ERIKS PTE. LTD. v. COURT OF APPEALS, et al.

G.R. No. 118843, 6 February 1997

PANGANIBAN, J.:

FACTS:
Petitioner Eriks Pte. Ltd. is a non-resident foreign corporation engaged in the manufacture
and sale of elements used in sealing pumps, valves and pipes for industrial purposes,
valves and control equipment used for industrial fluid control and PVC pipes and fittings
for industrial uses.

For the period 17 January to 16 August 1989, private respondent Delfin Enriquez, Jr.,
doing business under the name and style of Delrene EB Controls Center and/or EB
Karmine Commercial, ordered and received from petitioner various elements used in
sealing pumps, valves, pipes and control equipment, PVC pipes and fittings.

The transfers of goods were perfected in Singapore, for private respondent’s account,
F.O.B. Singapore, with a 90-day credit term. Subsequently, demands were made by
petitioner upon private respondent to settle his account, but the latter failed/refused to do
so.

Thus, Eriks filled with the Regional Trial Court (RTC) for the recovery of SGD41,939.63
or its equivalent in Philippine currency, plus interest thereon and damages. As it is a
corporation duly organized and existing under the laws of the Republic of Singapore,
Enriquez, affirmed by the RTC and the Court of Appeals (CA), held that petitioner is not
licensed to do business in the Philippines and has no legal capacity to sue.

ISSUE:
1. WHETHER OR NOT petitioner corporation’s actions constitute as “doing business
without a license in the Philippines.

2. WHETHER OR NOT petitioner corporation may maintain an action in Philippine courts

considering that it has no license to do business in the country.

RULING:
1. Yes, Eriks Pte. Ltd. is considered as illegally doing business in the Philippines. The
Corporation Code does not define what constitutes “doing,” “engaging in,” or
“transacting” business. To fill the gap, the evolution of its statutory definition has
produced a rather all-encompassing concept in Republic Act No. 7042 (An Act to
Promote Foreign Investments, Prescribe the Procedures for Registering Enterprises
Doing Business in the Philippines, and for Other Purposes) in this wise:
Sec. 3. Defnitions. — As used in this Act:
xxx xxx xxx

 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
progressive prosecution of, commercial gain or of the purpose and object of the business
organization: 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.
In this case, the invoices and delivery receipts covering the period from 17 January 1989
to 16 August 1989 cannot be treated to a mean singular and isolated business transaction
that is temporary in character. Granting that there is no distributorship agreement
between herein parties, yet by the mere fact that plaintiff, each time that the defendant
posts an order delivers the items as evidenced by the several invoices and receipts of
various dates only indicates that plaintiff has the intention and desire to repeat the said
transaction in the future in pursuit of its ordinary business. Even as contended by the
appellant, that the transactions which occurred between January to August 1989,
constitute a single act or isolated business transaction, this being the ordinary business
of appellant corporation, it can be said to be illegally doing or transacting business without
a license.

Hence, the Supreme Court held the transactions entered into by the appellant with the
appellee are a series of commercial dealings which would signify an intent on the part of
the appellant (petitioner) to do business in the Philippines and could not by any stretch of
the imagination be considered an isolated one, thus would fall under the category of doing
business.

2. No, the petition has no merit. The Corporation Code provides:

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.
The aforementioned provision prohibits, not merely absence of the prescribed license,
but it also bars a foreign corporation “doing business” in the Philippines without such
license access to our courts.

Here in this case, petitioner was held to be doing business in the Philippines without a
license.

Accordingly and ineluctably, petitioner is held to be incapacitated to maintain the action a

quo against private respondent. The legislature cannot allow foreign corporations or
entities which conduct regular business any access to courts without the fulfillment by
such corporations of the necessary requisites to be subjected to our government’s
regulation and authority.
ABRERA, et. al. vs. HON. ROMEO F. BARZA and COLLEGE ASSURANCE PLAN PHILIPPINES, INC.

G.R. No. 171681

September 11, 2009

PERALTA, J.:

DOCTRINE: Under the Interim Rules, a “debtor”, refers to “any corporation, partnership, or association,
whether supervised or regulated by the Securities and Exchange Commission or other government agencies,
on whose behalf a petition for rehabilitation has been filed under these Rules.” The Interim Rules does not
distinguish whether a pre-need corporation like CAP cannot file a petition for rehabilitation before the
RTC. Courts are not authorized to distinguish where the Interim Rules makes no distinction.

FACTS: CAP was incorporated on February 14, 1980 for the purpose of engaging in the sale of pre-need
educational plans. Initially, it sold open-ended educational plans which guaranteed the payment of tuition
and other standard school fees to the planholder irrespective of the cost at the time of availment. Later,
it engaged in the sale of fixed value plans which guaranteed the payment of a predetermined amount to
the planholder. In 1982, CAP was among the country’s top 2000 corporations. It started sending its
scholars to college in 1984 and saw its first batch of graduates in 1988. However, it subsequently suffered
financial difficulties.

In 2005, CAP planholders filed an action with the RTC of Makati City for Specific Performance and/or
Annulment of Contract due to Fraud, Return and Disgorgement of Illegal Profits, Damages with
Application for Receiver and/or Management Committee against CAP, its Directors and Officers, and the
Fil-Estate Group of Companies. The case was assigned to respondent Judge Romeo Barza of the RTC of
Makati City, Branch 61.

CAP filed a Petition for Corporate Rehabilitation, which was given due course by public respondent
herein. Public respondent Judge Barza in an Order stayed the enforcement of all claims against CAP.

ISSUES:

1) Whether the claims arising from the pre-need contracts between petitioners and CAP can be stayed?

2) Whether a trust relationship exists between a planholder and a pre-need company, therefore, CAP
may not avail itself of rehabilitation proceedings to stop payments from its trust assets to the
beneficiaries?

RULING:

1) YES, it can be stayed. Section 6, Rule 4 of the Interim Rules echoes the provision in Section 6(c) of P.D.
No. 602-A, as amended by P.D. No. 1758, which mandates that “upon appointment of a management
committee, rehabilitation receiver, board or body, x x x all actions for claims against corporations,
partnerships or associations under management or receivership pending before any court, tribunal,
board or body shall be suspended accordingly.” The Interim Rules of Procedure on Corporate
Rehabilitation of 2000 has been amended by the Rules of Procedure on Corporate Rehabilitation of 2009,
which took effect on January 16, 2009. Under the 2009 Rules of Procedure, the power of the RTC to issue
a Stay Order when it finds the petition for rehabilitation to be sufficient in form and substance is
contained in Section 7, Rule 3, which likewise does not exempt claims arising from pre-need contracts
from the Stay Order.

2) NO, a creditor-debtor relationship exists between the parties NOT a trust relationship. The claim of
petitioners for payment of tuition fees from CAP is included in the definition of “claims” under the Interim
Rules.

CAP filed the petition for corporate rehabilitation under Section 1, Rule 4 of the Interim Rules, because it
is “unable to service its debts as they fall due and its assets are insufficient to cover its liabilities.”

Section 1, Rule 4 of the Interim Rules provides that, “Any debtor who foresees the impossibility of
meeting its debts when they respectively fall due, or any creditor or creditors holding at least twenty-five
percent (25%) of the debtor’s total liabilities, may petition the proper Regional Trial Court to have the
debtor placed under rehabilitation.”

Under the Interim Rules, a “debtor”, refers to “any corporation, partnership, or association, whether
supervised or regulated by the Securities and Exchange Commission or other government agencies,
on whose behalf a petition for rehabilitation has been filed under these Rules.” The Interim Rules does
not distinguish whether a pre-need corporation like CAP cannot file a petition for rehabilitation before
the RTC. Courts are not authorized to distinguish where the Interim Rules makes no distinction.

The issuance of the Order staying enforcement of all claims against CAP and the Order giving due course
to CAP’s petition for rehabilitation, in the present case, were proper.
G.R. No. 178501 & G.R. NO. 178510
January 11, 2016
LEONARDO-DE CASTRO, J.:

The Case:

Before the Court are two consolidated Petitions for Review on Certiorari under Rule 45 of
the Revised Rules of Court assailing the Decision and Resolution of the Court of Appeals
in CA-G.R. SP No. 71190.

The petitioners in G.R. No. 178501 are 24 former pilots of Philippine Airlines, Inc.
(PAL), namely, Rodriguez, Alisangco, Ang, Ang, Arroyo, Baquiran, Cruz, Delos Reyes,
Ecarma, Galisim, Garcia, Gutiza, Jadie, Jose, Labuga, Lastimoso, Matias, Maturan,
Ocharan, Piamonte, Sabado, Sanchez, Corpus, and Alcañeses, hereinafter collectively
referred to as Rodriguez, et al., deemed by PAL to have lost their employment status for
taking part in the illegal strike in June 1998.

The petitioner in G.R. No. 178510 is PAL, a domestic operating as a common carrier
transporting passengers and cargo through aircraft. PAL named Rodriguez, et al. and
Rodolfo O. Poe (Poe) as respondents in its Petition.

The Facts:

The 1st ALPAP case

On December 9, 1997, the Airline Pilots Association of the Philippines (ALPAP) filed with
the National Conciliation and Mediation Board (NCMB) a Notice of Strike, docketed as
NCMB NCR NS 12-514-97 (Strike Case), on the grounds of unfair labor practice and
union-busting by PAL.

The Secretary of the Department of Labor and Employment (DOLE) assumed jurisdiction
over the Strike Case, and issued an Order on December 23, 1997 prohibiting all actual
and impending strikes and lockouts. On May 25, 1998, the DOLE Secretary issued
another Order reiterating the prohibition against strikes and lockouts.

Despite the abovementioned Orders of the DOLE Secretary, ALPAP filed a second Notice
of Strike on June 5, 1998 and staged a strike on the same day. The DOLE Secretary
immediately called PAL and ALPAP for conciliation conferences on June 6 and 7, 1998
to amicably settle the dispute between them. After his efforts failed, the DOLE Secretary
issued an Order8 on June 7, 1998 (Return-to-Work Order) ordering the striking
employees to return to work within 24 hours from receipt of the order and for PAL
management to receive them under the same terms and conditions prior to the strike.

On June 26, 1998, the members of ALPAP reported for work but PAL did not accept them
on the ground that the 24-hour period for the strikers to return set by the DOLE Secretary
in his Return-to-Work Order had already lapsed, resulting in the forfeiture of their
employment.

Consequently, ALPAP filed with the NLRC on June 29, 1998 a Complaint for illegal
lockout against PAL, On August 21, 1998, the Acting Executive Labor Arbiter ordered the
consolidation of the Illegal Lockout Case with the Strike Case pending before the DOLE
Secretary.

The DOLE Secretary issued a Resolution on June 1, 1999 declaring the strike conducted
by ALPAP on June 5, 1998 and thereafter illegal for being procedurally infirm and in open
defiance of the return-to-work order of June 7, 1998 and consequently, the strikers are
deemed to have lost their employment status. Likewise, it dismissed the complaint for
illegal lockout for lack of merit.
After failing to get favorable resolutions on their motions for reconsideration with DOLE
and Petition for Review on Certiorari under Rule 65 of the rules of court with the Court of
Appeals, ALPAP elevated the case to this Court by filing a Petition for
Certiorari, (1st ALPAP case). The Court dismissed the Petition of ALPAP in a minute
Resolution dated April 10, 2002 for failure of ALPAP to show grave abuse of discretion
on the part of the appellate court. Said Resolution dismissing the 1st ALPAP
case became final and executory on August 29, 2002.

Meanwhile, 32 ALPAP members, consisting of Rodriguez, et al, Poe, Dela Cruz, Musong,
Peña, Cruz, Noble, Versoza, Hinayon, hereinafter collectively referred to as complainants
- filed with the NLRC on June 7, 1999 a Complaint for illegal dismissal against PAL,
docketed as NLRC-NCR Case No. 00--06-06290-99 (Illegal Dismissal Case).

Complainants alleged that they were not participants of the June 5, 1998 strike of ALPAP
and that they had no obligation to comply with the Return-to-Work Order of the DOLE
Secretary.They alleged that PAL terminated complainants from employment together with
the strikers who disobeyed the Return-to-Work Order, even though complainants had
valid reasons for not reporting for work.

In its Motion to Dismiss and/or Position Paper for Respondent, PAL averred that the
Complaint for illegal dismissal is an offshoot of the Strike and Illegal Lockout Cases
wherein the DOLE Secretary already adjudged with finality that the striking pilots lost their
employment for participating in an illegal strike and/or disobeying the Return-to-Work
Order. Hence, PAL argued that the Complaint was already barred by res judicata.

In addition, PAL presented the following evidence to refute complainants' allegation that
they were not strikers: (a) the logbook showing that complainants belatedly complied with
the Return-to-Work Order on June 26, 1998; and (b) the photographs showing that some
of complainants were at the strike area or picket line.

The Labor Arbiter rendered a Decision declaring that the complainants were illegally
dismissed. Moreover, the LA opined that the illegal dismissal case may proceed
independently from the Strike and Lockout Cases.PAL appealed before the NLRC. The
NLRC reversed the decision of the LA declaring all but Jadie legally dismissed. Aggreived,
Rodriguez et al, dela Cruz and Poe filed a Petition for Certiori with the CA, assailing the
NLRC decision for having been rendered with grace abuse of discretion. Dela Cruz
subsequently withdrew his petition.The Court of Appeals rendered their decision favoring
Rodriquez et al., and Poe. Finding them illegally dismissed, the appellate court ordered
PAL to pay the complainants separation pay in lieu of reinstatement. Motions for
reconderation filed by both parties were denied.

Hence, Rodriguez et al & PAL assail before this Court the Decision and Resolution of the
Court of Appeals by way of separate Petitions for review on Certiorari, docketed as G.R.
No.178501 and G.R. No. 178510, respectively.

The 2nd ALPAP Case

In the meantime, during the pendency of the instant Petitions, the Court decided on June
6, 2011 Airline Pilots Association of the Philippines v. Philippine Airlines, Inc,docketed as
G.R. No. 168382 (2nd ALPAP case). The 2nd ALPAP case arose from events that took
place following the finality on August 29, 2002 of the Resolution dated April 10, 2002
which dismissed the 1st ALPAP case. On January 13, 2003,

ALPAP filed before the Office of the DOLE Secretary a Motion in [the Strike Case],
requesting the said office to conduct an appropriate legal proceeding to determine who
among its officers and members should be reinstated or deemed to have lost their
employment with PAL for their actual participation in the strike conducted in June 1998.
In a decision dated on June 6, 2011, the Court declared that such proceeding would entail
a reopening of a final judgement which could not be permitted. Settled in law is that once
a decision has acquired finality, it becomes immutable and unalterable, thus can no longer
be modified in any respect. Moreover, there is no necessity to conduct a proceeding to
determine the participants in the illegal strike or those who refused to heed the return to
work order because the ambiguity can be cured by reference the body of the decision
and the pleadings filed.

The Decision dated June 6, 2011 of the Court in the 2nd ALPAP case became final and
executory on September 9, 2011.

Issue:
Whether or not 1st and 2nd ALPAP cases constitute res judicata on the issue issue of the
legality of the Rodriguez et al’s dismissal.

Ruling:
Bearing in mind the final and executory judgments in the 1st and 2nd ALPAP cases, the
Court denies the Petition of Rodriguez, et al, in G.R. No. 178501 and partly grants that
of PAL in G.R. No. 178510.

The Court, in the 2nd ALPAP case, acknowledged the illegal dismissal cases instituted
by the individual ALPAP members before the NLRC following their termination for the
strike in June 1998 (which were apart from the Strike and Illegal Lockout Cases of ALPAP
before the DOLE Secretary) and affirmed the jurisdiction of the NLRC over said illegal
dismissal cases. The Court, though, also expressly pronounced in the 2nd ALPAP
case that "the pendency of the foregoing cases should not and could not affect the
character of our disposition over the instant case. Rather, these cases should be resolved
in a manner consistent and in accord with our present disposition for effective
enforcement and Execution of a final judgement.”

The Petitions at bar began with the Illegal Dismissal Case of Rodriguez, et al. and eight
other former pilots of PAL before the NLRC. Among the Decisions rendered by Labor
Arbiter Robles, the NLRC, and the Court of Appeals herein, it is the one by the NLRC
which is consistent and in accord with the disposition for effective enforcement and
execution of the final judgments in the 1st and 2nd ALPAP cases.

The 1st and 2nd ALPAP cases which became final and executory on August 29, 2002
and September 9, 2011, respectively, constitute res judicata on the issue of who
participated in the illegal strike in June 1998 and whose services were validly terminated.

In the 1st ALPAP case, the Court upheld the DOLE Secretary's Resolution dated June 1,
1999 declaring that the strike of June 5, 1998 was illegal and all ALPAP officers and
members who participated therein had lost their employment status. The Court in the
2nd ALPAP case ruled that even though the dispositive portion of the DOLE Secretary's
Resolution did not specifically enumerate the names of those who actually participated in
the illegal strike, such omission cannot prevent the effective execution of the decision in
the 1st ALPAP case. The Court referred to the records of the Strike and Illegal Lockout
Cases, particularly, the logbook, which it unequivocally pronounced as a "crucial and vital
piece of evidence." In the words of the Court in the 2nd ALPAP case, "[t]he logbook with
the heading 'Return-To-Work Compliance/Returnees' bears their individual signature
signifying their conformity that they were among those workers who returned to work only
on June 26, 1998 or after the deadline imposed by DOLE.,

The logbook was similarly submitted as evidence by PAL against the complainants in the
Illegal Dismissal Case now on appeal. Rodriguez, et al., except for Jadie and Baquiran,
were signatories in the logbook as returnees,44 bound by the Resolution dated June 1,
1999 of the DOLE Secretary. The significance and weight accorded by the NLRC to the
logbook can no longer be gainsaid considering the declarations of the Court in the
2nd ALPAP case. Moreover, the logbook entries were corroborated by photographs
showing Rodriguez, et al., excluding Baquiran, Galisim, Jadie, Wilfredo S. Cruz, and
Piamonte, actually participating in the strike. The objection that the photographs were not
properly authenticated deserves scant consideration as rules of evidence are not strictly
observed in proceedings before administrative bodies like the NLRC, where decisions
may be reached on the basis of position papers only. It is also worth noting that those
caught on photographs did not categorically deny being at the strike area on the time/s
and date/s the photographs were taken, but assert that they were there in lawful exercise
of their right while on official leave or scheduled off-duty, or in the alternative, that they
were already dismissed from service as early as June 7, 1998 and their presence at the
strike area thereafter was already irrelevant.

The Court declared that among the petitioner-complainants Rodriguez, et al, only Jadie
was illegally dismissed by PAL. During the strike, Jadie was already on maternity leave.
Jadie did not join the strike and could not be reasonably expected to report back for work
by June 9, 1998 in compliance with the Return-to-Work Order. Indeed, Jadie gave birth
on June 24, 1998. However, as both the NLRC and the Court of Appeals had held, Jadie
can no longer be reinstated for the following reasons: (1) Jadie's former position as
Captain of the E-50 aircraft no longer existed as said aircraft was already returned to its
lessors in accordance with the Amended and Restated Rehabilitation Plan of PAL; (2)
Per ATO certification, Jadie's license expired in 1998; (3) the animosity between the
parties as engendered by the protracted and heated litigation; (4) the possibility that Jadie
had already secured equivalent or other employment after the significant lapse of time
since the institution of the Illegal Dismissal Case; and (5) the nature of the business of
PAL which requires the continuous operations of its planes and, thus, the hiring of new
pilots. In lieu of reinstatement, Jadie is entitled to separation pay.
Spouses Sobrejuanite
v.
ASB Development Corp., G.R. No. 165675

FACTS OF THE CASE

1. On March 7, 2001, spouses Eduardo and Fidela Sobrejuanite

(Sobrejuanite) filed a Complaint for rescission of contract, refund of
payments and damages, against ASB Development Corporation
(ASBDC) before the Housing and Land Use Regulatory Board
(HLURB).

2. Sobrejuanite alleged that they entered into a Contract to Sell with

ASBDC over a condominium unit and a parking space in the BSA
Twin Tower-B Condominum located at Bank Drive, Ortigas Center,
Mandaluyong City. They averred that despite full payment and
demands, ASBDC failed to deliver the property on or before
December 1999 as agreed. They prayed for the rescission of the
contract; refund of payments amounting to P2,674,637.10;
payment of moral and exemplary damages, attorney’s fees,
litigation expenses, appearance fee and costs of the suit.

3. ASBDC filed a motion to dismiss or suspend proceedings in view

of the approval by the Securities and Exchange Commission (SEC)
on April 26, 2001 of the rehabilitation plan of ASB Group of
Companies, which includes ASBDC, and the appointment of a
rehabilitation receiver. The HLURB arbiter however denied the
motion and ordered the continuation of the proceedings.

ISSUE:
Whether the SEC’s approval of the corporate rehabilitation plan
has the effect of suspending the proceeding before HLURB.

RULING:
Yes. Section 6(c) of PD No. 902-A empowers the SEC:

c) To appoint one or more receivers of the property, real and

personal, which is the subject of the action pending before the
Commission … whenever necessary in order to preserve the rights
of the parties-litigants and/or protect the interest of the investing
public and creditors: … Provided, finally, That upon appointment of
a management committee, rehabilitation receiver, board or body,
pursuant to this Decree, all actions for claims against corporations,
partnerships or associations under management or receivership
pending before any court, tribunal, board or body shall be
suspended accordingly.

The purpose for the suspension of the proceedings is to prevent a

creditor from obtaining an advantage or preference over another
and to protect and preserve the rights of party litigants as well as
the interest of the investing public or creditors. Such suspension is
intended to give enough breathing space for the management
committee or rehabilitation receiver to make the business viable
again, without having to divert attention and resources to litigations
in various fora.

The suspension would enable the management committee or

rehabilitation receiver to effectively exercise its/his powers free
from any judicial or extra-judicial interference that might unduly
hinder or prevent the “rescue” of the debtor company.

To allow such other action to continue would only add to the burden
of the management committee or rehabilitation receiver, whose
time, effort and resources would be wasted in defending claims
against the corporation instead of being directed toward its
restructuring and rehabilitation.
 G.R. No. 175109 August 6, 2008 YNARES-SANTIAGO, J.:

PARAMOUNT INSURANCE CORP., petitioner,

vs.

A.C. ORDOÑEZ CORPORATION and FRANKLIN SUSPINE, respondents.

Dissolution or even the expiration of the three-year liquidation period should not be a bar to a
corporation’s enforcement of its rights as a corporation.

FACTS:

Petitioner Paramount Insurance Corp. is the subrogee of Maximo Mata, the registered owner of a Honda
City sedan involved in a vehicular accident with a truck mixer owned by respondent corporation and driven
by respondent Franklin A. Suspine on September 10, 1997, at Brgy. Panungyanan, Gen. Trias, Cavite.

Petitioner filed before the MTC of Makati City, a complaint for damages against respondents. Based on
the Sheriff’s Return of Service, summons remained unserved on respondent Suspine, while it was served
on respondent corporation and received by Samuel D. Marcoleta of its Receiving Section on April 3, 2000.

On May 19, 2000, petitioner filed a Motion to Declare Defendants in Default; however, on June 28, 2000,
respondent corporation filed an Omnibus Motion (And Opposition to Plaintiff’s Motion to Declare
Defendant in Default) alleging that summons was improperly served upon it because it was made to a
secretarial staff who was unfamiliar with court processes; and that the summons was received by Mr.
Armando C. Ordoñez, President and General Manager of respondent corporation only on June 24, 2000.
Respondent corporation asked for an extension of 15 days within which to file an Answer.

The RTC issued a decision granting the petition.

ISSUE:

W/N A party without corporate existence may file an appeal

HELD:

Yes. There is no merit in petitioner’s claim that respondent corporation lacks legal personality to file an
appeal. Although the cancellation of a corporation’s certificate of registration puts an end to its juridical
personality, Sec. 122 of the Corporation Code, however provides that a corporation whose corporate
existence is terminated in any manner continues to be a body corporate for three years after its
dissolution for purposes of prosecuting and defending suits by and against it and to enable it to settle and
close its affairs. Moreover, the rights of a corporation, which is dissolved pending litigation, are accorded
protection by law pursuant to Sec. 145 of the Corporation Code, to wit:
Section 145. Amendment or repeal. No right or remedy in favor of or against any corporation, its
stockholders, members, directors, trustees, or officers, nor any liability incurred by any such corporation,
stockholders, members, directors, trustees, or officers, shall be removed or impaired either by the
subsequent dissolution of said corporation or by any subsequent amendment or repeal of this Code or of
any part thereof.

Dissolution or even the expiration of the three-year liquidation period should not be a bar to a
corporation’s enforcement of its rights as a corporation.

WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals dated July 17, 2006
reinstating the August 25, 2000 and September 26, 2000 Orders of the Metropolitan Trial Court of Makati
City, Branch 66 which admitted respondent corporation’s Answer and set the case for pre-trial, as well as
the Resolution dated October 12, 2006 denying the motion for reconsideration, are AFFIRMED.
SOUTH AFRICAN AIRWAYS v. CIR
G.R. No. 180356 | February 16, 2010
Petitioner: SOUTH AFRICAN AIRWAYS
Respondent: COMMISSIONER OF INTERNAL REVENUE
VELASCO, JR., J.:

Doctrine: If an international air carrier maintains flights to and from the Philippines, it shall be taxed at the rate of 2
½%of its Gross Philippine Billings, while international air carriers that do not have flights to and from the Philippines
but nonetheless earn income from other activities in the country will be taxed at the regular rate of 32% (now 30%) of
such income.

SUMMARY:
South African Airways is a foreign corporation organized and existing under and by virtue of the laws of the Republic
of South Africa. In the Philippines, it is an internal air carrier having no landing rights in the country. South African
Airways, however, has a general sales agent in the Philippines, Aerotel. Aerotel sells passage documents for
compensation or commission for South African Airways’ off-line flights for the carriage of passengers and cargo
between ports or points outside the territorial jurisdiction of the Philippines. South African Airways filed income tax
returns and paid tax on its Gross Philippine Billings (GPB). South African Airways, however, subsequently claim for
refund contending that it was not liable to pay tax on its GPB. CTA denied the claim on the ground that South African
Airways is liable to pay the 32% (now 30%) regular corporate income tax.

W/N South African Airways engaged in trade or business in the Philippines subject to the regular corporate
income tax? YES. The general rule is that resident foreign corporations shall be liable for a 32% income tax on their
income from within the Philippines, except for resident foreign corporations that are international carriers that derive
income “from carriage of persons, excess baggage, cargo and mail originating from the Philippines” which shall be
taxed at 2 ½% of their Gross Philippine Billings. South African Airways being an international carrier with no flights
originating from the Philippines, does not fall under the exception. As such, it must fall under the general rule  Hence,
it is liable for regular corporate income tax.

FACTS:

 Petition for Review on Certiorari seeking the reversal of CTA EB decision (affirming decision of CTA division)
DENYING its claim for tax refund.
 South African Airways is a foreign corporation organized and existing under and by virtue of the laws of the
Republic of South Africa. Its principal office is located at Johannesburg International Airport, South Africa.
 In PH, it is an internal air carrier having no landing rights in the country. South African Airways, however,
has a general sales agent in the Philippines, Aerotel Limited Corporation (Aerotel).
 Aerotel sells passage documents for compensation or commission for South African Airways’ off-line
flights for the carriage of passengers and cargo between ports or points outside the territorial
jurisdiction of the Philippines.
 South African Airways is not registered with the SEC as a corporation, branch office, or partnership. It is not
licensed to do business in PH.
 For the taxable year 2000, South African Airways filed separate quarterly and annual income tax returns for
its off-line flights
 February 5, 2003: South African Airways filed with the BIR a claim for the refund of the amount of PhP
1,727,766.38 as erroneously paid tax on Gross Philippine Billings (GPB) for the taxable year 2000.
 Claim was unheeded  South African Airways filed a Petition for Review with the CTA for the refund of the
said amount.

CTA First Division: DENIED petition for lack of merit

 Ruled that South African Airways is a resident foreign corporation engaged in trade or business in the
Philippines.
 South African Airways was not liable to pay tax on its GPB under Section 28(A)(3)(a) of NIRC. BUT South
African Airways is liable to pay a tax of 32% on its income derived from the sales of passage
documents in the Philippines.
CTA En Banc: AFFIRMED CTA Division’s Decision. MR Denied.

Hence, this petition.

ISSUES:

1. W/N South African Airways, as an off-line international carrier selling passage documents through an
independent sales agent in the Philippines, is engaged in trade or business in the Philippines subject to
the 32% (now 30%) income tax? YES
2. W/N the income derived by South African Airways from the sale of passage documents covering petitioner’s off-
line flights is Philippine-source income subject to Philippine income tax? YES
3. W/N South African Airways is entitled to a refund or a tax credit of erroneously paid tax on Gross Philippine Billings
for the taxable year 2000 in the amount of P1,727,766.38?
HELD: CTA Decision SET ASIDE. The instant case is REMANDED to the CTA En Banc for further proceedings and
appropriate action, more particularly, the reception of evidence for both parties and the corresponding disposition the
case consistent with the SC’s decision

RATIO:
SOUTH AFRICAN AIRWAYS IS SUBJECT TO INCOME TAX AT THE RATE OF 32% (NOW 30%) OF ITS TAXABLE
INCOME

 South African Airways failed to sufficiently prove that it is exempted from being taxed for its sale of passage
documents in the Philippines.
o CIR v. Acesite (Philippines) Hotel Corporation: Tax refund partakes of the nature of an exemption 
it is strictly construed against the claimant who must discharge such burden convincingly.

South African Airways’ contentions:

 With the new definition of GPB (the provision was amended), it is no longer liable under Sec. 28(A)(3)(a).
 Since 2 1/2% tax on GPB is inapplicable to it, South African Airways is also excluded from the imposition of
any income tax.

There were several amendments to the provision involving GPB, but the present Tax Code (1997) provides:
"Gross Philippine Billings" refers to the amount of gross revenue derived from carriage of persons, excess baggage,
cargo and mail originating from the Philippines in a continuous and uninterrupted flight, irrespective of the place of sale
or issue and the place of payment of the ticket or passage document.

 Essentially, prior to the 1997 NIRC, GPB referred to revenues from uplifts anywhere in the world, provided
that the passage documents were sold in the Philippines.
 Now, it is the place of sale that is irrelevant; as long as the uplifts of passengers and cargo occur to
or from the Philippines, income is included in GPB.

SC: South African Airways is correct in saying that since it does not maintain flights to or from the Philippines, it
is not taxable under Sec. 28(A)(3)(a) of the 1997 NIRC (GPB provision).

 BUT it is wrong when it said that in view of non-applicability of Sec. 28(A)(3)(a) to it, it is precluded from paying
any other income tax for its sale of passage documents in the Philippines.
 CIR v. British Overseas Airways Corporation (BOAC): SC ruled that off-line air carriers having general sales
agents in the Philippines are engaged in or doing business in the Philippines and that their income from sales
of passage documents here is income from within the Philippines.  The off-line air carrier liable for the 32%
tax on its taxable income. (Note: this case was decided under similar factual circumstances as South African
Airways)

 Sec. 28(A)(3)(a) of the 1997 NIRC does NOT, in any categorical term, exempt all international air carriers
from the coverage of Sec. 28(A)(1) – General Rule 32% (now 30%) income tax.
 Had legislature’s intentions been to completely exclude all international air carriers from the application of the
general rule it would have used the appropriate language to do so – BUT IT DID NOT!
 Thus, the logical interpretation of such provisions is that, if the GPB provision (2 ½% Gross PH Billings)
were applicable to a taxpayer, then the general rule (32% now 30% income tax) would not apply.
 If, however, GPB Provision does not apply, a resident foreign corporation, whether an international air
carrier or not, would be liable for the tax under Sec. 28(A)(1).

To reiterate, the correct interpretation of the above provisions is that, if an international air carrier maintains flights
to and from the Philippines, it shall be taxed at the rate of 2 1/2% of its Gross Philippine Billings, while
international air carriers that do not have flights to and from the Philippines but nonetheless earn income from
other activities in the country will be taxed at the rate of 32% of such income.

Other Matters:

a. Statutory Construction: Basically, SC said that the pronouncements made during the deliberations are not
controlling. It is a cardinal rule in the interpretation of statutes is that the meaning and intention of the law-making
body must be sought, first of all, in the words of the statute itself.
b. Exception firmat regulam in casibus non exceptis, which means, a thing not being excepted must be regarded as
coming within the purview of the general rule. Sec. 28(A)(1) of the 1997 NIRC is a general rule that resident foreign
corporations are liable for 32% tax on all income from sources within the Philippines. Sec. 28(A)(3) is an exception
to this general rule.
 South African Airways, being an international carrier with no flights originating from the Philippines, does not
fall under the exception. As such, petitioner must fall under the general rule.

c. On the Denial of claim for refund: The CTA denied the claim on the basis that South African Airways is liable for
income tax. Thus, South African Airways raises the issue of whether the existence of such liability would preclude
their claim for a refund of tax paid on the basis of Gross Philippine Billings.

 South African Airways avers that a deficiency tax assessment does not disqualify a taxpayer from claiming a
tax refund since a refund claim can proceed independently of a tax assessment and that the assessment
 cannot be offset by its claim for refund.  Argument is erroneous.
o South African Airways premises its argument on the existence of an assessment.
o In the assailed Decision, CTA did not, in any way, assess South African Airways of any deficiency
corporate income tax.
o CTA merely pointed out that it is liable for the regular corporate income tax.  There is no
assessment to speak of.

 GR: Taxes cannot be subject to compensation for the simple reason that the government and the taxpayer
are not creditors and debtors of each other.
 Exception: CIR v. CA, CityTrust (234 SCRA 348) SC, however, granted the offsetting of a tax refund with a
tax deficiency on the ground that such deficiency assessment is intimately related to and inextricably
intertwined with the right of CityTrust to claim for a tax refund for the same year.
o To award such refund despite the existence of that deficiency assessment is an absurdity and a
polarity in conceptual effects. CityTrust cannot be entitled to refund and at the same time be liable
for a tax deficiency assessment for the same year.
o The grant of a refund is founded on the assumption that the tax return is valid - the facts stated therein
are true and correct.
o The deficiency assessment, although not yet final, created a doubt as to and constitutes a challenge
against the truth and accuracy of the facts stated in said return which, by itself and without
unquestionable evidence, cannot be the basis for the grant of the refund.
o To avoid multiplicity of suits and unnecessary difficulties or expenses, it is both logically necessary
and legally appropriate that the issue of the deficiency tax assessment against Citytrust be
resolved jointly with its claim for tax refund, to determine once and for all in a single proceeding
the true and correct amount of tax due or refundable.

 Note: In determining W/N South African Airways is entitled to the refund of the amount paid, it would be
necessary to determine how much the Government is entitled to collect as taxes.
o This would necessarily include the determination of the correct liability of the taxpayer and, certainly,
a determination of this case would constitute res judicata on both parties as to all the matters subject
thereof or necessarily involved therein.
o Given the finding of the CTA that South African Airways, although not liable for GPB, is liable for
income tax  the correctness of the return filed by South African Airways is now put in doubt.
o Hence, SC cannot grant the prayer for a refund.

SC Court is unable to affirm CTA En Banc’s decision on the outright denial of petitioner’s claim for a refund.

 Even though petitioner is not entitled to a refund due to the question on the propriety of petitioner’s tax return
subject of the instant controversy, it would not be proper to deny such claim without making a determination
of South African Airways’ liability under Sec. 28(A)(1).
o Note: Tax under Sec. 28(A)(3)(a) is based on GPB, while Sec. 28(A)(1) is based on taxable income,
that is, gross income less deductions and exemptions, if any.
o It cannot be assumed that South African Airways’ liabilities under the two provisions would be the
same.
o There is a need to make a determination of South African Airways’ liability under Sec. 28(A)(1) to
establish whether a tax refund is forthcoming or that a tax deficiency exists.
Corporate Dissolution
- Rehabilitation (Financial Rehabilitation and Insolvency Act of 2010, R.A. No. 10142)

9. Rosario v. Co
G.R. No. 133608
August 26, 2008

Facts:
Petitioner Tiong Rosario is the proprietor of TR Mercantile (TRM), a single proprietorship engaged in the business of
selling and trading paper products and supplies of various kinds; while respondent Alfonso Co is the Chairman and President of
Modern Paper Products, Inc. (MPPI). In the course of its business, MPPI purchased from TRM a variety of paper products on
credit. As payment for his purchases, respondent issued the three (3) China Banking Corporation checks in favor of TRM which,
upon presentment for payment, were dishonored by the drawee bank on May 11, 1995, April 6, 1995, and April 28, 1995,
respectively, for the reason that the payment was either stopped or that the checks were drawn against insufficient funds. TRM,
through a demand letter, demanded that respondent make good the checks and pay MPPI’s outstanding obligations within five (5)
banking days from receipt of the letter, otherwise, it would be constrained to file both criminal and civil actions to protect its
interest. Respondent, however, failed to heed the demand. So petitioner filed a complaint against respondent for violation of Batas
Pambansa (B.P.) Blg. 22 with the Office of the City Prosecutor, Pasig City; upon finding probable cause against respondent, the
investigating prosecutor filed three separate informations against him for violation of B.P. Blg. 22 before the Metropolitan Trial
Court (MeTC), Pasig City.

Prior thereto, MPPI and its principal stockholders, the Spouses Alfredo and Elizabeth Co filed before the Securities and
Exchange Commission (SEC), under P.D. No. 902-A, a Petition for Suspension of Payments for Rehabilitation Purposes with
prayer for the creation of a management committee and for a temporary restraining order and/or preliminary injunction. The SEC
issued an Omnibus Order creating a Management Committee and consequently suspending all actions for claims against MPPI
pending before any court, tribunal, branch or body.

Meanwhile, in the criminal cases pending before the MeTC, respondent was arraigned, and the cases were set for trial.
Prior to initial trial, respondent filed a Motion to Suspend Proceedings which petitioner opposed. The SEC, through an order,
granted respondents Motion to Compel Compliance and For Issuance of Orders of Suspension in the Criminal
Cases. On September 3, 1996, the MeTC issued an Order denying respondents motion to suspend proceedings. It held that the
elements of a prejudicial question do not exist. Respondent filed a Motion for Reconsideration but it was denied. Aggrieved,
respondent filed a petition for certiorari before the RTC questioning the above orders. The RTC enjoined the MeTC from further
proceeding with Criminal Cases during the pendency of the action before it. Then, petitioner filed a Motion for Partial
Reconsideration. However, upon agreement of the parties, resolution on the motion was held in abeyance awaiting the RTC
resolution in the main case, the issues raised being identical. The RTC issued the assailed Resolution granting respondent’s
petition stating that the respondent Court is directed to suspend the proceedings in Criminal Cases during the pendency of the
petition in SEC Case. Hence, this petition.

Issue: Whether a criminal case against a corporate officer for violation of B.P. 22 could be suspended on account of the pendency
of a petition for suspension of payments filed by that officer’s corporation with the Securities and Exchange Commission?

Ruling:
No. A criminal case against a corporate officer for violation of BP 22 could not be suspended on account of the pendency
of a petition for suspension of payments filed by that officer’s corporation with the Securities and Exchange Commission.

As early as Finasia Investment and Finance Corp. v. Court of Appeals, this Court clarified that the word claim used in
Sec. 6 (c) of P.D. No. 902-A, as amended, refers to debts or demands of a pecuniary nature and the assertion of a right to have
money paid. It is used in special proceedings like those before an administrative court on insolvency. In Arranza v. B.F. Homes,
Inc., claim was defined as an action involving monetary considerations. Clearly, the suspension contemplated under Sec. 6 (c) of
P.D. No. 902-A refers only to claims involving actions which are pecuniary in nature.

The purpose of suspending the proceedings under P.D. No. 902-A is to prevent a creditor from obtaining an advantage
or preference over another and to protect and preserve the rights of party litigants as well as the interest of the investing public or
creditors. It is intended to give enough breathing space for the management committee or rehabilitation receiver to make the
business viable again, without having to divert attention and resources to litigations in various fora.

Whereas, the gravamen of the offense punished by B.P. Blg. 22 is the act of making and issuing a worthless check; that
is, a check that is dishonored upon its presentation for payment. It is designed to prevent damage to trade, commerce, and banking
caused by worthless checks. In Lozano v. Martinez, the SC declared that it is not the nonpayment of an obligation which the law
punishes. The thrust of the law is to prohibit, under pain of penal sanctions, the making and circulation of worthless
checks. Because of its deleterious effects on the public interest, the practice is proscribed by the law. The law punishes the act not
as an offense against property, but an offense against public order. The prime purpose of the criminal action is to punish the
offender in order to deter him and others from committing the same or similar offense, to isolate him from society, to reform and
rehabilitate him or, in general, to maintain social order. Hence, the criminal prosecution is designed to promote the public welfare
by punishing offenders and deterring others.
 Consequently, the filing of the case for violation of B.P. Blg. 22 is not a claim that can be enjoined within the purview of
P.D. No. 902-A. True, although conviction of the accused for the alleged crime could result in the restitution, reparation or
indemnification of the private offended party for the damage or injury he sustained by reason of the felonious act of the accused,
nevertheless, prosecution for violation of B.P. Blg. 22 is a criminal action.

A criminal action has a dual purpose, namely, the punishment of the offender and indemnity to the offended party. The
dominant and primordial objective of the criminal action is the punishment of the offender. The civil action is merely incidental to
and consequent to the conviction of the accused. The reason for this is that criminal actions are primarily intended to vindicate an
outrage against the sovereignty of the state and to impose the appropriate penalty for the vindication of the disturbance to the
social order caused by the offender. On the other hand, the action between the private complainant and the accused is intended
solely to indemnify the former.

As far as the criminal aspect of the cases is concerned, the provisions of Sec. 6 (c) of P.D. No. 902-A should not interfere
with the prosecution of a case for violation of B.P. Blg. 22, even if restitution, reparation or indemnification could be ordered,
because an absurdity would result, i.e., one who has engaged in criminal conduct could escape punishment by the mere filing of
a petition for rehabilitation by the corporation of which he is an officer. At any rate, should the court deem it fit to award
indemnification, such award would now fall under the category of a claim under Sec. 6 (c) of P.D. No. 902-A, considering that it is
already one for monetary or pecuniary consideration. Only to this extent can the order of suspension be considered obligatory
upon any court, tribunal, branch or body where there are pending actions for claims against the distressed corporation.
Home Insurance Company vs. Eastern Shipping Lines
[GR L-34382, 20 July 1983];
Home Insurance vs. Nedlloyd Lijnen [GR L-34383]

Facts: [GR L-34382] On or about 13 January 1967, S. Kajita & Co., on behalf of Atlas Consolidated
Mining & Development Corporation, shipped on board the SS Eastern Jupiter from Osaka, Japan,
2,361 coils of Black Hot Rolled Copper Wire Rods. The said VESSEL is owned and operated by
Eastern Shipping Lines. The shipment was covered by Bill of Lading O-MA-9, with arrival notice to
Phelps Dodge Copper Products Corporation of the Philippines at Manila. The shipment was insured
with the Home Insurance Company against all risks in the amount of P1,580,105.06 under its
Insurance Policy AS-73633. The coils discharged from the VESSEL numbered 2,361, of which 53
were in bad order. What the Phelps Dodge ultimately received at its warehouse was the same number
of 2,361 coils, with 73 coils loose and partly cut, and 28 coils entangled, partly cut, and which had to
be considered as scrap. Upon weighing at Phelps Dodge's warehouse, the 2,361 coils were found to
weight 263,940.85 kilos as against its invoiced weight of 264,534.00 kilos or a net loss/shortage of
593.15 kilos, or 1,209,56 lbs., according to the claims presented by the Phelps Dodge against Home
Insurance, the Eastern Shipping, and Angel Jose Transportation Inc. For the loss/damage suffered by
the cargo, Home Insurance paid the Phelps Dodge under its insurance policy the amount of P3,260.44,
by virtue of which Home Insurance became subrogated to the rights and actions of the Phelps Dodge.
Home Insurance made demands for payment against the Eastern Shipping and the Angel Jose
Transportation for reimbursement of the aforesaid amount but each refused to pay the same."

[GR L-34383] On or about 22 December 1966, the Hansa Transport Kontor shipped from Bremen,
Germany, 30 packages of Service Parts of Farm Equipment and Implements on board the VESSEL,
SS 'NEDER RIJN' owned by N. V. Nedlloyd Lijnen, and represented in the Philippines by its local
agent, the Columbian Philippines, Inc.. The shipment was covered by Bill of Lading No. 22 for
transportation to, and delivery at, Manila, in favor of International Harvester Macleod, Inc. The
shipment was insured with Home Insurance company under its Cargo Policy AS-73735 'with average
terms' for P98,567.79. The packages discharged from the VESSEL numbered 29, of which seven
packages were found to be in bad order. What International Harvester ultimately received at its
warehouse was the same number of 29 packages with 9 packages in bad order. Out of these 9
packages, 1 package was accepted by International Harvester in good order due to the negligible
damages sustained. Upon inspection at International Harvester's warehouse, the contents of 3 out of
the 8 cases were also found to be complete and intact, leaving 5 cases in bad order. The contents of
these 5 packages showed several items missing in the total amount of $131.14; while the contents of
the undelivered 1 package were valued at $394.66, or a total of $525.80 or P2,426.98. For the short-
delivery of 1 package and the missing items in 5 other packages, Home Insurance paid International
Harvester under its Insurance Cargo Policy the amount of P2,426.98, by virtue of which Home
Insurance became subrogated to the rights and actions of International Harvester. Demands were
made on N.V. Nedlloyd Lijnen and International Harvester for reimbursement thereof but they failed
and refused to pay the same."

When the insurance contracts which formed the basis of these cases were executed, Home Insurance
had not yet secured the necessary licenses and authority; but when the complaints in these two cases
were filed, Home Insurance had already secured the necessary license to conduct its insurance
business in the Philippines. In both cases, Home Insurance made the averment regarding its capacity
to sue, as that it "is a foreign insurance company duly authorized to do business in the Philippines
through its agent, Mr. Victor H. Bello, of legal age and with office address at Oledan Building, Ayala
Avenue, Makati, Rizal." The Court of First Instance of Manila, Branch XVII, however, dismissed the
complaints in both cases, on the ground that Home Insurance had failed to prove its capacity to sue.
Home Insurance filed the petitions for review on certiorari, which were consolidated.

Issue: Whether Home Insurance, a foreign corporation licensed to do business at he time of the filing
of the case, has the capacity to sue for claims on contracts made when it has no license yet to do
business in the Philippines.

Held: As early as 1924, the Supreme Court ruled in the leading case of Marshall Wells Co. v. Henry
W. Elser & Co. (46 Phil. 70) that the object of Sections 68 and 69 of the Corporation Law was to subject
the foreign corporation doing business in the Philippines to the jurisdiction of Philippine courts. The
Corporation Law must be given a reasonable, not an unduly harsh, interpretation which does not
hamper the development of trade relations and which fosters friendly commercial intercourse among
countries. The objectives enunciated in the 1924 decision are even more relevant today when we
commercial relations are viewed in terms of a world economy, when the tendency is to re-examine the
political boundaries separating one nation from another insofar as they define business requirements
or restrict marketing conditions. The court distinguished between the denial of a right to take remedial
action and the penal sanction for non-registration. Insofar as transacting business without a license is
concerned, Section 69 of the Corporation Law imposed a penal sanction — imprisonment for not less
than 6 months nor more than 2 years or payment of a fine not less than P200.00 nor more than
P1,000.00 or both in the discretion of the court. There is a penalty for transacting business without
registration. And insofar as litigation is concerned, the foreign corporation or its assignee may not
maintain any suit for the recovery of any debt, claim, or demand whatever. The Corporation Law is
silent on whether or not the contract executed by a foreign corporation with no capacity to sue is null
and void ab initio. Still, there is no question that the contracts are enforceable. The requirement of
registration affects only the remedy. Significantly, Batas Pambansa 68, the Corporation Code of the
Philippines has corrected the ambiguity caused by the wording of Section 69 of the old Corporation
Law. Section 133 of the present Corporation Code provides that "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 in 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." The old
Section 69 has been reworded in terms of non-access to courts and administrative agencies in order
to maintain or intervene in any action or proceeding. The prohibition against doing business without
first securing a license is now given penal sanction which is also applicable to other violations of the
Corporation Code under the general provisions of Section 144 of the Code. It is, therefore, not
necessary to declare the contract null and void even as against the erring foreign corporation. The
penal sanction for the violation and the denial of access to Philippine courts and administrative bodies
are sufficient from the viewpoint of legislative policy. Herein, the lack of capacity at the time of the
execution of the contracts was cured by the subsequent registration is also strengthened by the
procedural aspects of these cases. Home Insurance averred in its complaints that it is a foreign
insurance company, that it is authorized to do business in the Philippines, that its agent is Mr. Victor
H. Bello, and that its office address is the Oledan Building at Ayala Avenue, Makati. These are all the
averments required by Section 4, Rule 8 of the Rules of Court. Home Insurance sufficiently alleged its
capacity to sue.
CEMCO HOLDINGS, INC. vs. NATIONAL LIFE INSURANCE COMPANY OF THE
PHILIPPINES, INC.
GR No. 171815,
August 7, 2007
Chico-Nazario, J.
FACTS: Union Cement Corporation (UCC), a publicly-listed company, has two
principal stockholders – UCHC, a non-listed company, with shares amounting to
60.51%, and petitioner Cemco with17.03%. Majority of UCHC’s stocks were
owned by BCI with 21.31% and ACC with 29.69%. Cemco, on the other hand,
owned 9% of UCHC stocks. In a disclosure letter, BCI informed the Philippine
Stock Exchange (PSE) that it and its subsidiary ACC had passed resolutions to sell
to Cemco BCI’s stocks in UCHC equivalent to 21.31% and ACC’s stocks in UCHC
equivalent to 29.69%.
As a consequence of this disclosure, the PSE inquired as to whether the Tender
Offer Rule under Rule 19 of the Implementing Rules of the Securities Regulation
Code is not applicable to the purchase by petitioner of the majority of shares of
UCC. The SEC en banc had resolved that the Cemco transaction was not covered
by the tender offer rule. Feeling aggrieved by the transaction, respondent
National Life Insurance Company of the Philippines, Inc., a minority stockholder
of UCC, sent a letter to Cemco demanding the latter to comply with the rule on
mandatory tender offer. Cemco, however, refused.
Respondent National Life Insurance Company of the Philippines, Inc. filed a
complaint with the SEC asking it to reverse its 27 July 2004 Resolution and to
declare the purchase agreement of Cemco void and praying that the mandatory
tender offer rule be applied to its UCC shares.
The SEC ruled in favor of the respondent by reversing and setting aside its 27
July 2004Resolution and directed petitioner Cemco to make a tender offer for
UCC shares to respondent and other holders of UCC shares similar to the class
held by UCHC in accordance with Section 9(E), Rule 19 of the Securities
Regulation Code.
On petition to the Court of Appeals, the CA rendered a decision affirming the
ruling of the SEC. It ruled that the SEC has jurisdiction to render the questioned
decision and, in any event, Cemco was barred by estoppel from questioning the
SEC’s jurisdiction.
It, likewise, held that the tender offer requirement under the Securities
Regulation Code and its Implementing Rules applies to Cemco’s purchase of
UCHC stocks. Cemco’s motion for reconsideration was likewise denied.
ISSUES:
1. Whether or not the SEC has jurisdiction over respondent’s complaint and to
require Cemco to make a tender offer for respondent’s UCC shares.
2. Whether or not the rule on mandatory tender offer applies to the indirect
acquisition of shares in a listed company, in this case, the indirect acquisition
by Cemco of 36% of UCC, a publicly-listed company, through its purchase of
the shares in UCHC, a non-listed company.
HELD:
1. YES. In taking cognizance of respondent’s complaint against petitioner and
eventually rendering a judgment which ordered the latter to make a tender
offer, the SEC was acting pursuant to Rule19(13) of the Amended
Implementing Rules and Regulations of the Securities Regulation Code, to wit:
“ 13. Violation If there shall be violation of this Rule by pursuing a purchase of
equity shares of a public company at threshold amounts without the required
tender offer, the Commission, upon complaint, may nullify the said acquisition
and direct the holding of a tender offer. This shall be without prejudice to the
imposition of other sanctions under the Code.”
The foregoing rule emanates from the SEC’s power and authority to regulate,
investigate or supervise the activities of persons to ensure compliance with the
Securities Regulation Code, more specifically the provision on mandatory tender
offer under Section 19thereof. Moreover, petitioner is barred from questioning
the jurisdiction of the SEC. It must be pointed out that petitioner had participated
in all the proceedings before the SEC and had prayed for affirmative relief.
2. YES. Tender offer is a publicly announced intention by a person acting alone
or in concert with other persons to acquire equity securities of a public company.
A public company is defined as a corporation which is listed on an exchange, or a
corporation with assets exceeding P50,000,000.00 and with 200 or
more stockholders, at least 200 of them holding not less than 100 shares of such
company .
Stated differently, a tender offer isan offer by the acquiring person to
stockholders of a public company for them to tender their shares therein on the
terms specified in the offer.
Tender offer is in place
to protect minority shareholders against any scheme that dilutes the share value
of their investments. It gives the minority shareholders the chance to exit the
company under reasonable terms, giving them the opportunity to sell their
shares at the same price as those of the majority shareholders. The SEC and the
Court of Appeals ruled that the indirect acquisition by petitioner of 36% of
UCC shares through the acquisition of the non-listed UCHC shares is covered by
the mandatory tender offer rule. The legislative intent of Section 19 of the Code is
to regulate activities relating to acquisition of control of the listed company and
for the purpose of protecting the minority stockholders of a listed corporation.
Whatever may be the method by which control of a public company isobtained,
either through the direct purchase of its stocks or through an indirect means,
mandatory tender offer applies. As appropriately held by the Court of Appeals:
The petitioner posits that what it acquired were stocks of UCHC and not UCC. By
happenstance, as a result of the transaction, it became an indirect owner of
UCC. We are constrained, however, to construe ownership acquisition to mean
both direct and indirect. What is decisive is the determination of the power of
control. The legislative intent behind the tender offer rule makes clear that the
type of activity intended to be regulated is the acquisition of control of the listed
company through the purchase of shares. Control may [be] effected through a
direct and indirect acquisition of stock, and when this takes place, irrespective of
the means, a tender offer must occur. The bottom line of the law is to give the
shareholder of the listed company the opportunity to decide whether or not to
sell in connection with a transfer of control. x x x
PUA VS CITIBANK

G.R. No. 180064

PERLAS-BERNABE, J.

FACTS: Petitioners alleged that they had been depositors of Citibank Binondo Branch) since 1996.
Sometime in 1999, Guada Ang, Citibank Binondo’s Branch Manager, invited Jose to a dinner party at the
Manila Hotel where he was introduced to several officers and employees of Citibank Hongkong
Branch. A few months after, Chingyee Yau (Yau), Vice-President of Citibank Hongkong, came to the
Philippines to sell securities to Jose. They averred that Yau required Jose to open an account with
Citibank Hongkong as it is one of the conditions for the sale of the aforementioned securities. After
opening such account, Yau offered and sold to petitioners numerous securities issued by various public
limited companies established in Jersey, Channel Islands.

Later on, petitioners discovered that the securities sold to them were not registered with the Securities
and Exchange Commission (SEC)and that the terms and conditions covering the subscription were not
likewise submitted to the SEC for evaluation, approval, and registration. Asserting that respondent’s
actions are in violation of Republic Act No.8799, entitled the "Securities Regulation Code" (SRC), they
assailed the validity of the subscription agreements and the terms and conditions thereof for being
contrary to law and/or public policy.

For its part, respondent filed a motion to dismiss on the ground that that petitioners’ complaint is an
outright violation of the doctrine of primary jurisdiction. It pointed out that the merits of the case would
largely depend on the issue of whether or not there was a violation of the SRC, in particular, whether or
not there was a sale of unregistered securities. In this regard, respondent contended that the SRC
conferred upon the SEC jurisdiction to investigate compliance with its provisions and thus, petitioners’
complaint should be first filed with the SEC and not directly before the RTC.

Petitioners opposed this on the ground that the RTC has jurisdiction over their complaint. They asserted
that Section 63 of the SRC expressly provides that the RTC has exclusive jurisdiction to hear and decide
all suits to recover damages pursuant to Sections 56 to 61 of the same law.

ISSUE: Whether or not petitioners’ action falls within the primary jurisdiction of the SEC.

RULING: NO. A criminal charge for violation of the Securities Regulation Code is a specialized dispute.
Hence, it must first be referred to an administrative agency of special competence, i.e., the SEC. Under
the doctrine of primary jurisdiction, courts will not determine a controversy involving a question within
the jurisdiction of the administrative tribunal, where the question demands the exercise of sound
administrative discretion requiring the specialized knowledge and expertise of said administrative
tribunal to determine technical and intricate matters of fact. The Securities Regulation Code is a special
law. Its enforcement is particularly vested in the SEC.

Hence, all complaints for any violation of the Code and its implementing rules and regulations should be
filed with the SEC. Where the complaint is criminal in nature, the SEC shall indorse the complaint to the
DOJ for preliminary investigation and prosecution as provided in Section 53.1 earlier quoted.

The Court agrees with the Court of Appeals that petitioner committed a fatal procedural lapse when he
filed his criminal complaint directly with the DOJ. Verily, no grave abuse of discretion can be ascribed to
the DOJ in dismissing petitioner’s complaint.

Records show that petitioners’ complaint constitutes a civil suit for declaration of nullity of contract and
sums of money with damages, which stemmed from respondent’s alleged sale of unregistered
securities, in violation of the various provisions of the SRC and not a criminal case such as that involved
in Baviera case.
In this light, when the Court ruled in Baviera that "all complaints for any violation of the [SRC] x x x
should be filed with the SEC," it should be construed as to apply only to criminal and not to civil suits
such as petitioners’ complaint.

Based on the foregoing, it is clear that cases falling under Section 57of the SRC, which pertain to civil
liabilities arising from violations of the requirements for offers to sell or the sale of securities, as well as
other civil suits under Sections 56, 58, 59, 60, and 61 of the SRC shall be exclusively brought before the
regional trial courts. It is equally revelatory that no SRC provision of similar import is found in its sections
governing criminal suits; quite the contrary, the SRC states that criminal cases arising from violations of
its provisions should be first referred to the SEC.

Based from the foregoing, petitioners' filing of a civil suit against respondent for purported violations of
the SRC was properly filed directly before the RTC.