Chap 17: Corporations; A.5.
Right of Foreign Corporations to bring suit  NMC would pay Cargill P3M upon signing of the compromise agreement and
G.R. No. 168266 – Cargill, Inc. vs. Intra Strata Assurance Co.
Carpio
Cargill, a foreign corporation, bought several metric tons of molasses from NMC, a domestic
corp (w/c acquired the services of Intra Strata as surety). NMC failed to deliver the agreed
upon amount and so Cargill went after Intra Strata for its claims. Intra Strata interposed the
defense that Cargill cannot file an action in the PH because it is a foreign corporation doing
business here w/out a license (per Sec. 133, Corp Code). The SC found that Cargill isn’t
actually doing business here, thus, it doesn’t fall under the prohibition of Sec. 133. This
means that Cargill, albeit a foreign corporation (w/out a license to do business in the PH)
can file an action against Intra Strata for NMC’s breach of contract.
DOCTRINE
Under Article 123 of the Corporation Code, a foreign corporation must first obtain a license
and a certificate from the appropriate government agency before it can transact business
in the Philippines. Where a foreign corporation does business in the Philippines without the
proper license, it cannot maintain any action or proceeding before Philippine courts as
provided under Section 133 of the Corporation Code.
FACTS
1. Cargill, Inc. (Delaware corporation) and Northern Mindanao Corp. or NMC (domestic
corporation) entered into a contract.
 Cargill bought 20k-24k metric tons of molasses from NMC;
 To be delivered from Jan 1-June 30, ’90 at the price of $44/metric ton.
2. The contract provides that Cargill would open a Letter of Credit (LOC) w/ BPIL.
 Under the “red clause” of the LOC, NMC was permitted to draw up to $500k
representing the minimum price of the contract.
3. The contract was amended 3x1, w/c included a need for NMC to put up a performance
bond.
 Complying w/ the 3rd amendment, Intra Strata Assurance Corporation (respondent;
NMC’s surety) issued a performance bond (P11,287,500) to guarantee NMC’s
delivery of the 10,500 tons of molasses, and a surety bond (P9,978,125) to
guarantee the repayment of downpayment.
4. NMC was only able to deliver 219,551 metric tons out of the 10,500mt agreed upon.
 Cargill sent demand letters to Intra Strata (as surety).claiming payment under the
performance and surety bonds.
 Intra Strata refused to pay.
5. So Cargill filed a complaint for sum of money against NMC and Intra Strata.
6. Cargill, NMC, and Intra Stata entered into a compromise agreement w/c the trial court
approved. It provided that:
1 1st: Increasing the purchase price to $47.50/metric ton (Jan 11, 1990); 2nd: Reducing quantity of the
molasses to 10,500 metric tons and increasing price to $55/metric ton (June 18, ’90); 3rd: Providing for the
shipment of 5, 250 metric tons of molasses and requiring NMC to put up a performance bond (Aug. 22, 1990)
2 SEC. 123. Definition and rights of foreign corporations.—For the purpose of this Code, a foreign corporation
is oneformed, organized or existing under any laws other than those of the Philippines and whose laws allow
Filipino citizens and corporations to do business in its own country or state. It shall have the right to transact
business in the Philippines after it shall have obtained a license to transact business in this country in
accordance with this Code and a certificate of authority from the appropriate government agency
3 “x x x the phrase “doing business” shall include soliciting orders, purchases, service contracts, opening
offices, whether called ‘liaison’ offices or branches; appointing representatives or distributors who are
domiciled in the Philippines or who in any calendar year stay in the Philippines for a period or periods
would deliver to Cargill 6,991 metric tons of molasses from Dec 16-31 1991.
7. But NMC still failed to comply w/ its obligation under the compromise agreement.
8. Hence, trial proceeded against NMC. Trial court ruled in favor of Cargill ordering NMC
and Intra Strata to pay P16,993,200.
9. On appeal, the CA reversed the trial court’s decision. Hence, this petition.
 Cargill does not have the capacity to file suit since it’s a foreign corporation
doing business in the PH WITHOUT the requisite license.
 Cargill’s purchases of molasses were in pursuance of its basic business and not
just mere isolated an incidental transactions.
ISSUE with HOLDING: Whether Cargill, an unlicensed foreign corporation, has the
legal capacity to use before Philippine courts. – YES.
1. Under Article 1232 of the Corporation Code, a foreign corporation must first obtain a
license and a certificate from the appropriate government agency before it can transact
business in the Philippines. Where a foreign corporation does business in the
Philippines without the proper license, it cannot maintain any action or proceeding
before Philippine courts as provided under Section 133 of the Corporation Code:
“Sec. 133. Doing business without a license.—No foreign corporation transacting business in the
Philippines without a license, or its successors or assigns, shall be permitted to maintain or
intervene in any action, suit or proceeding in any court or administrative agency of the
Philippines; but such corporation may be sued or proceeded against before Philippine courts or
administrative tribunals on any valid cause of action recognized under Philippine laws.
2. Thus, the threshold question is Was Cargill doing business in the Philippines? (NO.)
If it WAS (and it was doing so w/out a license) – then it can’t sue
If it WASN’T (then it doesn’t fall under Art. 123 – then it CAN sue
 There is no exact legal definition of “doing business” but Sec. 1, RA 5455 and Art.
44, Omnibus Investment Code provides acts that constitute “doing business 3.
 Sec. 3(d), RA 70424 (Foreign Investments Act of 1991) enumerated not only
acts/activities constituting “doing business” but also those activities that are not
deemed “doing business.
3. Intra Strata relies on Sec. 133 to bar Cargill from maintaining an action in Phil. courts,
it has the burden of proving that Cargill’s business activities in the Phils. are not just
casual or occasional, but so systematic and regular as to manifest contiuity and
permanence of activity to constitute “doing business” in the Phils.
 SC found that Intra Strata failed to prove that Cargill’s activities in the Phils.
constitute doing business as would prevent it from brining action.
4. Determining w/n a foreign corporation is doing business in the PH must be based on
the FACTS OF EACH CASE.
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; 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 progressive prosecution of, commercial gain or of the purpose and object of the business
organization.”
4 “x x x Provided, however, That the phrase ‘doing business’ shall not be deemed
to include 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; nor having a nominee director or officer to
represent its interests in such corporation; nor appointing a representative or distributor domiciled in the
Philippines which transacts business in its own name and for its own account.”
1
  Antam Consolidated, Inc. v. CA – a foreign corp filed an action for collection of sum its products to the Philippines, the Philippines has no jurisdiction to require such
of money against Antam for damages and loss sustained for its failure to deliver foreign corporation to secure a Philippine business license.
coconut crude oil. The Court emphasized the importance of the element of 9. In the present case, Cargill is a foreign company merely importing molasses
continuity of commercial activities to constitute doing business in the Phils. from a Philippine exporter. A foreign company that merely imports goods from
5. Cargill is NOT doing business in the Phils. a Philippine exporter, without opening an office or appointing an agent in the
 There is no showing that the transactions between Cargill and NMC signify the Philippines, is not doing business in the Philippines.
intent of the former to establish a continuous business or extend its operations in
the Philippines. Thus, CA’s finding that Cargill was doing business in the PH is not supported by evidence.
 Section 1(f), Rule I, IRR of RA 7042 (Foreign Investments Code) provide that
“doing business doesn’t include the ff.: DISPOSITIVE PORTION
(1) Mere investment as a shareholder by a foreign entity in domestic corporations duly Petition is GRANTED. Trial court’s decision is reinstated, Cargill wins.
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; OTHER NOTES
(3) Appointing a representative or distributor domiciled in the Philippines which transacts Upon review of the records of the case, Intra Strata had no legal excuse to refuse to pay
business in the representative’s or distributor’s own name and account;
Cargill’s claims under performance and surety bond.
(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; DIGESTER: Viveka
(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
(8) Performing services auxiliary to an existing isolated contract of sale which are not on a
continuing basis, such as installing in the Philippines machinery it has manufactured or
exported to the Philippines, servicing the same, training domestic workers to operate it,
and similar incidental services.
 National Sugar Trading Corp. v. CA – activities within Philippine jurisdiction that do
not create earnings or profits to the foreign corporation do not constitute doing
business in the Philippines.
In this case, it was NMC (the domestic corporation) that derived income from the
transaction and not Cargill (foreign corp w/c merely bought from NMC).
 Besides, under Section 3(d) of RA 7042, “soliciting purchases” has been
deleted from the enumeration of the acts/activities w/c constitute “doing business”

6. Other factors w/c support that Cargill is NOT doing business in the PH:
(1) It does not have an office in the Philippines;
(2) It imports products from the PH through its nonexclusive local broker, whose
authority to act on behalf of Cargill is limited to soliciting purchases of products from
suppliers engaged in the sugar trade in the PH; and
(3) The local broker is an independent contractor and not an agent of Cargill.

7. B. Van Zuiden Bros., Ltd. v. GTVL Marketing Industries, Inc. - An exporter in one
country may export its products to many foreign importing countries without
performing in the importing countries specific commercial acts that would constitute
doing business in the importing countries. It can’t be forced to secure a license in every
foreign country from w/c it exports its products. Otherwise, it would be deleterious to
global trade.
8. To be doing or “transacting business in the Philippines” for purposes of Section 133
of the Corporation Code, the foreign corporation must actually transact business in
the Philippines, that is, perform specific business transactions within the Philippine
territory on a continuing basis in its own name and for its own account. Actual
transaction of business within the Philippine territory is an essential requisite for the
Philippines to to acquire jurisdiction over a foreign corporation and thus require the
foreign corporation to secure a Philippine businesslicense. If a foreign corporation
does not transact such kind of business in the Philippines, even if it exports