Procedimientos de actuación ante emergencias

FACTUAL SITUATION POINT OF CONTACT

Powers and Liabilities General Rule: the law of the place of incorporation

Exceptions:

• For constitutional purposes – even if the corporation was incorporated in the Phil., it is not deemed a Filipino corporation and therefore cannot acquire land, exploit our natural resources and perate public utilities unless 60% of capital is Filipino owned

• For wartime purposes – we pierce the corporation veil and go to the nationality of the controlling stockholders to determine if the corporation is an enemy (control test)

Formation of the Corporation

(requisites): kind of stocks, transfer of stocks to bind corporation, issuance, amount and legality and dividends and duties of members, stockholders and officers

law of the place of incorporation

Validity of corporate acts and

contracts (including ultra vires acts) law of the place of incorporation and law of the place of performance (the act or contract must be authorized by both laws)

Right to sue and amenability to court

processes and suits against it law of the place of incorporation provided that the public policy of the

forum is not militated against

Domicile If not fixed by the law creating or recognizing the corporation or by any other provision – the domicile is where its legal representation is established or where it exercises its principal functions (Article 15)

Receivers (appointment and powers) Principal receiver is appointed by the courts of the state of incorporation;

ancillary receivers, by the courts of any state where the corporation has assets (authority is co-extensive) with the authority of the appointing

Personal law of corporations

The personal law of a corporation is the law of the State where it is incorporated. Since a corporation is an artificial being created by law, it possesses only the rights and powers conferred upon in its charter. Hence, if the law creating the corporation does not give authority to enter into certain contracts, such contracts made by it in another state shall e void despite the express permission given by the laws of that other state.

Matters where the personal law of the corporation governs:

1. Requisites for formation of the corporation and its legal character 2. Capacity and powers of the corporation; note: however two requisites

should be asked in determining the legal effect of an act of a corporation: (a) is the corporation authorized by its charter to do the particular act? (b) is this act permitted by the law of the place where the act is done

3. Kinds of stocks allowed and transfer of stocks in a way that would be binding on the corporation

4. Issuance, amount and legality of dividends

5. The internal organization of the corporate enterprise, the rights and liabilities of shareholders, members, directors, officers, their relation inter se and stockholders’ participation in the management and in the profits

6. Alteration or modification of the charter and the dissolution of the corporation

M.E. GRAY v. INSULAR LUMBER CO.

67 Phil 139

FACTS : Defendant Corporation is a corporation organized under the laws of New York and is licensed to engage business in the Philippines to which plaintiff is a stockholder. However, plaintiff M.E. Gray does not own 3% of the total capital stock nor does he represent stockholders who own 3% of its capital. Plaintiff asked the corporation to let him examine its books but the corporation refused on the ground that under New York laws, only stockholder owning at least 3% of the total capital stock are entitled to such right. Plaintiff contends that under the Philippine law, he is entitled to examine the books of the corporation to which he is a stockholder.

ISSUE : Whether or not Philippine law shall govern in this case giving the plaintiff the right to examine the books of the corporation.

HELD : No. The stipulation of facts is binding upon the parties and cannot be altered by either of them.The plaintiff is bound to adhere the agreement made by him with the defendant corporation because the personal law of the corporation is the law of the State where it is incoporated.The defendant is a corporation under New York law licensed to do business in the Philippines. Under the laws of New York, the rights of a stockholder to examine the books of corporation organized under

being a stockholder owning at least 3% of the capital stocks of the defendant corporation has no right to examine its books and records nor to require a statement of its affairs.

Exceptions to the rule of incorporation test a. Constitutional and Statutory Restrictions

•A state, if it sees fit, may by legislation exclude a foreign corporation altogether, subject to constitutional limitations or prescribe any conditions it may see fit as prerequisite to the corporation’s right to do business within its territory.

PALTING v. SAN JOSE PETROLEUM INC.

18 SCRA 924

FACTS : San Jose Petroleum, a Panamanian Corporation filed with the Philippine SEC a sworn registration statement for the registration and licensing for sale in the Philippine Voting Trust Certificates representing 2M shares of its capital stock with a par value of $0.35 a share at P1.00. allegedly, the entire proceeds of the sale will be devoted exclusively to finance the operations of San Jose Oil, Co.

Inc., a domestic mining corporation. Petitioner Plating anf others, who were prospective investors in the shares of respondent corporation opposed on such registration and licensing on the ground that the tie-up between the issuer San Jose Petroleum Oil, Investment, a Panamanian corporation and San Jose Oil, a domestic corporation violates the Philippine Constitution that “the privilege to

utilize, exploit, and develop our natural resources was granted to corporation 60% of its capital stock belongs to Filipino with parity rights granted to the US citizen. Respondent corporation contends that it was an American business enterprise entitled to parity rights in the Philippines as embodied in the Laurel-Langley agreement.

ISSUE : Whether or not San Jose Petroleum, an American business enterprise is entitled to parity rights in the Philippines.

HELD : No. Respondent corporation was not owned and controlled directly by the citizens of the US because it was owned and controlled by a corporation organized in Panorama. Neither it was indirectly owned and controlled by American citizens through Oil Investment , for the latter was owned and controlled by two Venezuelan corporation. The tie-up violates the constitution.

Granting arguendo that these individual stockholders are American citizens, it is necessary to establish that the different status of which they are stockholders are citizens, allow Filipino citizens, or corporation or association owned and controlled by Filipino citizens to engage in the exploitation of the natural resources of said states.

b. Control Test during the war

• In wartime, the courts may pierce the veil of corporate identity and look into the nationality of the controlling stockholders to determine the “citizenship” of the corporation

FILIPINAS COMPANIA DE SEGUROS v. CHRISTERN HUENEFELD 89 Phil 54

FACTS : Christern Huenefeld & Co., Inc. obtained from petitioner fire insurance in the sum of P100,000 covering merchandise contained in a building in Binondo Manila. In 1942, during the Japanese military occupation, the building and insured merchandise were burned. The total loss was fixed at P92,650.00. At first, the

petitioner refused to pay the claim, however in pursuance of the order of the Director of the Philippine Executive Commission, it paid to the respondent the said amount of loss. The petitioner then filed in the CFI of Manila for recovery of the amount it paid to respondent on the gound that the policy issued in 1941 had ceased to be effective because of the outbreak of the war between the U.S. and Germany and that the payment made by the petitioner to respondent corporation during the Japanese military occupation was under pressure.

ISSUE : Whether or not petitioner is entitled to recover what was paid to respondent.

HELD : Yes. In wartime, the courts may pierce the veil of corporate identity and look into the nationality of the controlling stockholders to determine the citizenship of the corporation. Under Phil. Insurance Law in Sec. 8 provides that “any one except a public enemy may be insure“. An insurance policy ceases to be allowable as soon as an insured becomes a public enemy. The respondent having become an enemy corporation on December 10, 1941, the insurance policy issued in its favor by the petitioner, a Philippine corporation had ceased to be valid and enforceable. Hence, the petitioner is entitled to recover what was paid to the respondent.

Domicile or residence of foreign corporation

• A foreign corporation that has been granted license to operate in the Philippines acquires domicile in the Philippines. The object of the Corporation Code in requiring a foreign corporation to secure a license to transact business in the Philippines is to prevent it from acquiring a domicile for the purpose of business without taking steps necessary to render it amenable to suit in the local courts.

STATE INVESTMENT HOUSE INC. v. CITIBANK 203 SCRA 9

FACTS : Respondent banks, the Bank of America N.T., & Citibank N.A. and Hongkong &

Shanghai Banking Corporation jointly filed with the CFI of Rizal for involuntary solvency of Consolidated Mines Inc., (CMI) on the ground that the latter committed specific acts of insolvency. The petitioners State Investment House Inc., & State Financing Center Inc. opposed on the ground that the court had no jurisdiction to take cognizance of the petition because respondent banks are not resident creditors and they were merely licensed to do business and being branches in the Philippines could not be deemed as resident creditors as contemplated under the insolvency law.

ISSUE : Whether or not the respondent banks being branches in the Philippines may be considered “residents of the Phil Islands as that term is used in Sec. 20, of the Insolvency law.

HELD : Yes. A foreign corporation that has been granted license to operate in the Philippines acquires domicile in the Philippines. Our laws and jurisprudence indicate a purpose to assimilate foreign corporation, duly licensed to do business here to the status of domestic corporations. What effectively makes such a foreign corporation a resident corporation in the Philippines is its actually being in the Philippines and licitly doing business here “locality of existence“ being to repeat the necessary element in the signification of the term resident corporation.

Jurisdiction over foreign corporations

• The prevailing rule is that with the consent of a state, a foreign corporation shall be recognized and will be allowed to transact business in any state which gives its consent. The consent doctrine is established in Secs. 125, 126, 127, & 129 of the Corporation Code.

• Art. 29 of the Corporation Code mandates that all foreign corporations lawfully doing business in the Philippines shall be bound by all laws, rules and regulations applicable to domestic corporations.

• Service upon foreign corporations doing business in the Philippines may be made on:

1. Its resident agent

2. In the absence thereof, process will be served on the government official designated by law or any of its officers or agent within the Philippines

3. On any officer or agent of said corporation in the Philippines 4. Serving summons through diplomatic channels

Right of foreign corporations to bring suit

• The right of a private corporation to bring suit in the forum and its amenability to court processes and suits against it, are governed by the lex fori. From the theoretical viewpoint, the country like ours may completely prohibit a foreign corporation from transacting business in the Philippines; we may even prohibit it from filing suit here.

• Acquisition by a foreign corporation of a license to transact business in the Philippines is an essential prerequisite for filing a suit of the corporation before our courts. This rule is embodied in Article 133 of the Corporation Code which says that “such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws.

Bar Question: A issued in the RTC of Manila by California Candy Corporation, a corporation organized under the laws of California for damages in the amount of P5M arising from a breach of contract whereby A had agreed to sell to said corporation 500 tons of sugar to be delivered in San Francisco, where the contract was entered into. Would you grant A’s motion to dismiss the complaint on the ground that the plaintiff corporation has no capacity to sue, it not having previously obtained a license to transact business in the Philippines? State your reasons briefly.

Answer: I would deny the motion to dismiss. (1) The contract was an isolated transaction. (2) The plaintiff was not transacting business in the Philippines the contract having entered into in San Francisco and expressly agreed upon to be consummated there. So long, therefore as the jurisdictional requirements are complied with, the plaintiff’s suit may properly be entertained by our tribunals of justice.

Bar Question: A New York Corporation takes part in bidding for the construction of a building in Makati. The New York Corporation won the bid, but the construction company which opened the bid refused to sign the contract with the New York corporation for the construction of the building. The New York Corporation then sued. As New York Corporation had not expressly obtained a license to engage in business in the Philippines, the construction company moved to dismiss the suit on the ground that New York has no right or personality to sue in the Philippine courts. How should the motion to dismiss be resolved?

Answer: The motion to dismiss should be denied. To take part in the bidding does not constitute “transacting business” as the term is understood in the Philippine law – for this is an isolated act.

HOME INSURANCE v. EASTERN SHIPPING LINES 123 SCRA 424

FACTS : Petitioner Home Insurance was the insurer of the two consignees Atlas Consolidated Mining Dev’t Corp. and Hansa Transport Kantor, whose goods were transported by herein respondent shipping lines. When the shipments arrived in Manila, some of the goods were in bad order. Hence, the petitioner, a foreign insurance company paid for the damaged goods. Upon payment, petitioner became subrogated of the right to claim against respondent.

Respondent in its answer to petitioner’s complaint however denied the latter’s capacity to sue by asserting that at the time the contract of insurance was

entered into petitioner was not yet licensed to do business in the Philippines.

Petitioner however contends that the company was duly licensed to do business in the Philippines through its agent Mr. Victor Bello.

ISSUE : Whether or not the petitioner has the capacity to sue before the Philippine Courts.

HELD : Yes. The lack of capacity to sue at the time of the execution of the contract was cured by the subsequent registration and was strengthened by the procedural aspect of this case. A foreign corporation duly licensed to do business in the Philippines has the right to bring suit before our courts. When the complaints in these two cases were filed the petitioner had already secured the necessary license to conduct its insurance business in the Philippines. It could alreay file suits. Moreover, the general denials made by private respondents were inadequate to attack the foreign corporation’s lack of capacity to sue in the light of its positive averment that it is authorized to do so.

ATLANTIC MUTUAL INSURANCE CO. v. CEBU STEVEDORING 17 Phil 1037

FACTS : Petitioners, both foreign corporations existing under the laws of the US sued Cebu Stevedoring Co., a domestic corporation for recovery of a sum of money.

They alleged that the latter, as a common carrier undertook to carry a shipment of copra for delivery to Procter and Gamble in Cebu, however upon discharge, the copra was found damaged. Plaintiffs as subrogees to the shipper and consignee demand settlement from defendant due to its failure to comply with its obligation as carrier to deliver the copra in good order. Defendant moved to dismiss the case on the grounds that plaintiffs had no legal personality to appear before Philippine courts and had no capacity to sue.

ISSUE : Whether or not the plaintiffs had the capacity to sue before our courts.

HELD : No. Sec. 69 of the Corp. Law provides that no foreign corporation shall be permitted to transact business in the Phils unless it shall have the license required by law and until it complies with this law, shall not be permitted to maintain any suit in the local courts. Sec. 4, Rule 8 of RRC requires that “fact showing the capacity of a party to sue or be sued or the authority of a party to sue or be sued in a representative capacity or the legal existence of an organized association of persons that is made a party must be averred. In the case at bar, all that was averred was that they are both foreign corporations existing under the laws of the U.S.

Exceptions to license requirement:

a. Isolated Transactions

• An isolated business is one which is occasional, incidental

and casual not of a character to indicate a purpose to engage in business. A business is isolated if there is no continuity of conduct and intention on the part of the foreign corporation to establish a continuous business within the state.

b. Action to protect trademark, trade name, good will, patent or for unfair competition

• A foreign corporation engaging in business without a license may file a complaint for unfair competition since that is essentially a suit enjoining the unfair trader from pursuing the unlawful competition and in order to allow the aggrieved party to recover damages. This rule is based on equity considerations.

LEVITON INDUSTRIES v. SALVADOR 114 SCRA 420

FACTS : Private respondent Leviton Mfg. Co. Inc., a foreign corporation organized and existing under the laws of New York USA, is the largest manufacturer of electrical devices under the trademark,“Leviton“ Said electrical devices are being exported to the Philippines and well known to Filipino consumers under the trademark

“leviton“. Petitioners Leviton Industries, a partnership organized in the Phils.

began manufacturing electrical devices under the tradename “Leviton Industries“

and claimed that they had registered with the Philippine Patent Office the trademarks “Leviton Label and Leviton“. Private respondent filed a complaint for unfair competition against petitioner because the trademark on its products would cause confusion in the minds of the consumers. Petitioners moved to dismiss on the ground that the private respondent failed to allege its capacity to sue and no license to business in the Philippines.

ISSUE : Whether or not private respondent has the capacity to sue for unfair competition before Philippine Courts.

HELD : Yes. A foreign corporation engaging in business without a license may file a complaint for unfair competition since that is essentially a suit enjoining the unfair trader pursuing the unlawful competition and in order to allow the aggrieved party to recover damages. An action to protect trademark, trade name, goodwill patent or unfair competition is one of the exceptions to license requirement in bringing suit before the Philippine courts by a foreign corporation. However Sec. 21-A of

HELD : Yes. A foreign corporation engaging in business without a license may file a complaint for unfair competition since that is essentially a suit enjoining the unfair trader pursuing the unlawful competition and in order to allow the aggrieved party to recover damages. An action to protect trademark, trade name, goodwill patent or unfair competition is one of the exceptions to license requirement in bringing suit before the Philippine courts by a foreign corporation. However Sec. 21-A of