Signetics Corporation vs. Court of Appeals

A foreign corporation may be sued and validly summoned in Philippine courts when the complaint sufficiently alleges that the corporation is doing business in the Philippines; the fact of doing business need only be established by appropriate allegations in the complaint, not by proof, at the motion to dismiss stage. Jurisdiction cannot be made to depend on independent pleas set up in a mere motion to dismiss, as this would render jurisdiction dependent almost entirely upon the defendant.

Signetics Corporation was organized under the laws of the United States of America. Through Signetics Filipinas Corporation (SigFil), a wholly-owned domestic subsidiary, Signetics entered into a lease contract over a piece of land with Fruehauf Electronics Phils., Inc. SigFil later underwent a change in ownership and corporate identity, becoming TEAM Pacific Corporation. The dispute centers on whether Philippine courts could acquire jurisdiction over Signetics, a foreign corporation, through service of summons effected on TEAM Pacific Corporation as its alleged agent in the Philippines.

Signetics Corporation, a foreign corporation organized under the laws of the United States of America, became interested in engaging in business in the Philippines in 1978. To serve as its local business conduit, Signetics organized a wholly-owned domestic subsidiary, Signetics Filipinas Corporation (SigFil), which was intended to be its actual operating entity in the Philippines. Through SigFil, Signetics entered into a lease contract over a piece of land with Fruehauf Electronics Phils., Inc. The lease contract contained a cost-free transfer provision, but Signetics allegedly caused SigFil to insert the words "machineries, equipment and accessories" into the contract, thereby withdrawing these assets from the cost-free transfer provision.

In February 1983, Signetics ceased all its business operations in the leased premises. On November 21, 1986, Signetics transferred all shares of stock of SigFil in favor of TEAM Holdings Limited, a foreign corporation organized under the laws of the British Virgin Islands. Subsequently, on January 12, 1987, the new owners changed SigFil's corporate name to Technology Electronics Assembly and Management (T.E.A.M.) Pacific Corporation, otherwise known as TEAM Pacific Corporation. Fruehauf alleged that the similarity between "TEAM Holdings Limited" and "TEAM Pacific Corporation" was apparent and that Signetics made a devious use of the fiction of separate corporate identity to shield chicanery and perpetuate fraud.

On March 15, 1990, Freuhauf sued Signetics for damages, accounting or return of certain machinery, equipment and accessories, as well as the transfer of title and surrender of possession of the buildings, installations and improvements on the leased land, before the Regional Trial Court of Pasig, Metro Manila. On the basis of the allegation that Signetics may be served summons at Philips Electrical Lamps, Inc. in Las Piñas and/or c/o TEAM Pacific Corporation at the FTI Complex in Taguig, service of summons was made on Signetics through TEAM Pacific Corporation. Signetics, by special appearance, filed a motion to dismiss on the ground of lack of jurisdiction over its person, contending that it had ceased to do business in the Philippines and that the fact of doing business must first be established before summons could be validly served. The trial court denied the motion, applying the rule that a foreign corporation not doing business in the Philippines may still be sued for acts done against persons in the Philippines. Signetics' motion for reconsideration was likewise denied.

• Proof Required for Doing Business: Petitioner argued that the averments in the complaint are at best mere allegations and do not constitute proof of "doing business," and that the phrase "becoming interested in doing business" is not actual doing of business in the Philippines.
• Insufficient Allegations: Petitioner contended that what was effectively only alleged in the complaint as an activity of doing business was the mere equity investment of petitioner in SigFil, which had theretofore been transferred to TEAM Holdings, Ltd.
• Obiter Dicta: Petitioner maintained that the pronouncements in Wang Laboratories and Facilities Management Corporation are mere obiter dicta, since the foreign corporations involved in both cases were found to have, in fact, been doing business in the Philippines and were thus unquestionably amenable to local court processes.
• Misapplication of Pacific Micronisian: Petitioner relied on the Pacific Micronisian rule that the fact of doing business must first be established before summons can be made and jurisdiction acquired, interpreting "established" to require proof rather than mere allegation.

• Jurisdiction over Foreign Corporation: Whether the lower court, given the factual allegations in the complaint, correctly assumed jurisdiction over the petitioner, a foreign corporation, on its claim in a motion to dismiss that it had since ceased to do business in the Philippines.
• Proof vs. Allegation of Doing Business: Whether a foreign corporation can be sued in the Philippines and validly summoned by a Philippine court without prior "proof" that it was doing business here at the time of the suit, or whether sufficient allegations in the complaint suffice.

• Jurisdiction over Foreign Corporation: Yes. The lower court correctly assumed jurisdiction. Jurisdiction over a foreign corporation is initially determined by the allegations of the complaint, and the defense that the corporation has ceased doing business requires contravention of those allegations and ventilation of the merits, which is beyond the province of a motion to dismiss.
• Proof vs. Allegation of Doing Business: No, proof is not required at the motion to dismiss stage. The fact of doing business must be established by appropriate allegations in the complaint; jurisdiction cannot be made to depend on independent pleas set up in a mere motion to dismiss.

• Jurisdiction over Foreign Corporation: Jurisdiction and venue of actions are initially determined by the allegations of the complaint. Jurisdiction cannot be made to depend on independent pleas set up in a mere motion to dismiss, otherwise jurisdiction would become dependent almost entirely upon the defendant. The fact of doing business must, in the first place, be established by appropriate allegations in the complaint. This is what the Court meant in the Pacific Micronisian case. The complaint, although vaguely structured, was not fatally deficient when its allegations were taken correlatively rather than disjunctively. The complaint alleged that Signetics became interested in engaging in business in the Philippines, organized SigFil as its local business conduit, entered into a lease contract through SigFil involving properties in the Philippines, and later transferred its shareholdings in a manner suggesting fraud and corporate veil manipulation. These allegations sufficiently conveyed that TEAM Pacific was the business conduit of the petitioner and, by the charge of fraud, was none other than the petitioner itself. The petitioner's filing of a "Manifestation" regarding the motion to sell attached properties further reflected an interest in property which petitioner claimed was not its own, undermining its position. The defense that petitioner's only involvement was a passive investment in SigFil, which it later disposed of, requires contravention of the complaint's allegations and full ventilation of the merits, which should not be within the province of a mere motion to dismiss.
• Proof vs. Allegation of Doing Business: The petitioner's reliance on the phrase in Pacific Micronisian that the fact of doing business "must first be established" was interpreted to mean that the fact must be established by appropriate allegations in the complaint, not by proof. The Court distinguished Hyopsung Maritime Co., Ltd. vs. Court of Appeals, where the complaint was for recovery of damages based on a contract entirely entered into, executed, and consummated in Korea, with the vessel never docking at any Philippine port and no ship agent appointed in the Philippines. In contrast, the complaint here alleged acts done in the Philippines involving Philippine properties. The Court also noted that even a foreign corporation not engaged in business in the Philippines may be sued for acts done against persons in the Philippines, provided court processes can reach it. The issue of whether a foreign corporation that has ceased doing business can still be made to answer for a cause of action that accrued while it was doing business would await the reception and admission of evidence.

• Jurisdiction Determined by Allegations of the Complaint — Jurisdiction and venue of actions are initially determined by the allegations of the complaint. Jurisdiction cannot be made to depend on independent pleas set up in a mere motion to dismiss, otherwise jurisdiction would become dependent almost entirely upon the defendant. Applied here to hold that the fact of a foreign corporation doing business in the Philippines need only be sufficiently alleged in the complaint, not proven, at the motion to dismiss stage.
• Service of Summons on Foreign Corporation Doing Business — Under Section 14, Rule 14 of the Rules of Court, service of summons upon a foreign corporation doing business in the Philippines may be made on its resident agent, or if there be no such agent, on the government official designated by law, or on any of its officers or agents within the Philippines. The term "agent" refers to its general meaning, i.e., one who acts on behalf of a principal, and need not necessarily be a "resident agent designated in accordance with law." Applied here to uphold service of summons on TEAM Pacific Corporation as the alleged agent of Signetics.
• Suing a Foreign Corporation Not Doing Business — A foreign corporation, although not engaged in business in the Philippines, may be sued in Philippine courts for acts done against a person or persons in the Philippines, provided it would not be impossible for court processes to reach the foreign corporation. Applied here as an alternative ground supporting the trial court's jurisdiction.
• Piercing the Veil of Corporate Fiction — Where a foreign corporation organizes a domestic subsidiary as its local business conduit and later transfers its shareholdings in a manner suggesting fraud and manipulation of corporate identity, the complaint's allegations of fraud sufficiently invoke the doctrine of piercing the veil of corporate fiction, allowing service of summons on the subsidiary as the corporation's agent.

• "Jurisdiction cannot be made to depend on independent pleas set up in a mere motion to dismiss, otherwise jurisdiction would become dependent almost entirely upon the defendant." — This passage articulates the ratio decidendi that jurisdiction is determined by the complaint's allegations, not by defenses raised in a motion to dismiss, preventing defendants from controlling the court's jurisdiction.
• "The fact of doing business must then, in the first place, be established by appropriate allegations in the complaint. This is what the Court should be seen to have meant in the Pacific Micronisian case." — This clarifies the Pacific Micronisian ruling, establishing that "established" means sufficiently alleged in the complaint, not proven by evidence at the motion to dismiss stage.
• "a foreign corporation, although not engaged in business in the Philippines, may still look up to our courts for relief; reciprocally, such corporation may likewise be 'sued in Philippine courts for acts done against a person or persons in the Philippines' provided that, in the latter case, it would not be impossible for court processes to reach the foreign corporation" — This restates the rule that jurisdiction over non-business foreign corporations is proper for acts done against persons in the Philippines, subject to the practical limitation of effective service and execution of judgment.

• Pacific Micronisian Line, Inc. vs. Del Rosario and Pelington, 96 Phil. 23 (1954) — Controlling precedent on service of summons upon foreign corporations doing business in the Philippines. The Court clarified that the requirement that the fact of doing business "must first be established" means it must be alleged in the complaint, not proven by evidence at the motion to dismiss stage.
• Wang Laboratories, Inc. vs. Mendoza, G.R. No. 72147, December 1, 1987, 156 SCRA 44 — Followed. Cited for the rule that a foreign corporation not doing business in the Philippines may still be sued for acts done against persons in the Philippines, and for the definition of what constitutes "doing business."
• Facilities Management Corporation vs. De la Osa, L-38649, March 26, 1979, 89 SCRA 131 — Followed. Cited for the proposition that a foreign corporation not doing business in the Philippines may be sued for acts done against persons in the Philippines.
• Hyopsung Maritime Co., Ltd. vs. Court of Appeals, G.R. No. 77369, August 31, 1988, 165 SCRA 258 — Distinguished. Although it cited Pacific Micronisian and dismissed the complaint for lack of jurisdiction, the factual milieu was completely different: the contract was entirely entered into and consummated in Korea, the vessel never docked in the Philippines, and no ship agent was appointed locally.
• Notre Dame de Lourdes Hospital vs. Mallare-Phillips, G.R. No. 96630, May 15, 1991, 197 SCRA 187 — Cited for the rule that jurisdiction and venue of actions are initially determined by the allegations of the complaint.
• Commart (Phils.) Inc. vs. Securities and Exchange Commission, G.R. No. 85318, June 3, 1991, 198 SCRA 73 — Cited for the proposition that jurisdiction cannot be made to depend on independent pleas set up in a mere motion to dismiss.

• Section 14, Rule 14, Rules of Court — Governs service of summons upon private foreign corporations doing business in the Philippines. Provides three modes of service: (1) on the resident agent designated in accordance with law; (2) if no such agent, on the government official designated by law; or (3) on any of its officers or agents within the Philippines. The Court clarified that the term "agent" refers to its general meaning — one who acts on behalf of a principal — and need not be a resident agent specifically designated by law.
• Section 17, Rule 14, Rules of Court — Governs extraterritorial service of summons. The Court noted that the situation involving the lease contract over properties in the Philippines could have allowed Freuhauf to avail itself of this provision, since the relief sought consists in excluding the defendant from any interest in property within the Philippines.

Bidin, Romero, and Melo, JJ., concurred. Feliciano, J., took no part.