G.R. No. 79986 September 14, 1990 Granger Associates, Petitioner, Microwave Systems, Inc., Loreto F. Steward, Menardo R. Jimenez and JOHN PALMER, Respondents
G.R. No. 79986 September 14, 1990 Granger Associates, Petitioner, Microwave Systems, Inc., Loreto F. Steward, Menardo R. Jimenez and JOHN PALMER, Respondents
G.R. No. 79986 September 14, 1990 Granger Associates, Petitioner, Microwave Systems, Inc., Loreto F. Steward, Menardo R. Jimenez and JOHN PALMER, Respondents
business in the Philippines. It insists that it has dealt only with MSI and not the
general public and contends that dealing with the public itself is an indispensable
ingredient of transacting business. It also argues that its agreements with MSI
covered only one isolated transaction for which it did not have to secure a license to
be able to file its complaint.
According to Section 1 of Rep. Act No. 5455
...the phrase "doing business" shall include soliciting orders, purchases, 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 Philippines for a period or periods totalling one hundred eighty days
or more; participating in the management, supervision or control of any domestic
business firm, entity or corporation in the Philippines; any other act or acts that
imply a continuity of commercial dealings or arrangements and contemplates to
that extent the performance of acts or works, or the exercise of some of these
functions normally incident to, and in progressive prosecution of, commercial gain
or of the purpose and object of the business organization.
This Court interpreted the same phrase in the old case of Mentholatum v.
Mangaliman as follows:
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. (Traction Cos. v. Collectors of Int.
Revenue [C.C.A. Ohio], 223 F. 984,987.) The term implies a continuity
of commercial dealings and arrangements, and contemplates, to that
extent, the performance of acts or works or the exercise of some of the
functions normally incident to, and in progressive prosecution of, the
purpose and object of its organization. (Griffin v. Implement Dealers'
Mut. Fire Ins. Co., 241 N.W. 75, 77, Pauline Oil & Gas Go. v. Mutual Tank
Line Co., 246 p. 851, 852,118 Okl. 111; Automotive Material CO. v.
American Standard Metal Products Corp., 158 N.E. 698, 703, 327, I11.
367.)
We have amplified one that discussion in subsequent cases, among them Top-Weld
Manufacturing, Inc. v. ECED, S.A., where we said:
There is no general rule or governing principle laid down as to what
constitutes "doing" or "engaging in" or ""transacting" business in the
Philippines. Each case must be judged in the light of its peculiar
circumstance Thus, a foreign corporation with a settling agent in the
Philippines which issued twelve marine policies covering different
MSI binds itself to assume the warranty obligations and advance the
necessary funds to perform such obligations associated with Model
7l00/7200 Multiplex Equipment already sold by GRANGER. However,
GRANGER shall reimburse MSI the out-of-pocket cost for the services
rendered by MSI in connection with the warranty for the equipment
assumed from GRANGER but only to the extent authorized in advance
by GRANGER.
A study of the enumeration does support the contention that many of the
agreements concluded by the petitioner and the private respondent were intended
merely to supplement the basic contract dated March 28, 1977. However, this is not
true of the Multiplex agreement dated May 17, 1979, which dealt with a different
subject matter and had a different consideration to be paid under a different
method from that specified in the first agreement of the parties in 1977. It is also
noted that in the supplemental and Amendatory Agreement, Granger sold to MSI
certain materials/parts for 80 radios and granted it the right to exploit the designs
of Model 6015, Series of radio equipment (1.5 Ghz.) and the Plug-In Order Wire, and
the 6002 Series and Power Amplifiers. The subject matter of this transaction is also
different from those covered by the previous agreements.
Even if it be assumed for the sake of argument that the subject matter of the first
contract is of the same kind as that of the subsequent agreements, that fact alone
would not necessarily signify that all such agreements are merely auxiliary to the
first. As long as it can be shown that the parties entered into a series of
agreements, as in successive sales of the foreign company's regular products, that
company shall be deemed as doing business in the Philippines.
The quoted stipulations show that Granger had extended its personality in the
Philippines and would receive orders for its products and discharge its warranty
obligations through the agency of MSI It would even appear that Granger intended
to transact business in the Philippines through the instrumentality of MSI not only
for the sale and warranty of its products in this country. The 'agent, was expected to
extend also in mainland China and other ASEAN countries, where MSI was to act as
its representative in the development of possible markets for Granger products.
Thus it was provided in the Agreement:
6. OFF-SHORE MANUFACTURING.
GRANGER undertakes to utilize MSI's manufacturing facilities in the
Philippines in preference to any other manufacturer for offshore
manufacture, assembly, fabrication and testing of equipment, subassemblies, printed circuit boards and related or allied activities,
subject to MSI's demonstrated technical capability and its capacity to
comply with normal quality and delivery requirement for such