Antam Consolidated, Inc. vs. Court of Appeals

A foreign corporation not licensed to do business in the Philippines may sue in local courts without first securing a license, provided its transactions in the country are isolated and do not constitute "doing business" as defined by a continuity of commercial dealings in pursuit of the purpose for which it was organized.

Respondent Stokely Van Camp, Inc. is a corporation organized under the laws of Indiana, U.S.A., with its subdivision "Capital City Product Company" based in Columbus, Ohio. It was not licensed to do business in the Philippines. Petitioners Antam Consolidated, Inc., Tambunting Trading Corporation, Aurora Consolidated Securities and Investment Corporation, and United Coconut Oil Mills, Inc. are domestic entities engaged in the exportation of coconut oil, an export item vital to the Philippine economy.

On April 9, 1981, respondent Stokely Van Camp, Inc. filed a complaint for collection of a sum of money against Banahaw Milling Corporation, Antam Consolidated, Inc., Tambunting Trading Corporation, Aurora Consolidated Securities and Investment Corporation, and United Coconut Oil Mills, Inc. Stokely alleged that on August 21, 1978, its subdivision Capital City entered into a contract with Coconut Oil Manufacturing (Phil.) Inc. (Comphil) for the sale and delivery of 500 long tons of crude coconut oil. Comphil failed to deliver, causing Capital City a loss of US$103,600. To settle this loss, the parties entered into a second contract on November 3, 1978, where Comphil was supposed to repurchase the undelivered coconut oil at an increased price, effectively paying the US$103,600 loss. Comphil again failed to pay. A third contract was executed on January 24, 1979, where Comphil was to deliver the coconut oil at a discounted price, with the total discount equivalent to the US$103,600 liability. Comphil failed to deliver once more, prompting Capital City to declare default and claim damages of US$175,000.

Stokely also sought a writ of attachment, alleging that the Tambuntings, who owned Comphil, replaced themselves with employees to change Comphil's name to Banahaw Milling Corporation and dispose of its oil mill to Unicom to evade their obligations. The trial court issued the writ of attachment on April 10, 1981, upon a P1,285,000.00 bond. On June 11, 1981, petitioners filed a motion to dismiss, arguing that Stokely, as an unlicensed foreign corporation doing business in the Philippines, had no personality to sue. The trial court denied the motion on August 10, 1981, reducing the bond to P500,000.00. Petitioners elevated the matter to the Intermediate Appellate Court, which dismissed the petition on June 14, 1982, holding that the trial judge did not commit grave abuse of discretion. The appellate court noted that a related petition by Unicom and Banahaw had already been denied and upheld by the Supreme Court. Petitioners' motion for reconsideration was denied, leading to the present petition for certiorari and prohibition.

• Capacity to Sue: Petitioners argued that the respondent, being a foreign corporation not licensed to do business in the Philippines, has no personality to maintain the suit. They maintained that respondent is doing business in the Philippines because it participated in three transactions either as a seller or buyer, which are in pursuit of the purpose for which it was organized. They argued that the test for doing business is whether there is a continuity of transactions in pursuance of the normal business of the corporation.
• Validity of Attachment: Petitioners contended that the trial court should not have issued the order of attachment because the verification in support of the prayer for attachment was insufficient. They claimed that the person who made the verification, Renato Calma, did not personally know the facts relied upon and merely stated that the allegations were true and correct according to his information and belief.

• Capacity to Sue: Respondent countered that it was not doing business in the Philippines and that invoking lack of capacity to sue is a common ploy by defaulting local companies to evade their obligations to unlicensed foreign companies.
• Validity of Attachment: Respondent argued that the defect in the original verification was cured when Renato Calma subsequently executed an affidavit stating that he verified the allegations from the records of Comphil and the Securities and Exchange Commission.

• Capacity to Sue: Whether a foreign corporation not licensed to do business in the Philippines has the capacity to sue in local courts based on its participation in three transactions.
• Validity of Attachment: Whether the writ of attachment was properly issued despite an allegedly insufficient verification.

• Capacity to Sue: Yes. A foreign corporation not doing business in the Philippines does not need to obtain a license to have the capacity to sue. The three transactions entered into by the respondent were isolated and merely efforts to fulfill a single basic agreement, not a series of commercial dealings indicating an intent to do business.
• Validity of Attachment: Yes. The defect in the original verification was cured by a subsequent affidavit, and the allegations in the complaint satisfactorily justified the issuance of the attachment order.

• Capacity to Sue: The Court applied the test that "doing business" implies a continuity of commercial dealings and arrangements, and the performance of acts normally incident to the progressive prosecution of the purpose of the corporation's organization. The three contracts between Stokely and Comphil were not a series of commercial dealings. The second and third transactions were entered into solely to recover the loss from the first failed delivery and to give the petitioners a chance to make good on their obligation. In reality, there was only one agreement: the delivery of 500 long tons of crude coconut oil. Because the transactions were isolated and did not indicate an intent to engage in a continuity of transactions, Stokely was not "doing business" in the Philippines and thus did not need a license to sue. The doctrine of lack of capacity to sue based on failure to acquire a local license was intended to favor domestic corporations dealing with unwary foreign firms, not to allow defaulting local companies to repudiate obligations simply because the foreign corporation is unlicensed.
• Validity of Attachment: The Court found that the defect in the original verification, which was based on information and belief, was cured when the verifying attorney executed a subsequent affidavit stating that he verified the facts from the records of Comphil and the SEC. Furthermore, the petitioners had the opportunity to oppose the issuance of the writ. The Court also found that the allegations in the complaint satisfactorily justified the issuance of the attachment order, as they detailed a scheme by the petitioners to evade their obligation by disposing of assets.

• Doing Business in the Philippines — The true test of whether a foreign corporation is "doing business" in the Philippines is whether it is continuing the body or substance of the business for which it was organized, implying a continuity of commercial dealings and arrangements, and the performance of acts normally incident to the progressive prosecution of its corporate purpose. A single or isolated business transaction does not constitute doing business unless it indicates the foreign corporation's intention to do other business in the Philippines. In this case, the three transactions were merely efforts to fulfill a single basic agreement and did not indicate an intent to do business, so the foreign corporation was not required to secure a license to sue.
• Capacity to Sue of Unlicensed Foreign Corporations — A foreign corporation not licensed to do business in the Philippines may still maintain a suit in local courts if it is not engaged in business in the Philippines. The requirement to secure a license is based on sound public policy to protect domestic corporations, but it cannot be used by defaulting local companies as a shield to repudiate their obligations to unlicensed foreign firms engaged only in isolated transactions.

• "The true test, however, seems to be whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another." — This passage articulates the canonical test for determining whether a foreign corporation is "doing business" in the Philippines.
• "The doctrine of lack of capacity to sue based on failure to first acquire a local license is based on considerations of sound public policy. It was never intended to favor domestic corporations who enter into solitary transactions with unwary foreign firms and then repudiate their obligations simply because the latter are not licensed to do business in this country." — This explains the policy rationale behind the licensing requirement and prevents its abuse by defaulting domestic entities.

• Top-Weld Manufacturing, Inc. vs. ECED, S.A. — Cited for the principle that there is no general rule as to what constitutes "doing business" and that each case must be judged in light of its peculiar circumstances, distinguishing isolated transactions from continuous business dealings.
• Mentholatum Co. vs. Mangaliman — Cited for the "true test" of doing business, focusing on whether the foreign corporation is continuing the body or substance of the business for which it was organized.
• Eastboard Navigation Ltd. vs. Juan Ysmael and Co., Inc. — Cited to support the ruling that a foreign corporation without a license to transact business in the Philippines has the capacity to bring an action if it is not engaged in business in the country, as isolated transactions do not bar the suit.

Feria (Chairman), Fernan, Cruz, and Paras, JJ., concurred. Justice Alampay took no part.