Cases - Foreign Investment Act
Cases - Foreign Investment Act
1. The ASSIGNEE shall take appropriate steps against any user other
than ASSIGNOR or infringer of the BMW trademark in the Philippines,
for such purpose, the ASSIGNOR shall inform the ASSIGNEE
immediately of any such use or infringement of the said trademark
which comes to his knowledge and upon such information the
ASSIGNOR shall automatically act as Attorney-In-Fact of the ASSIGNEE
for such case, with full power, authority and responsibility to prosecute
unilaterally or in concert with ASSIGNEE, any such infringer of the
subject mark and for purposes hereof the ASSIGNOR is hereby named
and constituted as ASSIGNEE's Attorney-In-Fact, but any such suit
without ASSIGNEE's consent will exclusively be the responsibility and
for the account of the ASSIGNOR,
2. That the ASSIGNOR and the ASSIGNEE shall continue business
relations as has been usual in the past without a formal contract, and
for that purpose, the dealership of ASSIGNOR shall cover the
ASSIGNEE's complete production program with the only limitation that,
for the present, in view of ASSIGNEE's limited production, the latter
shall not be able to supply automobiles to ASSIGNOR.
Per the agreement, the parties "continue[d] business relations as has
been usual in the past without a formal contract." But on February 16,
1993, in a meeting with a BMW representative and the president of
Columbia Motors Corporation (CMC), Jose Alvarez, petitioner was
informed that BMW was arranging to grant the exclusive dealership of
BMW cars and products to CMC, which had expressed interest in
acquiring the same. On February 24, 1993, petitioner received
confirmation of the information from BMW which, in a letter, expressed
dissatisfaction with various aspects of petitioner's business,
mentioning among other things, decline in sales, deteriorating
services, and inadequate showroom and warehouse facilities, and
petitioner's alleged failure to comply with the standards for an
exclusive BMW dealer.[2] Nonetheless, BMW expressed willingness to
continue business relations with the petitioner on the basis of a
"standard BMW importer" contract, otherwise, it said, if this was not
acceptable to petitioner, BMW would have no alternative but to
terminate petitioner's exclusive dealership effective June 30, 1993.
Petitioner protested, claiming that the termination of his exclusive
dealership would be a breach of the Deed of Assignment.[3] Hahn
insisted that as long as the assignment of its trademark and device
subsisted, he remained BMW's exclusive dealer in the Philippines
because the assignment was made in consideration of the exclusive
....
10. In a letter dated February 24, 1993, defendant BMW advised
Plaintiff that it was willing to maintain with Plaintiff a relationship but
only "on the basis of a standard BMW importer contract as adjusted to
reflect the particular situation in the Philippines" subject to certain
conditions, otherwise, defendant BMW would terminate Plaintiff's
exclusive dealership and any relationship for cause effective June 30,
1993. . . .
....
15. The actuations of defendant BMW are in breach of the assignment
agreement between itself and plaintiff since the consideration for the
assignment of the BMW trademark is the continuance of the exclusive
dealership agreement. It thus, follows that the exclusive dealership
should continue for so long as defendant BMW enjoys the use and
ownership of the trademark assigned to it by Plaintiff.
The case was docketed as Civil Case No. Q-93-15933 and raffled to
Branch 104 of the Quezon City Regional Trial Court, which on June 14,
1993 issued a temporary restraining order. Summons and copies of the
complaint and amended complaint were thereafter served on the
private respondent through the Department of Trade and Industry,
pursuant to Rule 14, 14 of the Rules of Court. The order, summons and
copies of the complaint and amended complaint were later sent by the
DTI to BMW via registered mail on June 15, 1993[5] and received by
the latter on June 24, 1993.
On June 17, 1993, without proof of service on BMW, the hearing on the
application for the writ of preliminary injunction proceeded ex parte,
with petitioner Hahn testifying. On June 30, 1993, the trial court issued
an order granting the writ of preliminary injunction upon the filing of a
bond of P100,000.00. On July 13, 1993, following the posting of the
required bond, a writ of preliminary injunction was issued.
On July 1, 1993, BMW moved to dismiss the case, contending that the
trial court did not acquire jurisdiction over it through the service of
summons on the Department of Trade and Industry, because it (BMW)
was a foreign corporation and it was not doing business in the
Philippines. It contended that the execution of the Deed of Assignment
was an isolated transaction; that Hahn was not its agent because the
latter undertook to assemble and sell BMW cars and products without
the participation of BMW and sold other products; and that Hahn was
thereon until after trial on the merit constitutes, to our mind, grave
abuse of discretion.
Petitioner Alfred Hahn opposed the motion. He argued that BMW was
doing business in the Philippines through him as its agent, as shown by
the fact that BMW invoices and order forms were used to document his
transactions; that he gave warranties as exclusive BMW dealer; that
BMW officials periodically inspected standards of service rendered by
him; and that he was described in service booklets and international
publications of BMW as a "BMW Importer" or "BMW Trading Company"
in the Philippines.
....
The trial court[6] deferred resolution of the Motion to dismiss until after
trial on the merits for the reason that the grounds advanced by BMW in
its motion did not seem to be indubitable.
Then, after stating that any ruling which the trial court might make on
the motion to dismiss would anyway be elevated to it on appeal, the
Court of Appeals itself resolved the motion. It ruled that BMW was not
doing business in the country and, therefore, jurisdiction over it could
not be acquired through service of summons on the DTI pursuant to
Rule 14, Section 14. The court upheld private respondent's contention
that Hahn acted in his own name and for his own account and
independently of BMW, based on Alfred Hahn's allegations that he had
invested his own money and resources in establishing BMW's goodwill
in the Philippines and on BMW's claim that Hahn sold products other
than those of BMW. It held that petitioner was a mere indentor or
broker and not an agent through whom private respondent BMW
transacted business in the Philippines. Consequently, the Court of
Appeals dismissed petitioner's complaint against BMW.
Hence, this appeal. Petitioner contends that the Court of Appeals erred
(1) in finding that the trial court gravely abused its discretion in
deferring action on the motion to dismiss and (2) in finding that private
respondent BMW is not doing business in the Philippines and, for this
reason, dismissing petitioner's case.
Petitioner's appeal is well taken. Rule 14, 14 provides:
14. Service upon foreign corporations. If the defendant is a foreign
corporation, or a nonresident joint stock company or association, doing
business in the Philippines, service may be made on its resident agent
designated in accordance with law for that purpose, or, if there be no
such agent, on the government official designated by law to that
effect, or on any of its officers or agents within the Philippines.
(Emphasis added)
What acts are considered "doing business in the Philippines" are
enumerated in 3(d) of the Foreign Investments Act of 1991 (R.A. No.
7042) as follows:[7]
1991 and the IRR, and the trial court did not acquire jurisdiction over it
(BMW).
The Court of Appeals held that petitioner Alfred Hahn acted in his own
name and for his own account and not as agent or distributor in the
Philippines of BMW on the ground that "he alone had contacts with
individuals or entities interested in acquiring BMW vehicles.
Independence characterizes Hahn's undertakings, for which reason he
is to be considered, under governing statutes, as doing business." (p.
13) In support of this conclusion, the appellate court cited the following
allegations in Hahn's amended complaint:
8. From the time the trademark "BMW & DEVICE" was first used by the
Plaintiff in the Philippines up to the present, Plaintiff, through its firm
name "HAHN MANILA" and without any monetary contributions from
defendant BMW; established BMW's goodwill and market presence in
the Philippines. Pursuant thereto, Plaintiff invested a lot of money and
resources in order to single-handedly compete against other
motorcycle and car companies.... Moreover, Plaintiff has built buildings
and other infrastructures such as service centers and showrooms to
maintain and promote the car and products of defendant BMW.
As the above quoted allegations of the amended complaint show,
however, there is nothing to support the appellate court's finding that
Hahn solicited orders alone and for his own account and without
"interference from, let alone direction of, BMW." (p. 13) To the contrary,
Hahn claimed he took orders for BMW cars and transmitted them to
BMW. Upon receipt of the orders, BMW fixed the down payment and
pricing charges, notified Hahn of the scheduled production month for
the orders, and reconfirmed the orders by signing and returning to
Hahn the acceptance sheets. Payment was made by the buyer directly
to BMW. Title to cars purchased passed directly to the buyer and Hahn
never paid for the purchase price of BMW cars sold in the Philippines.
Hahn was credited with a commission equal to 14% of the purchase
price upon the invoicing of a vehicle order by BMW. Upon confirmation
in writing that the vehicles had been registered in the Philippines and
serviced by him, Hahn received an additional 3% of the full purchase
price. Hahn performed after-sale services, including, warranty services,
for which he received reimbursement from BMW. All orders were on
invoices and forms of BMW.[8]
These allegations were substantially admitted by BMW which, in its
petition for certiorari before the Court of Appeals, stated:[9]
9.4. As soon as the vehicles are fully manufactured and full payment of
the purchase prices are made, the vehicles are shipped to the
Philippines. (The payments may be made by the purchasers or thirdpersons or even by Hahn.) The bills of lading are made up in the name
of the purchasers, but Hahn-Manila is therein indicated as the person
to be notified.
9.5. It is Hahn who picks up the vehicles from the Philippine ports, for
purposes of conducting pre-delivery inspections. Thereafter, he
delivers the vehicles to the purchasers.
9.6. As soon as BMW invoices the vehicle ordered, Hahn is credited
with a commission of fourteen percent (14%) of the full purchase price
thereof, and as soon as he confirms in writing, that the vehicles have
been registered in the Philippines and have been serviced by him, he
will receive an additional three percent (3%) of the full purchase prices
as commission.
Contrary to the appellate court's conclusion, this arrangement shows
an agency. An agent receives a commission upon the successful
conclusion of a sale. On the other hand, a broker earns his pay merely
by bringing the buyer and the seller together, even if no sale is
eventually made.
As to the service centers and showrooms which he said he had put up
at his own expense, Hahn said that he had to follow BMW
specifications as exclusive dealer of BMW in the Philippines. According
to Hahn, BMW periodically inspected the service centers to see to it
that BMW standards were maintained. Indeed, it would seem from
BMW's letter to Hahn that it was for Hahn's alleged failure to maintain
BMW standards that BMW was terminating Hahn's dealership.
The fact that Hahn invested his own money to put up these service
centers and showrooms does not necessarily prove that he is not an
agent of BMW. For as already noted, there are facts in the record which
suggest that BMW exercised control over Hahn's activities as a dealer
and made regular inspections of Hahn's premises to enforce
compliance with BMW standards and specifications.[10] For example,
in its letter to Hahn dated February 23, 1996, BMW stated:
In the last years we have pointed out to you in several discussions and
letters that we have to tackle the Philippine market more professionally
and that we are through your present activities not adequately
prepared to cope with the forthcoming challenges.[11]
In effect, BMW was holding Hahn accountable to it under the 1967
Agreement.
This case fits into the mould of Communications Materials, Inc. v. Court
of Appeals,[12] in which the foreign corporation entered into a
"Representative Agreement" and a "Licensing Agreement" with a
domestic corporation, by virtue of which the latter was appointed
"exclusive representative" in the Philippines for a stipulated
commission. Pursuant to these contracts, the domestic corporation
sold products exported by the foreign corporation and put up a service
center for the products sold locally. This Court held that these acts
constituted doing business in the Philippines. The arrangement showed
that the foreign corporation's purpose was to penetrate the Philippine
market and establish its presence in the Philippines.
In addition, BMW held out private respondent Hahn as its exclusive
distributor in the Philippines, even as it announced in the Asian region
that Hahn was the "official BMW agent" in the Philippines.[13]
The Court of Appeals also found that petitioner Alfred Hahn dealt in
other products, and not exclusively in BMW products, and, on this
basis, ruled that Hahn was not an agent of BMW. (p. 14) This finding is
based entirely on allegations of BMW in its motion to dismiss filed in
the trial court and in its petition for certiorari before the Court of
Appeals.[14] But this allegation was denied by Hahn[15] and therefore
the Court of Appeals should not have cited it as if it were the fact.
Indeed this is not the only factual issue raised, which should have
indicated to the Court of Appeals the necessity of affirming the trial
court's order deferring resolution of BMW's motion to dismiss.
Petitioner alleged that whether or not he is considered an agent of
BMW, the fact is that BMW did business in the Philippines because it
sold cars directly to Philippine buyers. [16] This was denied by BMW,
which claimed that Hahn was not its agent and that, while it was true
that it had sold cars to Philippine buyers, this was done without
solicitation on its part.[17]
It is not true then that the question whether BMW is doing business
could have been resolved simply by considering the parties' pleadings.
There are genuine issues of facts which can only be determined on the
basis of evidence duly presented. BMW cannot short circuit the process
on the plea that to compel it to go to trial would be to deny its right not
to submit to the jurisdiction of the trial court which precisely it denies.
Rule 16, 3 authorizes courts to defer the resolution of a motion to
dismiss until after the trial if the ground on which the motion is based
does not appear to be indubitable. Here the record of the case bristles
with factual issues and it is not at all clear whether some allegations
correspond to the proof.
issued by the trial court. Although the injunction was issued ex parte,
the fact is that BMW was subsequently heard on its defense by filing a
motion to dismiss.
WHEREFORE, the decision of the Court of Appeals is REVERSED and the
case is REMANDED to the trial court for further proceedings.
SO ORDERED.
from 1 January to 30 June 1990 at the price of $44 per metric ton. The
contract provides that petitioner would open a Letter of Credit with the
Bank of Philippine Islands. Under the "red clause" of the Letter of
Credit, NMC was permitted to draw up to $500,000 representing the
minimum price of the contract upon presentation of some documents.
The contract was amended three times: first, on 11 January 1990,
increasing the purchase price of the molasses to $47.50 per metric
ton;3 second, on 18 June 1990, reducing the quantity of the molasses
to 10,500 metric tons and increasing the price to $55 per metric ton;4
and third, on 22 August 1990, providing for the shipment of 5,250
metric tons of molasses on the last half of December 1990 through the
first half of January 1991, and the balance of 5,250 metric tons on the
last half of January 1991 through the first half of February 1991.5 The
third amendment also required NMC to put up a performance bond
equivalent to $451,500, which represents the value of 10,500 metric
tons of molasses computed at $43 per metric ton. The performance
bond was intended to guarantee NMCs performance to deliver the
molasses during the prescribed shipment periods according to the
terms of the amended contract.
In compliance with the terms of the third amendment of the contract,
respondent Intra Strata Assurance Corporation (respondent) issued on
10 October 1990 a performance bond6 in the sum of P11,287,500 to
guarantee NMCs delivery of the 10,500 tons of molasses, and a surety
bond7 in the sum of P9,978,125 to guarantee the repayment of
downpayment as provided in the contract.
NMC was only able to deliver 219.551 metric tons of molasses out of
the agreed 10,500 metric tons. Thus, petitioner sent demand letters to
respondent claiming payment under the performance and surety
bonds. When respondent refused to pay, petitioner filed on 12 April
1991 a complaint8 for sum of money against NMC and respondent.
Petitioner, NMC, and respondent entered into a compromise
agreement,9 which the trial court approved in its Decision10 dated 13
December 1991. The compromise agreement provides that NMC would
pay petitioner P3,000,000 upon signing of the compromise agreement
and would deliver to petitioner 6,991 metric tons of molasses from 1631 December 1991. However, NMC still failed to comply with its
obligation under the compromise agreement. Hence, trial proceeded
against respondent.
On 23 November 1994, the trial court rendered a decision, the
dispositive portion of which reads:
Republic Act No. 7042 (RA 7042), otherwise known as the Foreign
Investments Act of 1991, which repealed Articles 44-56 of Book II of
the Omnibus Investments Code of 1987, enumerated not only the acts
or activities which constitute "doing business" but also those activities
In the case at bar, the transactions entered into by the respondent with
the petitioners are not a series of commercial dealings which signify an
intent on the part of the respondent to do business in the Philippines
but constitute an isolated one which does not fall under the category of
"doing business." The records show that the only reason why the
respondent entered into the second and third transactions with the
petitioners was because it wanted to recover the loss it sustained from
the failure of the petitioners to deliver the crude coconut oil under the
first transaction and in order to give the latter a chance to make good
on their obligation. x x x
x x x The three seemingly different transactions were entered into by
the parties only in an effort to fulfill the basic agreement and in no way
indicate an intent on the part of the respondent to engage in a
continuity of transactions with petitioners which will categorize it as a
foreign corporation doing business in the Philippines.17
Similarly, in this case, petitioner and NMC amended their contract
three times to give a chance to NMC to deliver to petitioner the
molasses, considering that NMC already received the minimum price of
the contract. There is no showing that the transactions between
petitioner and NMC signify the intent of petitioner to establish a
continuous business or extend its operations in the Philippines.
The Implementing Rules and Regulations of RA 7042 provide under
Section 1(f), Rule I, that "doing business" does not include the following
acts:
1. Mere investment as a shareholder by a foreign entity in domestic
corporations duly registered to do business, and/or the exercise of
rights as such investor;
2. Having a nominee director or officer to represent its interests in such
corporation;
3. Appointing a representative or distributor domiciled in the
Philippines which transacts business in the representative's or
distributor's own name and account;
4. The publication of a general advertisement through any print or
broadcast media;
5. Maintaining a stock of goods in the Philippines solely for the purpose
of having the same processed by another entity in the Philippines;
6. Consignment by a foreign entity of equipment with a local company
to be used in the processing of products for export;
7. Collecting information in the Philippines; and
clause" Letter of Credit from which said amount was drawn. The Head
of the International Operations Department of the Bank of Philippine
Islands testified that the bank would not have paid the beneficiary if
the required documents were not complete. It is a requisite in a
documentary credit transaction that the documents should conform to
the terms and conditions of the letter of credit; otherwise, the bank will
not pay. The Head of the International Operations Department of the
Bank of Philippine Islands also testified that they received
reimbursement from the issuing bank for the $500,000 withdrawn by
NMC.25 Thus, respondent had no legitimate reason to refuse payment
under the performance and surety bonds when NMC failed to perform
its part under its contract with petitioner.
WHEREFORE , we GRANT the petition. We REVERSE the Decision dated
26 May 2005 of the Court of Appeals in CA-G.R. CV No. 48447. We
REINSTATE the Decision dated 23 November 1994 of the trial court.
SO ORDERED.
The juridical relation among the various parties in this case can be
traced to a 5-year Value Added Assembly Services Agreement
("VAASA"), entered into on April 2, 1996 between Integrated Silicon
and the Hewlett-Packard Singapore (Pte.) Ltd., Singapore Components
Operation ("HP-Singapore").4 Under the terms of the VAASA, Integrated
Silicon was to locally manufacture and assemble fiber optics for export
to HP-Singapore. HP-Singapore, for its part, was to consign raw
materials to Integrated Silicon; transport machinery to the plant of
Integrated Silicon; and pay Integrated Silicon the purchase price of the
finished products.5 The VAASA had a five-year term, beginning on April
2, 1996, with a provision for annual renewal by mutual written
consent.6 On September 19, 1999, with the consent of Integrated
Silicon,7 HP-Singapore assigned all its rights and obligations in the
VAASA to Agilent.8
FIRST DIVISION
G.R. No. 154618
IV.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN
ORDERING THE DISMISSAL OF CIVIL CASE NO. 323-2001-C BELOW
INSTEAD OF ORDERING IT CONSOLIDATED WITH CIVIL CASE NO. 31102001-C.19
The two primary issues raised in this petition: (1) whether or not the
Court of Appeals committed reversible error in giving due course to
respondents petition, notwithstanding the failure to file a Motion for
Reconsideration of the September 4, 2001 Order; and (2) whether or
not the Court of Appeals committed reversible error in dismissing Civil
Case No. 3123-2001-C.
We find merit in the petition.
The Court of Appeals, citing the case of Malayang Manggagawa sa
ESSO v. ESSO Standard Eastern, Inc.,20 held that the lower court had
no jurisdiction over Civil Case No. 3123-2001-C because of the
pendency of Civil Case No. 3110-2001-C and, therefore, a motion for
reconsideration was not necessary before resort to a petition for
certiorari. This was error.
Jurisdiction is fixed by law. Batas Pambansa Blg. 129 vests jurisdiction
over the subject matter of Civil Case No. 3123-2001-C in the RTC.21
The Court of Appeals ruling that the assailed Order issued by the RTC
of Calamba, Branch 92, was a nullity for lack of jurisdiction due to litis
pendentia and forum shopping, has no legal basis. The pendency of
another action does not strip a court of the jurisdiction granted by law.
II.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN
ANNULLING AND SETTING ASIDE THE TRIAL COURTS ORDER DATED 4
SEPTEMBER 2001 AND ORDERING THE DISMISSAL OF CIVIL CASE NO.
3123-2001-C BELOW ON THE GROUND OF LITIS PENDENTIA, ON
ACCOUNT OF THE PENDENCY OF CIVIL CASE NO. 3110-2001-C.
III.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN
ANNULLING AND SETTING ASIDE THE TRIAL COURTS ORDER DATED 4
SEPTEMBER 2001 AND ORDERING THE DISMISSAL OF CIVIL CASE NO.
3123-2001-C BELOW ON THE GROUND OF FORUM SHOPPING, ON
ACCOUNT OF THE PENDENCY OF CIVIL CASE NO. 3110-2001-C.
(b) identity of rights asserted and reliefs prayed for, the reliefs being
founded on the same facts; and
(c) the identity in the two cases should be such that the judgment that
may be rendered in one would, regardless of which party is successful,
amount to res judicata in the other.28
Likewise, the fact that the positions of the parties are reversed, i.e., the
plaintiffs in the first case are the defendants in the second case or vice
versa, does not negate the identity of parties for purposes of
determining whether the case is dismissible on the ground of litis
pendentia.31
The identity of parties notwithstanding, litis pendentia does not obtain
in this case because of the absence of the second and third requisites.
The rights asserted in each of the cases involved are separate and
distinct; there are two subjects of controversy presented for
adjudication; and two causes of action are clearly involved. The fact
that respondents instituted a prior action for "Specific Performance and
Damages" is not a ground for defeating the petitioners action for
"Specific Performance, Recovery of Possession, and Sum of Money with
Replevin, Preliminary Mandatory Injunction, and Damages."
In Civil Case No. 3110-2001-C filed by respondents, the issue is
whether or not there was a breach of an oral promise to renew of the
VAASA. The issue in Civil Case No. 3123-2001-C, filed by petitioner, is
whether petitioner has the right to take possession of the subject
properties. Petitioners right of possession is founded on the ownership
of the subject goods, which ownership is not disputed and is not
contingent on the extension or non-extension of the VAASA. Hence, the
replevin suit can validly be tried even while the prior suit is being
litigated in the Regional Trial Court.
Possession of the subject properties is not an issue in Civil Case No.
3110-2001-C. The reliefs sought by respondent Integrated Silicon
The true test [for doing business], however, seems to be whether the
foreign corporation 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.
Sec. 3, par. (d). The phrase "doing business" shall include soliciting
orders, service contracts, opening offices, whether called "liaison"
offices or branches; appointing representatives or distributors
domiciled in the Philippines or who in any calendar year stay in the
country for a period or periods totaling one hundred eighty (180) days
or more; participating in the management, supervision or control of
any domestic business, firm, entity, or corporation in the Philippines;
and any other act or acts that imply a continuity of commercial
dealings or arrangements, and contemplate to that extent the
performance of acts or works, or the exercise of some of the functions
normally incident to, and in the progressive prosecution of, commercial
gain or of the purpose and object of the business organization.
An analysis of the relevant case law, in conjunction with Section 1 of
the Implementing Rules and Regulations of the FIA (as amended by
Republic Act No. 8179), would demonstrate that the acts enumerated
in the VAASA do not constitute "doing business" in the Philippines.