that as a company organized under private law, it has a legal personality independent of that of the Federal Republic of Germany.

It is entirely possible that under German law, an entity such as GTZ or particularly GTZ itself has not been vested or has been specifically deprived the power and capacity to sue and/or be sued. Yet in the pro-ceedings below and before this Court, GTZ has failed to establish that under German law, it has not con-sented to be sued despite it being owned by the Federal Republic of Germany. We adhere to the rule

that in the absence of evidence to the contrary, foreign laws on a particular subject are presumed to be the same as those of the Philippines, and following the most intelligent assumption we can gather, GTZ is akin to a governmental owned or controlled corporation without original charter which, by virtue of the Corporation Code, has expressly consented to be sued. At the very least, like the Labor Arbiter and the Court of Appeals, this Court has no basis in fact to conclude or presume that GTZ enjoys immunity from suit.

US v. Fowler

Facts: The two defendants have been accused of the theft of 16 bottles of champagne of the value of $20, on the 12th August, 1901, while on board the transport Lawton, then navigating the high seas, which said bottles of champagne formed part of the cargo of the said vessel and were the property of Julian Lindsay.

The case was brought before the CFI of Manila. The counsel for defendants opposed and prayed for the dismissal of said case alleging that the Court of First Instance was without jurisdiction to try the crime charged since based on the information, the crime was committed on the high seas and not in the city of Manila or within the territory comprising the Bay of Manila, or upon the seas within the 3-mile limit to which the jurisdiction of the court extends.

However, the prosecuting attorney opposed and alleged that the court has original jurisdiction in all criminal cases in which the penalty exceeds 6 months imprisonment, or a fine of over $100; that, in ac-cordance with the orders of the Military Governor and the Civil Commission admiralty jurisdiction over all crimes committed on board vessel flying the flag of the United States has been vested in the Court of First Instance of the city of Manila. Among other laws and orders he cited the order of August 14, 1898, and Acts Nos. 76 and 186 of the United States Civil Commission. He argued that the President of the United States had unquestionable authority to authorize the commanding general and the Civil Commis-sion to establish a judicial system with authority to take cognizance of maritime and admiralty causes, citing a decision of the Supreme Court of the United States in support of this doctrine, which was appli-cable to this Archipelago, which is now analogous to the status of some of the States of the Union during the Mexican war and the war of secession.

Issue: Whether the CFI of Manila has jurisdiction over the case.

Held: No.

Act No. 136 of the organic law, as well as Act No. 186 passed by the Civil Commission, and which re-pealed the former law, Act No. 76, do not expressly confer jurisdiction or authority upon this court to take cognizance of all crimes committed on board vessels on the high seas. While the provisions of the law are clear and precise with respect to civil admiralty or maritime cases, this is not true with respect to criminal cases. If any doubt could arise concerning the true meaning of the law applicable to the case, Act No. 400 effectively dissipates such doubts.

This law, which is an addition to Act No. 136, by which the courts of justice of the Philippine Islands were organized, in article 1 adds to article 56, consisting of seven paragraphs, another paragraph numbered 8, which reads as follows: "Of all crimes and offenses committed on the high seas or beyond the jurisdic-tion of any country, or within any of the navigable waters of the Philippine Archipelago, on board a ship or water craft of any kind registered or licensed in the Philippine Islands in accordance with the laws thereof." The purpose of this law was to define the jurisdiction of the courts of First Instance in criminal cases for crimes committed on board vessels registered or licensed in the Philippine Islands. The trans-

port Lawton not being a vessel of this class, our courts are without jurisdiction to take cognizance of a crime committed on board the same.

People v. Wong Cheng

Facts: Appellee is accused of having illegally smoked opium, aboard the merchant vessel Changsa of Eng-lish nationality while said vessel was anchored in Manila Bay two and a half miles from the shores of the city.

The demurrer alleged lack of jurisdiction on the part of the lower court, which so held and dismissed the case.

Issue: Whether the Philippine courts have jurisdiction over the case

Held: Yes.

There are two fundamental rules on this particular matter in connection with International Law; to wit, the French rule, according to which crimes committed aboard a foreign merchant vessels should not be prosecuted in the courts of the country within whose territorial jurisdiction they were committed, unless their commission affects the peace and security of the territory; and the English rule, based on the terri-torial principle and followed in the United States, according to which, crimes perpetrated under such cir-cumstances are in general triable in the courts of the country within territory they were committed. Of this two rules, it is the last one that obtains in this jurisdiction, because at present the theories and ju-risprudence prevailing in the United States on this matter are authority in the Philippines which is now a territory of the United States.

We have seen that the mere possession of opium aboard a foreign vessel in transit was held by this court not triable by or courts, because it being the primary object of our Opium Law to protect the in-habitants of the Philippines against the disastrous effects entailed by the use of this drug, its mere pos-session in such a ship, without being used in our territory, does not being about in the said territory those effects that our statute contemplates avoiding. Hence such a mere possession is not considered a disturbance of the public order.

But to smoke opium within our territorial limits, even though aboard a foreign merchant ship, is cer-tainly a breach of the public order here established, because it causes such drug to produce its perni-cious effects within our territory.

US v. Look Chaw

Facts: On August 19, 1909 several persons, including the chief of the department of the port of Cebu and internal-revenue agent of Cebu, went abroad the steamship Erroll to inspect and search its cargo, and found, first in a cabin near the saloon 2 sacks containing cans opium.The hold, in which one of the sacks was found, was under the defendant's control, who moreover, freely and of his own will and ac-cord admitted that this sack, as well as the other one and found in the cabin, belonged to him. The said defendant also stated, freely and voluntarily, that he had bought these sacks of opium, in Hongkong with the intention of selling them as contraband in Mexico or Vera Cruz, and that, as his hold had al-ready been searched several times for opium, he ordered two other Chinamen to keep the sack.

It was found that the steamship Erroll was of English nationality, that it came from Hongkong, and that it was bound for Mexico, via the call ports of Manila and Cebu.

Issue: Whether the CFI of Cebu has jurisdiction over the case

Held: Yes.

Although the mere possession of a thing of prohibited use in these Islands, aboard a foreign vessel in transit, in any of their ports, does not, as a general rule, constitute a crime triable by the courts of this country, on account of such vessel being considered as an extension of its own nationality, the same rule does not apply when the article, whose use is prohibited within the Philippine Islands, in the present case a can of opium, is landed from the vessel upon Philippine soil, thus committing an open violation of the laws of the land, with respect to which, as it is a violation of the penal law in force at the place of the commission of the crime, only the court established in that said place itself had competent jurisdiction, in the absence of an agreement under an international treaty.

M.E. Grey v. Insular

Facts: The defendant was and 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, Occi-dental Negros, in New York and in Philadelphia. The plaintiff was and is the owner and possessor of 6, shares of the capital stock of the defendant corporation, registered in his name in the books. However, he does not own three per cent of the total capital stock of the corporation, nor does he represent stockholders who own three per cent of its capital.

During the years 1932 and 1933, the plaintiff asked the offices of the defendant in Manila and in Fabrica to permit him to examine the books and records of the defendant, but he was not allowed to do so.

Under the law of New York, the rights of a stockholder to examine the books and records of a corpora-tion organized under the laws of that State as provided for in section 77 of the Stock Corporation Law: “Stockholders owning three per centum of the shares of any corporation other than a moneyed corporation may make a written request to the treasurer or other fiscal officer thereof for statement of its affairs, under oath, em-bracing a particular account of all its assets and liabilities, and the treasurer shall make such statement and deliver it to the person making the request within thirty days thereafter, and keep on file in the office of the corporation for twelve months thereafter a copy of such statement, which shall at times during business hours be exhibited to any stockholder demanding an examination thereof...”

Plaintiff-appellant contends, however, that, in accordance with our Corporation Law, under which the defendant company was registered to do business in the Philippines, the plaintiff, as stockholder, is enti-tled 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 Cor-poration Law of New

Issue: Whether plaintiff-appellant is entitled, as stockholder of the defendant-appellee Insular Lumber Company, to inspect and examine the books and records of the transactions of said defendant.

Held: No.

The defendant was and 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. Under the law of New York, the rights of a stockholder to ex-amine the books and records of a corporation organized under the laws of that State, consist in making a written request to the treasurer or other fiscal officer thereof for a statement of its affairs, under oath, embracing a particular account of all its assets and liabilities, and the treasurer shall make such state-ment and deliver it to the person making the request within thirty days thereafter. The plaintiff not be-ing a stockholder owning at least three per cent of the capital stock of the defendant corporation, has no right to examine the books and records of the corporation nor to require a statement of its affairs embracing a particular account of all its assets and liabilities

The appellant has made no effort to prove or even allege that the information he desired to obtain through the examination and inspection of defendant’s 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 curios-ity, nor for speculative or vexatious purposes.

Marshall Wells v. Elser

Facts: Marshall-Wells Company, an Oregon corporation, sued Henry W. Elser & Co., Inc., a domestic cor-poration, in the Court of First Instance of Manila, for the unpaid balance of a bill of goods amounting to P2,660.74, sold by plaintiff to defendant and for which plaintiff holds accepted drafts.

Defendant demurred to the complaint on the statutory ground that the plaintiff has not legal capacity to sue. In the demurrer, counsel stated that "The said complaint does not show that the plaintiff has complied with the laws of the Philippine Islands in that which is required of foreign corporations desiring to do business in the Philippine Islands, neither does it show that it was authorized to do business in the Philippine Islands."

Issue: Whether petitioner has legal capacity to sue in the Philippine courts.

Held: Section 68 of the Corporation Law as amended by Act No. 2900, provides that no foreign corpora-tion "shall be permitted to transact business in the Philippine Islands until after it shall have obtained a license for that purpose from the Chief of the Mercantile Register of the Bureau of Commerce and In-dustry," upon order either of the Secretary of Finance or the Secretary of Commerce and Communica-tions. No order for a license shall be issued except upon a statement under oath of the managing agent of the corporation, showing to the satisfaction of the proper Secretary that the corporation is solvent and in sound financial condition, and setting forth the resources and liabilities of the corporation. Said statement shall contain the following: (1) The name of the corporation; (2) the purpose for which it was organized; (3) the location of its principal or home office; (4) the capital stock of the corporation and the amount thereof actually subscribed and paid into the treasury; (5) the net assets of the corporation over and above all debts, liabilities, obligations, and claims outstanding against it; and (6) the name of an agent residing in the Philippine Islands authorized by the corporation to accept evidence of summons and process in all legal proceedings against the corporation and of all notices affecting the corporation.

Section 69 of the Corporation Law literal terminology is as follows:

No foreign corporation or corporation formed, organized, or existing under any laws other that those of the Philippine Islands shall be permitted to transact business in the Philippine Islands or maintain by it-self or assignee any suit for the recovery of any debt, claim, or demand whatever, unless it shall have the license prescribed in the section immediately preceding.

The object of the statute was to subject the foreign corporation doing business in the Philippines to the jurisdiction of its courts. The object of the statute was not to prevent the foreign corporation from per-forming single acts, but to prevent it from acquiring a domicile for the purpose of business without tak-ing 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 on 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 con-nection with its object, and in connection with the spirit of the entire law. (State vs. American Book Co. [1904], 69 Kan., 1; American De Forest Wireless Telegraph Co. vs. Superior Court of City & County of San Francisco and Hebbard [1908], 153 Cal., 533; 5 Thompson on Corporations, 2d ed., chap. 184.)

Confronted with the option of giving to the Corporation Law a harsh interpretation, which would disas-trously embarrass trade, or of giving to the law a reasonable interpretation, which would markedly help in the development of trade; confronted with the option of barring from the courts foreign litigants with good causes of action or of assuming jurisdiction of their cases; confronted with the option of construing the law to mean that any corporation in the United States, which might want to sell to a person in the Philippine must send some representative to the Islands before the sale, and go through the compli-cated formulae provided by the Corporation Law with regard to the obtaining of the license, before the sale was made, in order to avoid being swindled by Philippine citizens, or of construing the law to mean that no foreign corporation doing business in the Philippines can maintain any suit until it shall possess the necessary license, — confronted with these options, can anyone doubt what our decision will be? The law simply means that no foreign corporation shall be permitted "to transact business in the Philip-pine Islands," as this phrase is known in corporation law, unless it shall have the license required by law, and, until it complies with the law, shall not be permitted to maintain any suit in the local courts. A con-trary holding would bring the law to the verge of unconstitutionality, a result which should be and can be easily avoided. (Sioux Remedy Co. vs. Cope and Cope, supra; Perkins, Philippine Business Law, p. 264.)

Palting vs. San Jose

Facts: On September 7, 1956, SAN JOSE PETROLEUM filed with the SEC a sworn registration statement, for the registration and licensing for sale in the Philippines Voting Trust Certificates representing 2,000,000 shares of its capital stock of a par value of $0.35 a share, at P1.00 per share. It was alleged that the entire proceeds of the sale of said securities will be devoted or used exclusively to finance the operations of San Jose Oil Company, Inc. (a domestic mining corporation) which has 14 petroleum explo-ration concessions covering an area of a little less than 1 million hectares, located in the Philippines. It was the express condition of the sale that every purchaser of the securities shall not receive a stock cer-tificate, but a registered or bearer-voting-trust certificate from the voting trustees named therein James L. Buckley and Austin G.E. Taylor, the first residing in Connecticut, U.S.A., and the second in New York City. While this application for registration was pending consideration by the Securities and Exchange Commission, SAN JOSE PETROLEUM filed an amended Statement on June 20, 1958, for registration of the sale in the Philippines of its shares of capital stock, which was increased from 2 million to 5 million at a reduced offering price of from P1.00 to P0.70 per share. At this time the par value of the shares has also been reduced from $.35 to $.01 per share.1

Pedro R. Palting and others, allegedly prospective investors in the shares of SAN JOSE PETROLEUM, filed with the SEC an opposition to registration and licensing of the securities on the grounds that (1) the tie-up between the issuer, SAN JOSE PETROLEUM, a Panamanian corporation and SAN JOSE OIL, a domestic corporation, violates the Constitution of the Philippines, the Corporation Law and the Petroleum Act of 1949 and the issuer has not been licensed to transact business in the Philippines among others.

Answering the foregoing opposition of Palting, et al., the registrant SAN JOSE PETROLEUM claimed that it was a "business enterprise" enjoying parity rights under the Ordinance appended to the Constitution, which parity right, with respect to mineral resources in the Philippines, may be exercised, pursuant to the Laurel-Langley Agreement, only through the medium of a corporation organized under the laws of the Philippines. Thus, registrant which is allegedly qualified to exercise rights under the Parity Amend-ment, had to do so through the medium of a domestic corporation, which is the SAN JOSE OIL. It refused the contention that the Corporation Law was being violated, by alleging that Section 13 thereof applies only to foreign corporations doing business in the Philippines, and registrant was not doing business here.

Issue: Whether San Jose is entitled to parity rights in the Philippines

Held: No.

The "tie-up" between SAN JOSE OIL on the one hand, and the respondent SAN JOSE PETROLEUM and its associates, on the other. The relationship of these corporations involved or affected in this case is ad-mitted and established through the papers and documents which are parts of the records: SAN JOSE OIL, is a domestic mining corporation, 90% of the outstanding capital stock of which is owned by respondent SAN JOSE PETROLEUM, a foreign (Panamanian) corporation, the majority interest of which is owned by OIL INVESTMENTS, Inc., another foreign (Panamanian) company. This latter corporation in turn is wholly (100%) owned by PANTEPEC OIL COMPANY, C.A., and PANCOASTAL PETROLEUM COMPANY, C.A., both organized and existing under the laws of Venezuela. As of September 30, 1956, there were 9,976 stock-

holders of PANCOASTAL PETROLEUM found in 49 American states and U.S. territories, holding 3,476,988 shares of stock; whereas, as of November 30, 1956, PANTEPEC OIL COMPANY was said to have 3,077,916 shares held by 12,373 stockholders scattered in 49 American state.

Re-stated, the privilege to utilize, exploit, and develop the natural resources of this country was granted, by Article XIII of the Constitution, to Filipino citizens or to corporations or associations 60% of the capital of which is owned by such citizens. With the Parity Amendment to the Constitution, the same right was extended to citizens of the United States and business enterprises owned or controlled directly or indi-rectly, by citizens of the United States.

There could be no serious doubt as to the meaning of the word "citizens" used in the aforementioned provisions of the Constitution. The right was granted to 2 types of persons: natural persons (Filipino or American citizens) and juridical persons (corporations 60% of which capital is owned by Filipinos and business enterprises owned or controlled directly or indirectly, by citizens of the United States). In American law, "citizen" has been defined as "one who, under the constitution and laws of the United States, has a right to vote for representatives in congress and other public officers, and who is qualified to fill offices in the gift of the people. (1 Bouvier's Law Dictionary, p. 490.) A citizen is —

One of the sovereign people. A constituent member of the sovereignty, synonymous with the people." (Scott v. Sandford, 19 Ho. [U.S.] 404, 15 L. Ed. 691.)

A member of the civil state entitled to all its privileges. (Cooley, Const. Lim. 77. See U.S. v. Cruikshank 92 U.S. 542, 23 L. Ed. 588; Minor v. Happersett 21 Wall. [U.S.] 162, 22 L. Ed. 627.)

These concepts clarified, is herein respondent SAN JOSE PETROLEUM an American business enterprise entitled to parity rights in the Philippines? The answer must be in the negative, for the following rea-sons:

Firstly — It is not owned or controlled directly by citizens of the United States, because it is owned and controlled by a corporation, the OIL INVESTMENTS, another foreign (Panamanian) corporation.

Secondly — Neither can it be said that it is indirectly owned and controlled by American citizens through the OIL INVESTMENTS, for this latter corporation is in turn owned and controlled, not by citizens of the United States, but still by two foreign (Venezuelan) corporations, the PANTEPEC OIL COMPANY and PAN-COASTAL PETROLEUM.

Thirdly — Although it is claimed that these two last corporations are owned and controlled respectively by 12,373 and 9,979 stockholders residing in the different American states, there is no showing in the certification furnished by respondent that the stockholders of PANCOASTAL or those of them holding the controlling stock, are citizens of the United States.

Fourthly — Granting that these individual stockholders are American citizens, it is yet necessary to es-tablish that the different states of which they are citizens, allow Filipino citizens or corporations or asso-ciations owned or controlled by Filipino citizens, to engage in the exploitation, etc. of the natural re-

sources of these states (see paragraph 3, Article VI of the Laurel-Langley Agreement, supra). Respondent has presented no proof to this effect.

Fifthly — But even if the requirements mentioned in the two immediately preceding paragraphs are sat-isfied, nevertheless to hold that the set-up disclosed in this case, with a long chain of intervening foreign corporations, comes within the purview of the Parity Amendment regarding business enterprises indi-rectly owned or controlled by citizens of the United States, is to unduly stretch and strain the language and intent of the law. For, to what extent must the word "indirectly" be carried? Must we trace the ownership or control of these various corporations ad infinitum for the purpose of determining whether the American ownership-control-requirement is satisfied? Add to this the admitted fact that the shares of stock of the PANTEPEC and PANCOASTAL which are allegedly owned or controlled directly by citizens of the United States, are traded in the stock exchange in New York, and you have a situation where it be-comes a practical impossibility to determine at any given time, the citizenship of the controlling stock re-quired by the law. In the circumstances, we have to hold that the respondent SAN JOSE PETROLEUM, as presently constituted, is not a business enterprise that is authorized to exercise the parity privileges un-der the Parity Ordinance, the Laurel-Langley Agreement and the Petroleum Law. Its tie-up with SAN JOSE OIL is, consequently, illegal.

State Investment vs. Citybank

Facts: The foreign banks involved in the controversy are Bank of America NT and SA, Citibank N.A. and Hongkong and Shanghai Banking Corporation. On December 11, 1981, they jointly filed with the Court of First Instance of Rizal a petition for involuntary insolvency of Consolidated Mines, Inc. (CMI), which they amended four days later. The petition alleged that that CMI had obtained loans from the three peti-tioning banks and said loans have not been satisfied.

Meanwhile sometime in November 1982, State Investment House, Inc. (SIHI) and State Financing Cen-ter, Inc. (SFCI) had separately instituted actions for collection of sums of money and damages in the CFI of Rizal against CMI and that on application of said plaintiffs, writs of preliminary attachment had been issued which were executed on "the royalty/profit sharing payments due CMI from Benguet Consoli-dated Mining, Inc"

The petition was opposed by State Investment House, Inc. (SIHI) and State Financing Center, Inc. (SFCI) claiming that the Court had no jurisdiction to take cognizance of the petition for insolvency because pe-titioners are not resident creditors of CMI in contemplation of the Insolvency Law among others

Issue: Whether foreign banks licensed to do business in the Philippines, and with branches or offices in the Philippines may be considered "residents of the Philippine Islands" within the meaning of Section 20 of the Insolvency Law

Held: Yes.

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 resi-dent creditors of the Philippines to file a petition to declare a corporation insolvent. The Tax Code de-clares 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 sates 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 distinc-tion between the former ad the latter in so far as the terms “banking institutions” and “banks” are used in said Act.

This Court itself has already had occasion to hold that a foreign corporation licitly doing business in the Philippines, which is a defendant in a civil suit, may not be considered a non-resident within the scope of the legal provision authorizing attachment against a defendant not residing in the Philippine Islands;" in other words, a preliminary attachment may not be applied for and granted solely on the asserted fact that the defendant is a foreign corporation authorized to do business in the Philippines — and is conse-quently and necessarily, "a party who resides out of the Philippines." Parenthetically, if it may not be considered as a party not residing in the Philippines, or as a party who resides out of the country, then, logically, it must be considered a party who does reside in the Philippines, who is a resident of the coun-try.

Obviously, the assimilation of foreign corporations authorized to do business in the Philippines "to the status of domestic corporations," subsumes their being found and operating as corporations, hence, re-siding, in the country.

The same principle is recognized in American law: that the "residence of a corporation, if it can be said to have a residence, is necessarily where it exercises corporate functions . . . ;" that it is .considered as dwelling "in the place where its business is done . . . ," as being "located where its franchises are exer-cised . . . ," and as being "present where it is engaged in the prosecution of the corporate enterprise;" that a "foreign corporation licensed to do business in a state is a resident of any country where it main-tains an office or agent for transaction of its usual and customary business for venue purposes;" and that the "necessary element in its signification is locality of existence." Courts have held that "a domestic corporation is regarded as having a residence within the state at any place where it is engaged in the particulars of the corporate enterprise, and not only at its chief place or home office;" that "a corpora-tion may be domiciled in one state and resident in another; its legal domicil in the state of its creation presents no impediment to its residence in a real and practical sense in the state of its business activi-ties."

The foregoing propositions are in accord with the dictionary concept of residence as applied to juridical persons, a term which appears to comprehend permanent as well as temporary residence.

The Court cannot thus accept the petitioners' theory that corporations may not have a residence (i.e., the place where they operate and transact business) separate from their domicile (i.e., the state of their formation or organization), and that they may be considered by other states as residents only for limited and exclusive purposes. Of course, as petitioners correctly aver, it is not really the grant of a license to a foreign corporation to do business in this country that makes it a resident; the license merely gives le-gitimacy to its doing business here. What effectively makes such a foreign corporation a resident corpo-ration in the Philippines is its actually being in the Philippines and licitly doing business here, "locality of existence" being, to repeat, the "necessary element in . . . (the) signification" of the term, resident cor-poration.

Home Insurance v. Eastern Shipping

Facts: On or about January 13, 1967, S. Kajita & Co., on behalf of Atlas Consolidated Mining & Develop-ment Corporation, shipped on board the SS "Eastern Jupiter' from Osaka, Japan, 2,361 coils of "Black Hot Rolled Copper Wire Rods." The said VESSEL is owned and operated by defendant Eastern Shipping Lines (CARRIER). The shipment was insured with plaintiff against all risks in the amount of P1,580,105.06 un-der its Insurance Policy

The coils discharged from the VESSEL numbered 2,361, of which 53 were in bad order. What the CON-SIGNEE, Phelps Dodge Copper Products Corporation of the Philippines (CONSIGNEE) at Manila ulti-mately received at its warehouse was the same number of 2,361 coils with 73 coils loose and partly cut, and 28 coils entangled, partly cut, and which had to be considered as scrap.

Petitioner-appellant allege that the plaintiff is a foreign insurance company duly authorized to do busi-ness in the Philippines through its agent Mr. Victor M. Bello.

Issue: Whether Home Insurance, has capacity to sue in the Philippine courts

Held: Yes.

When the complaints in these two cases were filed, the petitioner had already secured the necessary li-cense to conduct its insurance business in the Philippines. It could already filed suits.

Our ruling that the lack of capacity at the time of the execution of the contracts was cured by the subse-quent registration is also strengthened by the procedural aspects of these cases.

The petitioner 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. The petitioner sufficiently alleged its capacity to sue. The private respondents countered either with an admission of the plaintiff's jurisdictional averments or with a general denial based on lack of knowledge or information sufficient to form a belief as to the truth of the averments.

Atlantic v. Cebu

Facts: Petitioners 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 defen-dant, a common carrier, undertook to carry a shipment of copra for deliver to Procter & Gamble Com-pany, 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, the sum of P15,980.30; and that as subrogee to the shipper's and/or consignee's rights, plaintiffs demanded, without success, settlement from defendant by reason of its fail-ure to comply with its obligation, as carrier, to deliver the copra in good order.

Defendant moved to dismiss alleging that plaintiffs had "no legal personality to appear before Philippine courts and with no capacity to sue under sec. 69 of the Corporation Law.

Plaintiffs opposed the motion to dismiss; and the trial court, in an order dated June 27, 1960, found the complaint deficient in that it failed to state the plaintiffs were duly licensed to transact business in the Philippines, but gave them an opportunity to amend said complaint.

Issue: Whether petitioners have legal capacity to sue

Held: No.

Appellants' contention is correct as far as it goes. It finds support in the decision written by Mr. Justice Malcolm in Marshall-Wells Co. vs. Elser & Co. where this Court said after analyzing Section 69 of the Cor-poration Law: "The Law simply means that no foreign corporation shall be permitted to transact busi-ness 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," this Court explained in that case, "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 en-tire law."

Insofar as the allegations in the complaint have a bearing on appellants' capacity to sue, all that is averred is that they are both foreign corporations existing under the laws of the United States. This aver-ment conjures two alternative possibilities: either they are engaged in business in the Philippines or they are not so engaged. If the first, they must have been duly licensed in order to maintain this suit; if the second, if the transaction sued upon is singular and isolated, no such license is required. In either case,

the qualifying circumstance is an essential part of the element of plaintiffs' capacity to sue and must be affirmatively pleaded.

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.