General Corporation of the Philippines vs. Union Insurance Society of Canton

A foreign corporation actually doing business in the Philippines, regardless of whether it has obtained the required license to do so, is subject to the jurisdiction of local courts, and service of summons upon any agent of such corporation constitutes personal service upon the corporation under Section 14, Rule 7 of the Rules of Court.

The case addresses the jurisdictional question of whether a foreign insurance corporation may be sued in Philippine courts when it was actually engaged in business in the country but had not yet secured the necessary governmental authorization and license at the time summons was served. It clarifies the distinction between foreign corporations lawfully doing business under the Corporation Law and those actually but perhaps illegally doing business, and the applicable rules on service of summons for each.

• Plaintiffs General Corporation of the Philippines and Mayon Investment Co. are domestic corporations with principal offices in Manila.
• Defendant Union Insurance Society of Canton, Ltd. is a foreign insurance corporation authorized to do business in the Philippines with a branch office in Manila.
• Defendant Fireman's Fund Insurance Co. is a foreign insurance corporation organized under California law; it was registered and authorized to do business in the Philippines only on November 7, 1946.
• Union Insurance Society of Canton, Ltd. acted as settling agent for Fireman's Fund Insurance Co. before the war and continued as such up to at least November 7, 1946.
• Fireman's Fund issued twelve marine insurance policies covering merchandise shipped from the United States to the Philippines in 1945, made payable in Manila and endorsed in blank.
• The original bills of lading and insurance policies were sent to Hongkong & Shanghai Banking Corporation in Manila with instructions to surrender documents upon full payment of the invoice price.
• Plaintiffs claimed they paid the invoice price to the bank, received the shipping papers including the policies, and were authorized by the shipper to prosecute the case.
• Upon arrival, some merchandise was lost or damaged; claims for eleven policies were forwarded to Fireman's Fund in Seattle, approved by the company, but later adjudicated by the Superior Court of Washington against the plaintiffs (res adjudicata).
• Claim for policy No. 70448/6 (Exhibit E-2) was filed late, not forwarded to Seattle, and neither approved nor disapproved by Union Insurance in Manila.
• Summons for Fireman's Fund was served on Union Insurance (as settling agent) on September 12, 1946, when Fireman's Fund had not yet been authorized to do business.
• On September 25, 1946, Union Insurance moved to quash the summons, claiming no authority to receive service for Fireman's Fund; the trial court denied the motion on October 18, 1946.
• Fireman's Fund obtained license to do business on November 7, 1946, and subsequently participated in the trial by filing answers, motions, cross-examining witnesses, and presenting evidence.

• Fireman's Fund Insurance Co. contended that the trial court erred in acquiring jurisdiction because at the time of service of summons (September 12, 1946), it was not yet registered or authorized to do business in the Philippines, having obtained such authority only on November 7, 1946.
• It argued that Union Insurance Society of Canton, Ltd. had no authority to accept service of summons on its behalf.
• It maintained that Section 68 of the Corporation Law requires service only upon an agent residing in the Philippines and authorized by the corporation to accept service, which prerequisites were absent.
• It asserted that plaintiffs had no interest in the insurance policy, having received the same merely for collection.
• It claimed that plaintiffs' claim was never approved by appellant or its settling agent, and that the evidence was insufficient to support the claim for loss.

• Respondents (plaintiffs/appellees) argued that Fireman's Fund was actually doing business in the Philippines through its settling agent, Union Insurance, prior to obtaining formal license.
• They maintained that service of summons upon the settling agent was valid under Section 14, Rule 7 of the Rules of Court, which makes no distinction between licensed and unlicensed foreign corporations.
• They contended that Fireman's Fund engaged in continuous business activities in the Philippines, evidenced by multiple policies issued, the appointment of a settling agent, and the subsequent application for license.
• They asserted that plaintiffs had insurable interest because they paid the invoice price and received the properly endorsed policies.
• They argued that the defense of lack of jurisdiction was a mere technicality, waived by Fireman's Fund's subsequent participation in the proceedings after obtaining its license.

• Procedural Issues:
  • Whether the trial court acquired jurisdiction over Fireman's Fund Insurance Co. when service of summons was made upon its settling agent on September 12, 1946, prior to its registration and authorization to do business on November 7, 1946.
  • Whether service of summons upon Union Insurance Society of Canton, Ltd. as settling agent constituted valid personal service upon Fireman's Fund Insurance Co.
• Substantive Issues:
  • Whether Fireman's Fund Insurance Co. was "doing business" in the Philippines within legal contemplation at the time of service of summons.
  • Whether the plaintiffs possessed insurable interest in the policy sufficient to authorize them to sue.
  • Whether the evidence presented sufficiently proved the loss or damage claimed under policy No. 70448/6.

• Procedural:
  • The Supreme Court held that the trial court validly acquired jurisdiction over Fireman's Fund Insurance Co.
  • Section 14, Rule 7 of the Rules of Court applies to foreign corporations "doing business in the Philippines" without distinguishing whether such business is conducted legally with a license or illegally without one.
  • Service upon any agent of a foreign corporation doing business in the jurisdiction constitutes personal service upon the corporation.
  • The defense of lack of jurisdiction was deemed a technicality, especially considering that Fireman's Fund subsequently obtained a license on November 7, 1946, and actively participated in the trial without objecting to jurisdiction.
• Substantive:
  • The Court ruled that Fireman's Fund was doing business in the Philippines: it engaged in continuous conduct (issuing multiple marine insurance policies covering shipments to the Philippines, made payable in Manila, with a settling agent appointed to receive and settle claims), indicating an intention to establish continuous business rather than merely isolated transactions.
  • The Court held that plaintiffs had insurable interest: they paid the invoice price, received the endorsed policy, and were authorized by the shipper to prosecute the claim.
  • The Court found the evidence insufficient to support the claim for loss of eleven cases (shortlanding) due to lack of certificates from the steamship agent, but sufficient to prove damage to four cases valued at $635.50.
  • The decision was modified to reduce the award from $2,000 to $635.50 (or its Philippine currency equivalent), with legal interest from September 12, 1946.

• Doing Business Without a License — A foreign corporation actually engaging in business in the Philippines is subject to the jurisdiction of local courts regardless of whether it has obtained the required governmental license. The test is the actual engagement in business, not the possession of a license; otherwise, foreign corporations could evade liability by refusing to obtain licenses.
• Service of Summons on Foreign Corporations (Section 14, Rule 7) — Service of summons upon any officer or agent of a foreign corporation doing business in the Philippines is valid personal service upon the corporation itself. This rule applies whether the corporation is licensed (under Section 68 of the Corporation Law) or unlicensed.
• Isolated Transaction vs. Doing Business — A single or isolated business transaction does not constitute "doing business." There must be continuity of conduct and intention to establish a continuous business, such as the appointment of a local agent for regular transactions.
• Res Adjudicata — A foreign judgment (from the Superior Court of Washington) on the same claims and parties constitutes res adjudicata and is binding on the parties in subsequent local proceedings.

• "Section 14, Rule 7 of the Rules of Court above quoted in employing the phrase 'doing business in the Philippines' makes no distinction as to whether said business was being done or engaged in legally with the corresponding authority and license of the Government or, perhaps illegally, without the benefit of any such authority or license."
• "As long as a foreign private corporation does or engages in business in this jurisdiction, it should and will be amenable to process and the jurisdiction of the local courts, this for the protection of the citizens, and service upon any agent of said foreign corporation constitutes personal service upon the corporation."
• "It would indeed be anomalous and quite prejudicial, even disastrous, to the citizens in this jurisdiction who in all good faith and in the regular course of business accept and pay for shipments of good from America, relying for their protection on duly executed foreign marine insurance policies made payable in Manila... that when they go to court to enforce said policies, the insurer... serenely pleads immunity to local jurisdiction because of its refusal or neglect to obtain the corresponding license to do business here."
• "In order that a foreign corporation may be regarded as doing business within a State, there must be continuity of conduct and intention to establish a continuous business, such as the appointment of a local agent, and not one of a temporary character."

• Section 14, Rule 7 of the Rules of Court — Governs service upon private foreign corporations doing business in the Philippines; held applicable to both licensed and unlicensed foreign corporations actually doing business, allowing service on any resident agent, government official, or officer/agent within the Philippines.
• Section 68 of the Corporation Law — Governs service upon foreign corporations licensed to do business in the Philippines through their designated resident agents; distinguished from Section 14, Rule 7 and held inapplicable to corporations without license.
• First paragraph of the policy, Exhibit E-2 — Cited regarding the "loss payable" clause and the extent of coverage insuring the shipper and assigns.