Agilent Technologies Singapore vs. Integrated Silicon Technology Philippines Corp.

A foreign corporation without a license to do business in the Philippines is not per se incapacitated from maintaining a suit; incapacity attaches only when the foreign corporation is actually "doing business" in the country, which requires a continuity of commercial dealings and arrangements for profit-making purposes. Acts such as consigning equipment to a local company for processing products for export, and maintaining a stock of goods solely for such processing, do not constitute "doing business" under Section 3(d) of the Foreign Investments Act of 1991 and its Implementing Rules.

The case stems from a dispute over a Value Added Assembly Services Agreement (VAASA) between Integrated Silicon Technology Philippines Corporation (a domestic corporation) and Agilent Technologies Singapore (Pte.) Ltd. (a foreign corporation), which was assigned the rights of the original contracting party, Hewlett-Packard Singapore (Pte.) Ltd. The VAASA involved the local manufacture and assembly of fiber optics for export. When the agreement expired, Integrated Silicon alleged an oral promise to extend it and filed suit for specific performance. Agilent, in turn, filed a separate action for replevin to recover equipment and materials left in Integrated Silicon's plant, leading to conflicting claims and procedural maneuvering between the parties.

• Petitioner Agilent Technologies Singapore (Pte.) Ltd. is a foreign corporation admitted to be not licensed to do business in the Philippines.
• Respondent Integrated Silicon Technology Philippines Corporation is a 100% foreign-owned domestic corporation engaged in manufacturing and assembling electronics components.
• On April 2, 1996, Integrated Silicon entered into a 5-year Value Added Assembly Services Agreement (VAASA) with Hewlett-Packard Singapore (Pte.) Ltd. (HP-Singapore), whereby Integrated Silicon would manufacture and assemble fiber optics for export to HP-Singapore.
• Under the VAASA, HP-Singapore consigned raw materials to Integrated Silicon, transported machinery to the latter's plant, and paid the purchase price for finished products.
• On September 19, 1999, HP-Singapore assigned all its rights and obligations under the VAASA to Agilent with the consent of Integrated Silicon.
• On May 25, 2001, Integrated Silicon filed Civil Case No. 3110-01-C for Specific Performance and Damages against Agilent, alleging breach of an oral agreement to extend the VAASA.
• On July 2, 2001, Agilent filed Civil Case No. 3123-2001-C against Integrated Silicon and its directors for Specific Performance, Recovery of Possession, Sum of Money with Replevin, Preliminary Mandatory Injunction, and Damages, seeking the return of its equipment, machineries, and materials.
• Respondents alleged that Agilent was doing business in the Philippines without a license through: (1) entering into the VAASA; (2) appointing a full-time representative to oversee production; (3) appointing six full-time staff members stationed at Integrated Silicon's facilities to inspect finished goods; and (4) participating in the management, supervision, and control of Integrated Silicon (including instructing hiring, performing quality audits, inventory audits, and dictating production schedules).

• The Court of Appeals committed reversible error in not dismissing respondents' petition for certiorari for failure to file a Motion for Reconsideration before resorting to the extraordinary remedy.
• The Court of Appeals erred in annulling the RTC Order and dismissing Civil Case No. 3123-2001-C on the ground of litis pendentia, arguing that the rights asserted and reliefs sought in the two pending cases were separate and distinct.
• The Court of Appeals erred in ordering dismissal on the ground of forum shopping.
• The Court of Appeals should have ordered consolidation of the cases instead of dismissal.
• Agilent is not "doing business" in the Philippines and therefore has legal capacity to sue despite not having a license.

• A Motion for Reconsideration was not necessary before filing certiorari due to urgent necessity and because the RTC Order was allegedly a nullity for lack of jurisdiction caused by litis pendentia.
• Litis pendentia exists between Civil Case No. 3110-2001-C and 3123-2001-C because there is identity of parties, rights asserted, and reliefs prayed for.
• Forum shopping exists as the two cases involve the same parties and subject matter.
• Agilent is doing business in the Philippines without a license through various activities including entering into the VAASA, appointing representatives to oversee production, inspecting finished goods, and participating in the management and control of Integrated Silicon's operations, thereby lacking legal capacity to sue under Section 133 of the Corporation Code.

• Procedural Issues:
  • Whether respondents' failure to file a Motion for Reconsideration of the RTC Order dated September 4, 2001 before filing a petition for certiorari was fatal to their petition.
  • Whether the Court of Appeals committed reversible error in giving due course to respondents' petition despite the procedural lapse.
• Substantive Issues:
  • Whether litis pendentia exists between Civil Case No. 3110-2001-C (filed by respondents) and Civil Case No. 3123-2001-C (filed by petitioner).
  • Whether forum shopping exists between the two cases.
  • Whether petitioner Agilent, as an unlicensed foreign corporation, has the legal capacity to sue in Philippine courts, or whether it is "doing business" in the Philippines without a license.

• Procedural:
  • The Court held that the failure to file a Motion for Reconsideration was fatal. The rule requires filing a Motion for Reconsideration before certiorari, and none of the recognized exceptions (patent nullity of the order, urgency of the case, or where issues would become moot) were present.
  • The pendency of another action (litis pendentia) does not strip a court of jurisdiction granted by law; therefore, the RTC had jurisdiction, and the order was not a nullity that would justify bypassing the Motion for Reconsideration.
  • The Court of Appeals committed reversible error in taking cognizance of the petition.
• Substantive:
  • Litis Pendentia: The Court ruled that litis pendentia does not obtain. While there is substantial identity of parties, the second and third requisites are absent. The rights asserted are separate and distinct: the first case concerns an alleged oral promise to extend the VAASA, while the second concerns the right to possession of equipment and materials based on ownership (replevin). The reliefs prayed for are different, and judgment in one would not constitute res judicata in the other.
  • Forum Shopping: Forum shopping does not exist because the elements of litis pendentia are absent, and a final judgment in one case would not amount to res judicata in the other.
  • Legal Capacity to Sue/Doing Business: The Court held that Agilent is NOT "doing business" in the Philippines. Under the Foreign Investments Act of 1991 and its Implementing Rules, "doing business" implies continuity of commercial dealings and profit-making. The Court cited specific exemptions under the FIA IRR: (1) maintaining a stock of goods solely for processing by another entity, and (2) consignment of equipment to be used in processing products for export. Agilent's activities fell squarely within these exemptions. Therefore, as a foreign corporation not doing business in the Philippines, it needed no license to sue.

• Doctrine of Estoppel to Deny Corporate Existence — A party who has entered into a contract with a foreign corporation and received benefits therefrom is estopped from later challenging that corporation's legal capacity or existence. The Court noted this doctrine applies to foreign corporations but found it unnecessary to apply because Agilent was not doing business in the first place.
• Substance Test for Doing Business — The test of whether a foreign corporation is doing business is whether it is continuing the body of the business or enterprise for which it was organized, or whether it has substantially retired from it and turned it over to another.
• Continuity Test for Doing Business — 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 of its organization.
• Litis Pendentia — A ground for dismissal requiring: (a) identity of parties; (b) identity of rights asserted and reliefs prayed for founded on the same facts; and (c) identity such that judgment in one would amount to res judicata in the other.
• Forum Shopping — Exists where the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in the other.

• "A foreign corporation without a license is not ipso facto incapacitated from bringing an action in Philippine courts. A license is necessary only if a foreign corporation is 'transacting' or 'doing business' in the country."
• "The term [doing business] 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 or in progressive prosecution of the purpose and subject of its organization."
• "By and large, to constitute 'doing business', the activity to be undertaken in the Philippines is one that is for profit-making."

• Mentholatum Co., Inc. v. Mangaliman — Cited for the definition of "doing business" (substance and continuity tests).
• Merrill Lynch Futures, Inc. v. Court of Appeals — Cited for the doctrine of estoppel and the principle that doing business requires continuity of dealings.
• Commissioner of Internal Revenue v. Japan Airlines — Cited as an example where continuity of commercial dealings (selling tickets, promotions office) constituted doing business.
• General Corporation of the Philippines v. Union Insurance Society of Canton — Cited for the principle that appointing a settling agent and issuing multiple insurance policies manifests continuity of business.
• Eriks PTE Ltd. v. Court of Appeals — Cited for the principle that repeated transactions (16 orders in 8 months) indicate doing business.
• Communication Materials and Design, Inc. v. Court of Appeals and Top-Weld Manufacturing v. ECED — Cited for the principle that highly restrictive agreements reducing the local entity to a mere extension of the foreign corporation indicate doing business.
• Buan v. Lopez — Cited for the test to determine forum shopping.
• Northcott & Co. v. Villa-Abrille — Cited for the requisites of litis pendentia.
• Malayang Manggagawa sa ESSO v. ESSO Standard Eastern, Inc. — Cited by the Court of Appeals but distinguished by the Supreme Court; the SC held that pendency of another action does not divest a court of jurisdiction.

• Corporation Code, Section 133 — Prohibits foreign corporations doing business without a license from maintaining any action in Philippine courts.
• Foreign Investments Act of 1991 (Republic Act No. 7042), Section 3(d) — Defines "doing business" as including soliciting orders, service contracts, opening offices, appointing representatives, participating in management, and any act implying continuity of commercial dealings for profit.
• Implementing Rules and Regulations of the FIA (as amended by Republic Act No. 8179), Section 1 — Enumerates acts not deemed "doing business," specifically: (a) maintaining a stock of goods solely for processing by another entity; and (b) consignment of equipment with a local company to be used in processing products for export.
• Batas Pambansa Blg. 129, Section 19 — Vests jurisdiction over the subject matter in the Regional Trial Court.