GARCIA VS BOARD OF INVESTMENT

FACTS: Former bataan Petrochemical Corporation BPC, now Luzon Petrochemical Corporation, formed by a group of Taiwanese investors, was granted by the BOI to have its plant site for the products “naphta cracker” and “naphta” to based in Bataan. In February 1989, one year after the BPC began its production in Bataan, the corporation applied to the BOI to have its plant site transferred from Bataan to Batangas. Despite vigorous opposition from petitioner Cong. Enrique Garcia and others, the BOI granted private respondent BPC’c application, stating that the investors have the final choice as to where to have their plant site because they are the ones who risk capital for the project.

ISSUE: Whether or not the BOI committed a grave abuse of discretion in yielding to the application of the investors without considering the national interest

RULING: The Supreme Court found the BOI to have commited grave abuse of discretion in this case, and ordered the original application of the BPC to have its plant site in Bataan and the product naphta as feedstock maintained. The ponente, Justice Gutierez Jr., first stated the court’s judicial power to settle actual controversies as provided for by section 1 of Article VII in our 1987 Constitution before he wrote the reasons as to how the Court arrived to its conclusion. He mentioned that nothing is shown to justify the BOI’s action in letting the investors decide on an issue which, if handled by our own government, could have been very beneficial to the state, as he remembered the word of a great Filipino leader, to wit: “he would not mind having a government run like hell by Filipinos than one subservient to foreign dictation.”

Justice Grino Aquino, in her dissenting opinion, argued that the petition was not well-taken because the 1987 Investment Code does not prohibit the registration of a certain project, as well as any decision of the BOI regarding the amended application. She stated that the fact that petitiober disagrees with BOI does not make the BOI wrong in its decision, and that petitioner should have appealed to the President of the country and not to the court, as provided for by Section 36 of the 1987 Invesment Code.

ENRIQUE GARCIA VS EXECUTIVE SECRETARY

FACTS: On 27 November 1990, Cory issued Executive Order 438 which

imposed, in addition to any other duties, taxes and charges imposed by law on all

articles imported into the Philippines, an additional duty of 5% ad valorem. This

additional duty was imposed across the board on all imported articles, including

crude oil and other oil products imported into the Philippines. In 1991, EO 443

increased the additional duty to 9%. In the same year, EO 475 was passed

reinstating the previous 5% duty except that crude oil and other oil products

continued to be taxed at 9%.  Garcia, a representative from Bataan, avers that

EO 475 and 478 are unconstitutional for they violate Sec 24 of Art 6 of the

Constitution which provides: ” All appropriation, revenue or tariff bills, bills

authorizing increase of the public debt, bills of local application, and private bills

shall originate exclusively in the House of Representatives, but the Senate may

propose or concur with amendments.” He contends that since the Constitution

vests the authority to enact revenue bills in Congress, the President may not

assume such power of issuing Executive Orders Nos. 475 and 478 which are in

the nature of revenue-generating measures.

ISSUE: Whether or not EO 475 and 478 are constitutional.

HELD: Under Section 24, Article VI of the Constitution, the enactment of appropriation, revenue and tariff bills, like all other bills is, of course, within the province of the Legislative rather than the Executive Department. It does not follow, however, that therefore Executive Orders Nos. 475 and 478, assuming they may be characterized as revenue measures, are prohibited to the President, that they must be enacted instead by the Congress of the Philippines. Section 28(2) of Article VI of the Constitution provides as follows: “(2) The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government.” There is thus explicit constitutional permission to Congress to authorize the President “subject to such limitations and restrictions as [Congress] may impose” to fix “within specific limits tariff rates and other duties and impost.

PHILIPS SEAFOOD CORPORATION VS BOARD INVESTMENTS

FACTS: Phillips Seafood is registered with respondent Bureau of Investments (BOI) as an existing and expansion producer of soft shell crabs and other seafood products, on a non-pioneer status under Certificate of Registration No. EP 93-219. When Phillips relocated its plant to Roxas City, it filed with BOI an application for registration, which the latter granted. In effect, Petitioner’s Certificate of Registration No. EP 93-219 was extended up to 12 August 2000, pursuant to Article 39 (a) (1) (ii) of Executive Order No. 226. Petitioner changed its corporate name from PS-Masbate to its current name of Phillips Seafood (Philippines) Corporation, which was approved by respondent BOI on 16 February 2001.

In a letter dated 25 September 2003, respondent BOI informed petitioner that the ITH previously granted would be applicable only to the period from 13 August 1999 to 21 October 1999 or before petitioner’s transfer to a “not less-developed area.” Petitioner wrote respondent BOI requesting for a reconsideration of its decision.

On 03 May 2004, petitioner received BOI’s letter denying its motion for reconsideration. Petitioner elevated the matter to the Office of the President, which dismissed petitioner’s appeal on the ground of lack of jurisdiction in a Decision dated 22 September 2004. The Office of the President likewise denied petitioner’s motion for reconsideration in an Order dated 14 March 2005. Petitioner received a copy of the order on 01 April 2005. On 05 April 2005, petitioner filed a petition for review before the Court of Appeals, questioning the dismissal of its appeal before the Office of the President.

After respondent BOI filed its comment on the petition, petitioner filed an omnibus motion asking for leave to file an amended petition to counter the issues raised in the comment for the first time and to suspend the period for filing a reply.

On 24 May 2006, the Court of Appeals rendered the first assailed resolution denying petitioner’s omnibus motion and dismissing its petition for review. The appellate court denied petitioner’s omnibus motion on the ground that the same was filed with intent to delay the case. Simultaneously, the appellate court dismissed the petition for review for having been filed out of time as petitioner opted to appeal to the Office of the President instead of filing a Rule 43 petition to the Court of Appeals within the reglementary period.

ISSUE: Did the Court of Appeals err in denying the petition for review for having filed out of time? NO

RULING: Indeed, under E.O. 226, when the action or decision pertains to either of these two instances: first, in the decisions of the BOI over controversies concerning the implementation of the relevant provisions of E.O No. 226 that may arise between

registered enterprises or investors and government agencies under Article 7; and second, in an action of the BOI over applications for the Office of the President is available. E.O. No. 226 contains no provision specifically governing the remedy of a party whose application for an ITH has been denied by the BOI in the same manner that Articles 7 and 36 thereof allow recourse to the Office of the President in certain instances. Nevertheless, Article 82 of E.O. No. 22 is the catch-all provision allowing the appeal to the courts from all other decisions of respondent BOI involving the other provisions of E.O. No. 226. The intendment of the law is undoubtedly to afford immediate judicial relief from the decision of respondent BOI, save in cases mentioned under Articles 7 and 36.

In relation to Article 82, E.O. No. 226, Section 1 of Rule 43 of the 1997 Rules of Civil Procedure expressly includes respondent BOI as one of the quasi-judicial agencies whose judgments or final orders are appealable to the Court of Appeals via a verified petition for review. Appeals from judgments and final orders of quasi-judicial agencies are now required to be brought to the Court of Appeals on a verified petition for review, under the requirements and conditions in Rule 43 which was precisely formulated and adopted to provide for a uniform rule of appellate procedure for quasi-judicial agencies.

Thus, petitioner should have immediately elevated to the Court of Appeals the denial by respondent BOI of its application for an ITH. From the letter dated 09 October 2003 of respondent BOI, which informed petitioner that its ITH would be extended only from 13 August 1999 to 21 October 1999, petitioner appealed to the Office of the President, a recourse that is not sanctioned by either the Rules of Civil Procedure or by the Omnibus Investments Code of 1987.

Petitioner cannot invoke Article 36 of E.O. No. 226 to justify its appeal to the Office of the President. Article 36, along with Article 7, which allows recourse to the Office of the President, applies to specific instances, namely, controversies between a registered enterprise and a government agency and decisions concerning the registration of an enterprise, respectively. Expresio unius est exclusio alterius. This enumeration is exclusive so that other controversies outside of its purview, including petitioner’s entitlement to an ITH, can invoke only the appellate judicial relief provided under Article 82. In the instant case, the denial of petitioner’s application for an ITH is not within the cases where the law expressly provides for appellate recourse to the Office of the President. That being the case, petitioner should have elevated its appeal to the Court of appeals under rule 43.

ATLAS CONSOLIDATED MINING DEVT CORP vs. CIR

FACTS:  Petitioner corporation, a VAT-registered taxpayer engaged in mining, production, and sale of various mineral products, filed claims with the BIR for refund/credit of input VAT on its purchases of capital goods and on its zero-rated sales in the taxable quarters of the years 1990 and 1992. BIR did not immediately act on the

matter prompting the petitioner to file a petition for review before the CTA. The latter denied the claims on the grounds that for zero-rating to apply, 70% of the company's sales must consists of exports, that the same were not filed within the 2-year prescriptive period (the claim for 1992 quarterly returns were judicially filed only on April 20, 1994), and that petitioner failed to submit substantial evidence to support its claim for refund/credit.    The petitioner, on the other hand, contends that CTA failed to consider the following: sales to PASAR and PHILPOS within the EPZA as zero-rated export sales; the 2-year prescriptive period should be counted from the date of filing of the last adjustment return which was April 15, 1993, and not on every end of the applicable quarters; and that the certification of the independent CPA attesting to the correctness of the contents of the summary of suppliers’ invoices or receipts examined, evaluated and audited by said CPA should substantiate its claims. 

ISSUE: Did the petitioner corporation sufficiently establish the factual bases for its applications for refund/credit of input VAT?

HELD:  No. Although the Court agreed with the petitioner corporation that the two-year prescriptive period for the filing of claims for refund/credit of input VAT must be counted from the date of filing of the quarterly VAT return, and that sales to PASAR and PHILPOS inside the EPZA are taxed as exports because these export processing zones are to be managed as a separate customs territory from the rest of the Philippines, and thus, for tax purposes, are effectively considered as foreign territory, it still denies the claims of petitioner corporation for refund of its input VAT on its purchases of capital goods and effectively zero-rated sales during the period claimed for not being established and substantiated by appropriate and sufficient evidence.     Tax refunds are in the nature of tax exemptions.  It is regarded as in derogation of the sovereign authority, and should be construed in strictissimi juris against the person or entity claiming the exemption.  The taxpayer who claims for exemption must justify his claims by the clearest grant of organic or statute law and should not be permitted to stand on vague implication.

NATIONAL ECONOMIC PROTECTIONISM ASSOCIATION VS ONGPIN

FACTS: After the lifting of martial law in 1981, Marcos issued PD 1789 and some other PDs. The said PD was issued in order to suspend for one year the requirement that in order for companies to validly operate in the country it must be compose of at least 60% Filipino. NEPA assailed the said PD averring that as taxpayers and Filipinos they will be greatly adversed by such PD. The Sol-Gen commented that NEPA et al have no personality and standing to sue in the absence of an actual controversy concerning the enforcement of the PD in question.

ISSUE: Whether or not the requisites for judicial review are met.

HELD: NEPA et al question the constitutionality of Secs 1 and 3 of PD 1892 in relation to PD 1789, the 1981 Investment Priorities Plan and EO 676, as being violative of the

due process and equal protection clauses of the 1973 Constitution as well as Secs 8 & 9 of Article 14 thereof, and seek to prohibit Ongpin from implementing said laws. Yet, not even one of the petitioners has been adversely affected by the application of those provisions. No actual conflict has been alleged wherein the petitioner could validly and possibly say that the increase in foreign equity participation in non-pioneer areas of investment from the period of Dec 2, 1983 to Dec 4, 1984 had any direct bearing on them, such as considerable rise in unemployment, real increase in foreign investment, unfair competition with Philippine nationals, exploitation of the country’s natural resources by foreign investors under the decrees. Petitioners advance an abstract, hypothetical issue which is in effect a petition for an advisory opinion from the SC. The power of courts to declare a law unconstitutional arises only when the interests of litigants require the use of that judicial authority for their protection against actual interference, a hypothetical threat being insufficient. Bona fide suit. Judicial power is limited to the decision of actual cases and controversies. The authority to pass on the validity of statutes is incidental to the decision of such cases where conflicting claims under the Constitution and under a legislative act assailed as contrary to the Constitution are raised. It is legitimate only in the last resort, and as necessity in the determination of real, earnest, and vital controversy between litigants.

CIR vs. Petron Corporation, GR No. 185568, march 21, 2012

Facts: Petron, a Board of Investment (BOI)-registered enterprise, was an assignee of several Tax Credit Certificates (TCCs) from various BOI-registered enterprises for the taxable years 1995-1998. Petron subsequently utilized said TCCs to pay its excise taxes for said taxable years. The TCCs had a Liability Clause which provided:

Both the TRANSFEROR and the TRANSFEREE shall be jointly and severally liable for any fraudulent act or violation of the pertinent laws, rules and regulations relating to the transfer of this TAX CREDIT CERTIFICATE.

Sometime in 1999, a post-audit of said TCCs was conducted by the DOF. The TCCs and the TDMs were cancelled by reason of fraud. The DOF found that said TCCs were fraudulently obtained by the transferors and subsequently the same was fraudulently transferred to Petron. Thus, On January 30, 2002, The CIR issued an assessment against Petron for deficiency excise taxes for the taxable years 1995 to 1998 based on the ground that the TCCs utilized by petitioner in its payment of excise taxes have been cancelled by the DOF for having been fraudulently issued and transferred. Subsequently, petron filed a protest letter regarding said assessment.

In 2002, the CIR served a Warrant of Distraint and/or Levy on petitioner to enforce payment of the tax deficiencies. Construing the Warrant of Distraint and/or Levy as the final adverse decision of the BIR on its protest of the assessment, Petron filed a petition before the CTA contending that the assignment/transfer of the TCCs to petitioner by the TCC holders was submitted to, examined and approved by the concerned government

agencies which processed the assignment in accordance with law and revenue regulations and that the assessment and collection of alleged excise tax deficiencies sought to be collected by the BIR against petitioner through the January 30, 2002 letter are already barred by prescription.

The CTA Second Division ruled for the CIR. Petron appealed the decision to the CTA En banc which, in turn, reversed the CTA 2nd Division decision, based on the following on the ground that Petron was considered an innocent transferee of the subject TCCs and may not be prejudiced by a re-assessment of excise tax liabilities that respondent has already settled, when due, with the use of the TCCs.

Issue: Is Petron still liable to pay its excise taxes?

Held: PETRON’S NON-PARTICIPATION IN FRAUDULENT ACTS

RR 5-2000 prescribes the regulations governing the manner of issuance of TCCs and the conditions for their use, revalidation and transfer. Under the said regulation, a TCC may be used by the grantee or its assignee in the payment of its direct internal revenue tax liability. It may be transferred in favor of an assignee subject to the following conditions: 1) the TCC transfer must be with prior approval of the Commissioner or the duly authorized representative; 2) the transfer of a TCC should be limited to one transfer only; and 3) the transferee shall strictly use the TCC for the payment of the assignee’s direct internal revenue tax liability and shall not be convertible to cash. A TCC is valid only for 10 years subject to the following rules: (1) it must be utilized within five (5) years from the date of issue; and (2) it must be revalidated thereafter or be otherwise considered invalid.

The processing of a TCC is entrusted to a specialized agency called the “One-Stop-Shop Inter-Agency Tax Credit and Duty Drawback Center”… to expedite the processing and approval of tax credits and duty drawbacks.

A TCC may be assigned through a Deed of Assignment, which the assignee submits to the Center for its approval. Upon approval of the deed, the Center will issue a DOF Tax Debit Memo (DOF-TDM), which will be utilized by the assignee to pay the latter’s tax liabilities for a specified period. Upon surrender of the TCC and the DOF-TDM, the corresponding Authority to Accept Payment of Excise Taxes (ATAPET) will be issued by the BIR Collection Program Division and will be submitted to the issuing office of the BIR for acceptance by the Assistant Commissioner of Collection Service. This act of the BIR signifies its acceptance of the TCC as payment of the assignee’s excise taxes.

Thus, it is apparent that a TCC undergoes a stringent process of verification by various specialized government agencies before it is accepted as payment of an assignee’s tax liability… The CIR had no allegation that there was a deviation from the process for the

approval of the TCCs, which Petron used as payment to settle its excise tax liabilities for the years 1995 to 1998.

Further, any merit in the position of CIR on this issue is negated by the Joint Stipulation it entered into with Petron in the proceedings before the said Division. As correctly noted by the CTA En Banc, herein parties jointly stipulated before the Second Division in CTA Case No. 6423 as follows:

13. That petitioner (Petron) did not participate in the procurement and issuance of the TCCs, which TCCs were transferred to Petron and later utilized by Petron in payment of its excise taxes.

This stipulation of fact by the CIR amounts to an admission and, having been made by the parties in a stipulation of facts at pretrial, is treated as a judicial admission… Petron had the right to rely on the joint stipulation that absolved it from any participation in the alleged fraud pertaining to the issuance and procurement of the subject TCCs.

FIRST LEPANTO CERAMICS VS CA

FACTS: The Omnibus Investments Code of 1981 as amended provided that appeals from decisions of the Board of Investments (BOI) shall be the exclusive jurisdiction of the CA. Just a few monthsafter the 1987 Constitution took effect (July 17, 1987), the Omnibus Investments Code of 1987 (EO 226) was promulgated which provided in Art 82 thereof that such appeals be directly filed with the SC. The SC later promulgated, under its rule-making power, Circular No. 1-91 which confirmed that jurisdiction of the CA over appeals from the decisions of the BOI. SC’s Second Division, relying on said Circular, accordingly sustained the appellate jurisdiction of the CA in this present case. Petitioner now move to reconsider and question the Second Division’s ruling which provided: 

“….although the right to appeal granted by Art 82 of EO 226 is a substantive right which cannot be modified by a rule of procedure, nonetheless, questions concerning where and in what manner the appeal can be brought are only matters of procedure which this Court hast he power to regulate.” 

They contend that Circular No. 191 (a rule of procedure) cannot be deemed to have superseded Art 82 of EO 226 (a legislation). 

ISSUE: Was the Court correct in sustaining the appellate jurisdiction of the CA in decisions from the Board of Investments? 

HELD: Yes. EO 226 was promulgated after the 1987 Constitutiontook effect February 2, 1987. Thus, Art 82 of EO 226, which provides for increasing the appellate jurisdiction of the SC, is invalid and therefore never became effective for the concurrence of the Court was no sought in its enactment. Thus, the Omnibus Investments Code of 1981 as

amended still stands. The exclusive jurisdiction on appeals from decisions of the BOI belongs to the CA.

FIRST LEPANTO v. CA 231 SCRA 30

FACTS: BOI granted petitioner’s application to amend its BOI certificate of registration by changing the scope of its registered product from “glazed floor tiles” to “ceramic tiles”. Oppositor Mariwasa filed a petitioner for review with the CA. CA granted the preliminary injunction. Petitioner says that the CA has no jurisdiction as it is vested exclusively with the SC within 30 days from receipt of the decision pursuant to the Omnibus Investments Code and therefore, Mariwasa has lost its right to appeal. Mariwasa counters that whatever inconsistencies that the Omnibus Investment Code and the Judiciary Reorganization Act have been resolved by SC Circular 1-91.

ISSUES: W/n Mariwasa correctly filed its appeal with the CA.

RULING: YES. B.P. 129’s objective is providing a uniform procedure of appeal from decisions of all quasi-judicial agencies for the benefit of the bench and the bar. The obvious lack of deliberation in the drafting of our laws could perhaps explain the deviation of some of our laws from the goal of uniform procedure which B.P. 129 sought to promote. Although a circular is not strictly a statute or law, it has, however, the force and effect of law according to settled jurisprudence

The argument that Article 82 of E.O. 226 cannot be validly repealed by Circular 1-91 because the former grants a substantive right which is prohibited under the Constitution. These simply deal with procedural aspects which this Court has the power to regulate by virtue of its constitutional rule-making powers. Circular 1-91 simply transferred the venue of appeals from decisions of this agency to respondent Court of Appeals and provided a different period of appeal, i.e., fifteen (15) days from notice. It did not make an incursion into the substantive right to appeal.

Circular 1-91 effectively repealed or superseded Article 82 of E.O. 226 insofar as the manner and method of enforcing the right to appeal from decisions of the BOI are concerned.

FIRST LEPANTO v. CA 237 SCRA 519

FACTS: This is a MR of the previous case. Petitioner's contention is that Circular No. 1-91 cannot be deemed to have superseded art. 82 of the Omnibus Investments Code of 1987 (E.O.No. 226) because the Code, which President Aquino promulgated in the exercise of

legislative authority, is in the nature of a substantive act of Congress defining the jurisdiction of courts pursuant to Art. VIII, § 2 of the Constitution.

ISSUES: Same issue as in the first FIRST LEPANTO case.

RULING: YES (as in previous case). Art. 78 of the Omnibus Investment Code on Judicial Relief was thereafter amended by B.P. Blg. 129, 3 by granting in § 9 thereof exclusive appellate jurisdiction to the CA over the decisions and final orders of quasi-judicial agencies. When the Omnibus Investments Code was promulgated on July 17, 1987, the right to appeal from the decisions and final orders of the BOI to the Supreme Court was again granted. By then, however, the present Constitution had taken effect. 4

The Constitution now provides in Art. VI, § 30 that "No law shall be passed increasing the appellate jurisdiction of the Supreme Court as provided in this Constitution without its advice and concurrence." This provision is intended to give the Supreme Court a measure of control over cases placed under its appellate jurisdiction. For the indiscriminate enactment of legislation enlarging its appellate jurisdiction can unnecessarily burden the Court and thereby undermine its essential function of expounding the law in its most profound national aspects. Now, art. 82 of the 1987 Omnibus Investments Code, by providing for direct appeals to the Supreme Court from the decisions and final orders of the BOI, increases the appellate jurisdiction of this Court. Since it was enacted without the advice and concurrence of this Court, this provision never became effective, with the result that it can never be deemed to have amended BPblg. 129 S9.

JOHN HAY PEOPLES ALTERNATION COALITION VS LIM

FACTS: The controversy stemmed from the issuance of Proclamation No. 420 by then President Ramos declaring a portion of Camp John Hay as a Special Economic Zone (SEZ) and creating a regime of tax exemption within the John Hay Special Economic Zone. In the present petition, petitioners assailed the constitutionality of the proclamation. The Court also held that it is the legislature, unless limited by a provision of the Constitution, that has the full power to exempt any person or corporation or class of property from taxation, its power to exempt being as broad as its power to tax. The challenged grant of tax exemption would circumvent the Constitution's imposition that a law granting any tax exemption must have the concurrence of a majority of all the members of Congress. Moreover, the claimed statutory exemption of the John Hay SEZ from taxation should be manifest and unmistakable from the language of the law on which it is based. Thus, the Court declared that the grant by Proclamation No. 420 of tax exemption and other privileges to the John Hay SEZ was void for being violative of the Constitution. However, the entire assailed proclamation cannot be declared unconstitutional, the other parts thereof not being repugnant to the law or the Constitution. The delineation and declaration of a portion of the area covered by Camp John Hay as a SEZ was well within the powers of the President to do so by means of a proclamation. Where part of a statute is void as contrary to the

Constitution, while another part is valid, the valid portion, if separable from the invalid, as in the case at bar, may stand and be enforced.

Issue: WON the petitioners have legal standing to bring the petition

RULING:  YES. R.A. No. 7227 expressly requires the concurrence of the affected local government units to the creation of SEZs out of all the base areas in the country. The grant by the law on local government units of the right of concurrence on the bases' conversion is equivalent to vesting a legal standing on them, for it is in effect a recognition of the real interests that communities nearby or surrounding a particular base area have in its utilization. Thus, the interest of petitioners, being inhabitants of Baguio, in assailing the legality of Proclamation No. 420, is personal and substantial such that they have sustained or will sustain direct injury as a result of the government act being challenged. Theirs is a material interest, an interest in issue affected by the proclamation and not merely an interest in the question involved or an incidental interest, for what is at stake in the enforcement of Proclamation No. 420 is the very economic and social existence of the people of Baguio City. ... Moreover, petitioners Edilberto T.Claravall and Lilia G. Yaranon were duly elected councilors of Baguio at the time, engaged in the local governance of Baguio City and whose duties included deciding for and on behalf of their constituents the question of whether toconcur with the declaration of a portion of the area covered by Camp John Hay as a SEZ. Certainly then, petitioners Claravall and Yaranon, as city officials who voted against the sanggunian Resolution No. 255 (Series of 1994)supporting the issuance of the now challenged Proclamation No. 420 have legal standing to bring the present petition.

SCHMID & OBERLY, INC. vs. RJL MARTINEZ

FACTS: RJL Martinez Fishing Corporation is engaged in deep-sea fishing. In the course of its business, it needed electrical generators for the operation of its business. Schmid and Oberly sells electrical generators with the brand of “Nagata”, a Japanese product. D. Nagata Co. Ltd. of Japan was Schmid’s supplier. Schmid advertised the 12 Nagata generators for sale and RJL purchased 12 brand new generators. Through an irrevocable line of credit, Nagata shipped to the Schmid the generators and RJL paid the amount of the purchase price. (First sale = 3 generators; Second sale = 12 generators). Later, the generators were found to be factory defective. RJL informed the Schmid that it shall return the 12 generators. 3 were returned. Schmid replaced the 3 generators subject of the first sale with generators of a different brand. As to the second sale, 3 were shipped to Japan and the remaining 9 were not replaced. RJL sued the defendant on the warranty, asking for rescission of the contract and that Schmid be ordered to accept the generators and be ordered to pay back the purchase money as well as be liable for damages. Schmid opposes such liability averring that it was merely the indentor in the sale between Nagata Co., the exporter and RJL Martinez, the

importer. As mere indentor, it avers that is not liable for the seller’s implied warranty against hidden defects, Schmid not having personally assumed any such warranty.

ISSUES: 1) WON the second transaction between the parties was a sale or an indent transaction? INDENT TRANSACTION 2) Even is Schmid is merely an indentor, may it still be liable for the warranty? YES, under its contractual obligations it may be liable. But in this case, Schmid did not warrant the products.

HELD: An indentor is a middlemen in the same class as commercial brokers and commission merchants. A broker is generally defined as one who is engaged, for others, on a commission, negotiating contracts relative to property with the custody of which he has no concern; the negotiator between other parties, never acting in his own name but in the name of those who employed him; he is strictly a middleman and for some purpose the agent of both parties. There are 3 parties to an indent transaction, (1) buyer, (2) indentor, and (3) supplier who is usually a non-resident manufacturer residing in the country where the goods are to be bought. The chief feature of a commercial broker and a commercial merchant is that in effecting a sale, they are merely intermediaries or middle-men, and act in a certain sense as the agent of both parties to the transaction.

RJL MARTINEZ admitted that the generators were purchased “through indent order.” RJL admitted in its demand letter previously sent to SCHMID that 12 of 15 generators “were purchased through your company, by indent order and three (3) by direct purchase.” The evidence also show that RJL MARTINEZ paid directly NAGATA CO, for the generators, and that the latter company itself invoiced the sale and shipped the generators directly to the former. The only participation of Schmid was to act as an intermediary or middleman between Nagata and RJL, by procuring an order from RJL and forwarding the same to Nagata for which the company received a commission from Nagata.

evidences pointing to fact that Schmid is merely an indentor: a. the Quotation and the General Conditions of Sale on the dorsal side thereof do not necessarily lead to the conclusion that NAGATA CO., was the real seller of the 12 generators. b. When RJL complained to SCHMID, it immediately asked RJL to send the defective generators to its shop to determine what was wrong. SCHMID informed NAGATA about the complaint of RJL. After the generators were found to have factory defects, SCHMID facilitated the shipment of three (3) generators to Japan and, after their repair, back to the Philippines.c. the letter from NAGATA CO. to SCHMID regarding the repair of the generators indicated that the latter was “within the purview of a seller.” Even as SCHMID was merely an indentor, there was nothing to prevent it from voluntarily warranting that

twelve (12) generators subject of the second transaction are free from any hidden defects. In other words, SCHMID may be held answerable for some other contractual obligation, if indeed it had so bound itself. As stated above, an indentor is to some extent an agent of both the vendor and the vendee. As such agent, therefore, he may expressly obligate himself to undertake the obligations of his principal.Notably, nowhere in the Quotation is it stated therein that SCHMID did bind itself to answer for the defects of the things sold. Balagtas testified initially that the warranty was in the receipts covering the sale. Nowhere is it stated in the invoice that SCHMID warranted the generators against defects. He again changed his mind and asserted that the warranty was given verbally. Hence, RJL has failed to prove that

MR HOLDINGS Ltd. VS SHERIFF BAJAR

FACTS: Under a "Principal Loan Agreement" and "Complementary Loan Agreement," both dated 4 November 1992, Asian Development Bank (ADB), a multilateral development finance institution, agreed to extend to Marcopper Mining Corporation (Marcopper) a loan in the aggregate amount of US$40,000,000.00 to finance the latter's mining project at Sta. Cruz, Marinduque. The principal loan of US$15,000,000.00 was sourced from ADB's ordinary capital resources, while the complementary loan of US$25,000,000.00 was funded by the Bank of Nova Scotia, a participating finance institution. On even date, ADB and Placer Dome, Inc., (Placer Dome), a foreign corporation which owns 40% of Marcopper, executed a "Support and Standby Credit Agreement" whereby the latter. agreed to provide Marcopper with cash flow support for the payment of its obligations to ADB. To secure the loan, Marcopper executed in favor of ADB a "Deed of Real Estate and Chattel Mortgage" dated 11 November 1992, covering substantially all of its (Marcopper's) properties and assets in Marinduque. 

It was registered with the Register of Deeds on 12 November 1992. When Marcopper defaulted in the payment of its loan obligation, Placer Dome, in fulfillment of its undertaking under the "Support and Standby Credit Agreement," and presumably to preserve its international credit standing, agreed to have its subsidiary corporation, MR Holding, Ltd., assumed Marcopper's obligation to ADB in the amount of US$18,453,450.02. Consequently, in an "Assignment Agreement" dated 20 March 1997 ADB assigned to MR Holdings all its rights, interests and obligations under the principal and complementary loan agreements, ("Deed of Real Estate and Chattel Mortgage," and "Support and Standby Credit Agreement"). On 8 December 1997, Marcopper likewise executed a "Deed of Assignment" in favor of MR Holdings. Under its provisions, Marcopper assigns, transfers, cedes and conveys to MR Holdings, its assigns and/or successors-in-interest all of its (Marcopper's) properties, mining equipment and facilities. Meanwhile, it appeared that on 7 May 1997, Solidbank Corporation (Solidbank) obtained a Partial Judgment against Marcopper from the RTC, Branch 26,

Manila, in Civil Case 96-80083, ordering Marcopper to pay Solidbank he amount if PHP 52,970,756.89, plus interest and charges until fully paid; to pay an amount equivalent to 10% of above-stated amount as attorney's fees; and to pay the costs of suit. Upon Solidbank's motion, the RTC of Manila issued a writ of execution pending appeal directing Carlos P. Bajar, sheriff, to require Marcopper "to pay the sums of money to satisfy the Partial Judgment." Thereafter, Bajar issued two notices of levy on Marcopper's personal and real properties, and over all its stocks of scrap iron and unserviceable mining equipment. Together with sheriff Ferdinand M. Jandusay of the RTC, Branch 94, Boac, Marinduque, Bajar issued two notices setting the public auction sale of the levied properties on 27 August 1998 at the Marcopper mine site. Having learned of the scheduled auction sale, MR Holdings served an "Affidavit of Third-Party Claim" upon the sheriffs on 26 August 1998, asserting its ownership over all Marcopper's mining properties, equipment and facilities by virtue of the "Deed of Assignment." Upon the denial of its "Affidavit of Third-Party Claim" by the RTC of Manila, MR Holdings commenced with the RTC of Boac, Marinduque, presided by Judge Leonardo P. Ansaldo, a complaint for reivindication of properties, etc., with prayer for preliminary injunction and temporary restraining order against Solidbank, Marcopper, and sheriffs Bajar and Jandusay (Civil Case 98-13). 

In an Order dated 6 October 1998, Judge Ansaldo denied MR Holdings' application for a writ of preliminary injunction on the ground that (a) MR Holdings has no legal capacity to sue, it being a foreign corporation doing business in the Philippines without license; (b) an injunction will amount "to staying the execution of a final judgment by a court of co-equal and concurrent jurisdiction;" and (c) the validity of the "Assignment Agreement" and the "Deed of Assignment" has been "put into serious question by the timing of their execution and registration." Unsatisfied, MR Holdings elevated the matter to the Court of Appeals on a Petition for Certiorari, Prohibition and Mandamus (CA-GR SP 49226). On 8 January 1999, the Court of Appeals rendered a Decision affirming the trial court's decision. MR Holdings filed the Petition for Review on Certiorari. 

ISSUE: Whether MR Holdings' participation under the "Assignment Agreement" and the "Deed of Assignment" constitutes “doing business.” 

HELD: Batas Pambansa 68, otherwise known as "The Corporation Code of the Philippines," is silent as to what constitutes doing" or "transacting" business in the Philippines. Fortunately, jurisprudence has supplied the deficiency and has held that 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 for which the corporation was organized." The traditional case law definition has metamorphosed into a statutory definition, having been adopted with some qualifications in various

pieces of legislation in Philippine jurisdiction, such as Republic Act 7042 (Foreign Investment Act of 1991), and Republic Act 5455. There are other statutes defining the term "doing business," and as may be observed, one common denominator among them all is the concept of "continuity." The expression "doing business" should not be given such a strict and literal construction as to make it apply to any corporate dealing whatever. At this early stage and with MR Holdings' acts or transactions limited to the assignment contracts, it cannot be said that it had performed acts intended to continue the business for which it was organized. Herein, at this early stage and with MR Holdings' acts or transactions limited to the assignment contracts, it cannot be said that it had performed acts intended to continue the business for which it was organized. It may not be amiss to point out that the purpose or business for which MR Holdings was organized is not discernible in the records. No effort was exerted by the Court of Appeals to establish the nexus between MR Holdings' business and the acts supposed to constitute "doing business." Thus, whether the assignment contracts were incidental to MR Holdings' business or were continuation thereof is beyond determination. The Court of Appeals' holding that MR Holdings was determined to be "doing business" in the Philippines is based mainly on conjectures and speculation. In concluding that the "unmistakable intention" of MR Holdings is to continue Marcopper's business, the Court of Appeals hangs on the wobbly premise that "there is no other way for petitioner to recover its huge financial investments which it poured into Marcopper's rehabilitation without it (petitioner) continuing Marcopper's business in the country." Absent overt acts of MR Holdings from which we may directly infer its intention to continue Marcopper's business, the Supreme Court cannot give its concurrence. Significantly, a view subscribed upon by many authorities is that the mere ownership by a foreign corporation of a property in a certain state, unaccompanied by its active use in furtherance of the business for which it was formed, is insufficient in itself to constitute doing business. Further, long before MR Holdings assumed Marcopper's debt to ADB and became their assignee under the two assignment contracts, there already existed a "Support and Standby Credit Agreement" between ADB and Placer Dome whereby the latter bound itself to provide cash flow support for Marcopper's payment of its obligations to ADB. Plainly, MR Holdings' payment of US$18,453,450.12 to ADB was more of a fulfillment of an obligation under the "Support and Standby Credit Agreement" rather than an investment. That MR Holdings had to step into the shoes of ADB as Marcopper's creditor was just a necessary legal consequence of the transactions that transpired. Also, the "Support and Standby Credit Agreement" was executed 4 years prior to Marcopper's insolvency, hence, the alleged "intention of MR Holdings to continue Marcopper's business" could have no basis for at that time, Marcopper's fate cannot yet be determined. In the final analysis, MR Holdings was engaged only in isolated acts or transactions. Single or isolated acts, contracts, or transactions of foreign corporations are not regarded as a doing or carrying on of business. Typical examples of these are the making of a single contract, sale, sale with the taking of a note and mortgage in the state to secure payment therefor,purchase, or note, or the mere commission of a tort. In these instances, there is no purpose to do any other business within the country.

VINOYA VS NLRC

FACTS: Petitioner Vinoya was hired by RFC as sales representative. He avers that he was transferred by RFC to PMCI, an agency which provides RFC with additional contractual workers. In PMCI, he was reassigned to RFC as sales representative and then later informed by the personnel manager of RFC that his services were terminated. RFC maintains that no employer-employee relationship existed between petitioner and itself. Petitioner filed complaint for illegal dismissal. RFC alleges that PMCI is an independent contractor as the latter is a highly capitalized venture.

ISSUE: Whether or not petitioner was an employee of RFC and thereby, illegally dismissed.

HELD: Yes. PMCI was a labor-only contractor. Although the Neridoctrine stated that it was enough that a contractor had substantial capital to show it was an independent contractor, the case of Fuji Xerox clarified the doctrine stating that an independent business must undertake the performance of the contract according to its own manner and method free from the control of the principal. In this case, PMCI did not even have substantial capitalization as only a small amount of its authorized capital stock was actually paid-in. Also, PMCI did notcarry on an independent business or undertake the performance of its contract according to its own manner and method. Furthermore, PMCI was not engaged to perform a specific and special job or service, which is one of the strong indicators that is an independent contractor. Lastly, in labor-only contracting, the employees supplied by the contractor perform activities, which are directly related to the main business of its principal. It is clear that in this case, the work ofpetitioner as sales representative was directly related to the business of RFC. Since due to petitioner’s length of service, he attained the status of regular employee thus cannot be terminated without just or valid cause. RFC failed to prove that his dismissal was for cause and that he was afforded procedural due process. Petitioner is thus entitled to reinstatement plus full backwages from his dismissal up to actual reinstatement

CARGILL INC. VS INTRA STRATA ASSURANCE CORP.

FACTS: Cargill (foreign) is a corporation organized and existing under the laws of the State of Delaware. Cargill executed a contract with Northern Mindanao Corporation (NMC) (domestic), whereby NMC agreed to sell to petitioner 20,000 to 24,000 metric tons of molasses to be delivered from Jan 1 to 30 1990 for $44 per metric ton. The contract provided that CARGILL was to open a Letter of Credit with the BPI. NMC was permitted to draw up 500,000 representing the minimum price of the contract. The contract was amended 3 times (in relation to the amount and the price). But the third amendment required NMC to put up a performance bond which was intended to guarantee NMC’s performance to deliver the molasses during the prescribed shipment periods. In compliance, INTRA STRATA issued a performance bond to guarantee NMC’s delivery.NMC was only able to deliver 219551 metric tons out of the agreed 10,500. Thus CARGILL sent demand letters to INTRA claiming payment under the performance and surety bonds. When INTRA failed to pay, CARGILL filed a complaint. CARGILL NMC and INTRA entered into a compromise agreement approved by the court, such provided that NMC would pay CARGILL 3 million upon signing and would deliver to CARGILL 6,991 metric tons of molasses. But NMC still failed to comply.RTC – in favor of CARGILLCA – CARGILL does not have the capacity to file suit since it was a foreign corporation doing business in the PH without the requisite license. The purchase of molasses were in pursuance of its basic business and not just mere isolated and incidental transactions.

ISSUE: Whether or not petitioner is doing or transacting business in the Philippines in contemplation of the law and established jurisprudence/ Whether or not CARGILL, an unlicensed foreign corporation, has legal capacity to sue before Philippine courts.RULING: Under the law, 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, according to Article 133 of the Corporation CodeThe court ruled that INTRA should prove that Cargill is really doing business in the Philippines. But in this case, INTRA failed to prove that CARGILL’s activities in the Philippines constitute doing business as would prevent it from bringing an action. Thus, Cargill can bring an action since INTRA failed to prove that Cargill activities in the Philippines constitute doing business.

Other factors which support the finding that petitioner is not doing business in the Philippines are: (1) petitioner does not have an office in the Philippines; (2) petitioner imports products from the Philippines through its non-exclusive local broker, whose authority to act on behalf of petitioner is limited to soliciting purchases of products from suppliers engaged in the sugar trade in the

Philippines; and (3) the local broker is an independent contractor and not an agent of petitioner.

HON. EXECUTIVE SECRETARY vs. SOUTHWING HEAVY INDUSTRIES, INC.

FACTS: On December 12, 2002, President Gloria Macapagal Arroyo issued Executive Order 156 entitled "Providing for a comprehensive industrial policy and directions for the motor vehicle development program and its implementing guidelines." The said provision prohibits the importation of all types of used motor vehicles in the country including the Subic Bay Freeport, or the Freeport Zone, subject to a few exceptions. Consequently, three separate actions for declaratory relief were filed by Southwing Heavy Industries Inc, Subic Integrated Macro Ventures Corp, and Motor Vehicle Importers Association of Subic Bay Freeport Inc. praying that judgment be rendered declaring Article 2, Section3.1 of the EO 156 unconstitutional and illegal.

The RTC rendered a summary judgment declaring that Article 2, Section 3.1 of EO 156 constitutes an unlawful usurpation of legislative power vested by the Constitution with Congress and that the proviso is contrary to the mandate of Republic Act 7227(RA 7227) or the Bases Conversion and Development Act of 1992 which allows the free flow of goods and capital within the Freeport. The petitioner appealed in the CA but was denied on the ground of lack of any statutory basis for the President to issue the same. It held that the prohibition on the importation of use motor vehicles is an exercise of police power vested on the legislature and absent any enabling law, the exercise thereof by the President through an executive issuance is void.

ISSUE: Whether or not Article2, Section 3.1 of EO 156 is a valid exercise of the President’s quasi-legislative powerRULING: The Court finds that Article 2, Section 3.1 of EO 156 is VOID insofar as it is made applicable within the secured fenced-in former Subic Naval Base area but is declared VALID insofar as it applies to the customs territory or the Philippine territory outside the presently secured fenced-in former Subic Naval Base area as stated in Section 1.1 of EO 97-A (an EO executed by Pres. Fidel V. Ramos in 1993 providing the Tax and Duty Free Privilege within the Subic Freeport Zone). Hence, used motor vehicles that come into the Philippine territory via the secured fenced-in former Subic Naval Base area may be stored, used or traded therein, or exported out of the Philippine territory, but they cannot be imported into the Philippine territory outside of the secured fenced-in former Subic Naval Base area.

Petitions are PARTIALLY GRANTED provided that said provision is declared VALID insofar as it applies to the Philippine territory outside the presently fenced-in former Subic Naval Base area and VOID with respect to its application to the secured fenced-in former Subic Naval Base area.

NAMUHE VS OMBUSMAN

Facts: Petitioners were employed at the Mountain ProvinceEngineering District and Ifugao Engineering District of the DPWH. In connection with the purported public bidding held for the Bailey bridgecomponents for use in Mainit, Mountain Province, they were charged with dishonesty, falsification of official documents, grave misconduct, gross neglect of duty, violation of office rules and regulations and conduct prejudicial to the best interest of the service. As a result, the Office of the Ombudsman dismissed petitioners from the government service.

Issue: Whether or not the SC has jurisdiction over appeals of administrative disciplinary decisions of the Office of the Ombudsman

Held: In Fabian v. Desierto (G.R. No. 129742, September 16, 1998), the Court held that appeals from decisions of the Office of the Ombudsman in administrative disciplinary cases should be taken to the CA under Rule 43 of the 1997 Rules of Civil Procedure. In so holding, the Court en banc declared as unconstitutional Sec. 27 of RA 6770 or the Ombudsman Act of 1989, which provided that decisions of the Office of the Ombudsman may be appealed to the SC by way of a petition for review on certiorari under Rule 45 of the Rules of Court. Such provision was held violative of Sec. 30, Art. VI of the Constitution, as it expanded the jurisdiction of the SC without its advice and consent. 

TELECOMMUNICATIONS AND BROADCAST ATTORNEYS OF THE PHILIPPINES VS COMELEC

Facts: Petitioner Telecommunications and Broadcast Attorneys of the Philippines, Inc. (TELEBAP) is an organization of lawyers of radio and television broadcasting companies. It was declared to be without legal standing to sue in this case as, among other reasons, it was not able to show that it was to suffer from actual or threatened injury as a result of the subject law. Petitioner GMA Network, on the other hand, had the requisite standing to bring the constitutional challenge. Petitioner operates radio and television broadcast stations in the Philippines affected by the enforcement of Section 92, B.P. No. 881. Petitioners challenge the validity of Section 92, B.P. No. 881 which provides: “Comelec Time- The Commission shall procure radio and television time to be known as the “Comelec Time” which shall be allocated equally and impartially among the candidates within the area of coverage of all radio and television stations. For this purpose, the franchise of all radio broadcasting and television stations are hereby amended so as to provide radio or television time, free of charge, during the period of campaign.” Petitioner contends that while Section 90 of the same law requires COMELEC to procure print space in newspapers and magazines with payment, Section 92 provides that air time shall be procured by COMELEC free of charge. Thus it contends that Section 92 singles out radio and television stations to provide free air time.

Petitioner claims that it suffered losses running to several million pesos in providing COMELEC Time in connection with the 1992 presidential election and 1995 senatorial election and that it stands to suffer even more should it be required to do so again this year. Petitioners claim that the primary source of revenue of the radio and television stations is the sale of air time to advertisers and to require these stations to provide free air time is to authorize unjust taking ofprivate property. According to petitioners, in 1992 it lost P22,498,560.00 in providing free air time for one hour each day and, in this year’s elections, it stands to lost P58,980,850.00 in view of COMELEC’s requirement that it provide at least 30 minutes of prime time daily for such. Issues: (1) Whether of not Section 92 of B.P. No. 881 denies radio andtelevision broadcast companies the equal protection of the laws. (2) Whether or not Section 92 of B.P. No. 881 constitutes taking of property without due process of law and without just compensation.Held: Petitioner’s argument is without merit. All broadcasting, whether radio or by television stations, is licensed by the government. Airwave frequencies have to be allocated as there are more individuals who want to broadcast that there are frequencies to assign. Radio and television broadcasting companies, which are given franchises, do not own the airwaves and frequencies through which they transmit broadcast signals and images. They are merely given the temporary privilege to use them. Thus, such exercise of the privilege may reasonably be burdened with the performance by the grantee of some form of public service. In granting the privilege to operate broadcast stations and supervising radio and television stations, the state spends considerable public funds in licensing and supervising them. 

The argument that the subject law singles out radio and television stations to provide free air time as against newspapers and magazines which require payment of just compensation for the print space they may provide is likewise without merit. Regulation of the broadcast industry requires spending of public funds which it does not do in the case of print media. To require the broadcast industry to provide free air time for COMELEC is a fair exchange for what the industry gets. As radio and television broadcast stations do not own the airwaves, noprivate property is taken by the requirement that they provide air time to the COMELEC. 

Avon Insurance vs CA

FACTS: It all started with Yupangco Cotton Mills engaged to secure with Worldwide Security and Insurance Co. Inc., several of its properties totaling P200 Million. These contracts were covered by reinsurance treaties between Worldwide Surety and Insurance, and several foreign reinsurance companies including the petitioners through CJ Boatrwright acting as agent of Worldwide Surety and Insurance. A Fire then razed the properties insured on December 1969 and May 2, 1981. A Deed of Assignment made by Worldwide Surety and Insurance acknowledged a remaining balance of P19,444,447.75 still due and

assigned to Yupangco all reinsurance proceeds still collectible from all the foreign reinsurance companies. Yupangco then filed a collection suit on the above petitioners.The service of summons were made through the office of the Insurance Commissioner but since the international reinsurers question the jurisdiction the trial court the case has not proceeded to trial on the merits. The reinsurer is questioning also the service of summons through extraterritorial service under Sect 17 Rule 14 of the Rules of Court nor through the Insurance Commissioner under Sec 14. Yupangco also contends that since the reinsurers question the jurisdiction of the court they are deemed to have submitted to the jurisdiction of the court.

ISSUE: WON the international reinsurers are “doing business in the Philippines”. WON the Philippine court has jurisdiction over these international reinsurers who are not doing business in the Philippines

RULING: NO, international reinsurers are not “doing business in the Philippines” and the Philippine court has not acquired jurisdiction over them. The reinsurance treaties between the petitioners and Worldwide Surety and Insurance were made through an international insurance broker and NOT through any entity or means remotely connected with the Philippines . Reinsurance company is not doing business in a certain state even if the property or lives which are insured by the original insurer company are located in that state. Reinsurance Contract is generally separate and distinct arrangement from the original contract of insurance. Doing business in the Philippines – must be judged in the light of its peculiar circumstances upon its peculiar facts and upon the language of the statute applicable.

True test: whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized. If there exist a domestic agent of the foreign corporation it can be served with summons through that agent without proving that such corporation is doing business in the phils or not. NO allegation or demonstration of the existence of petitioners’ domestic agent but avers simply that they are doing business not only abroad but in the Phils. Petitioners had not performed any act which would give the general public the impression that it had been engaging or intends to engage in its ordinary and usual business undertaking in the country.The purpose of the law in requiring that foreign corporations doing business in the country be licensed to do so, is to subject the foreign corporations doing business in the Philippines to the jurisdiction of the courts, 19 otherwise, a foreign corporation illegally doing business here because of its refusal or neglect to obtain the required license and authority to do business may successfully though unfairly plead such neglect or illegal act so as to avoid service and thereby impugn the jurisdiction of the local courts. Voluntary appearance before the lower court to question the jurisdiction is not equivalent to submission to jurisdiction.

The SC disposed the case in favor of the international insurers (petitioners’) declaring that the lower court has not acquired and cannot acquire jurisdiction over them and was ordered to desist from maintaining further proceeding against them.

JG SUMMIT HOLDINGS INC. VS CAFACTS: The National Investment and Development Corporation (NIDC), a government corporation, entered into a Joint Venture Agreement (JVA) with Kawasaki Heavy Industries, Ltd. for the construction, operation and management of the Subic National Shipyard,Inc.,later became the Philippine Shipyard and Engineering Corporation (PHILSECO). Under the JVA, NIDC and Kawasaki would maintain a shareholding proportion of 60%-40% and that the parties have the right of first refusal in case of a sale.Through a series of transfers, NIDC’s rights, title and interest in PHILSECO eventually went to the National Government. In the interest of national economy, it was decided that PHILSECO should be privatized by selling 87.67% of its total outstanding capital stock to private entities. After negotiations, it was agreed that Kawasaki’s right of first refusal under the JVA be “exchanged” for the right to top by five percent the highest bid for said shares. Kawasaki that Philyards Holdings, Inc. (PHI), in which it was a stockholder, would exercise this right in its stead.During bidding, Kawasaki/PHI Consortium is the losing bidder. Even so, because of the right to top by 5% percent the highest bid, it was able to top JG Summit’s bid. JG Summit protested, contending that PHILSECO, as a shipyard is a public utility and, hence, must observe the 60%-40% Filipino-foreign capitalization. By buying 87.67% of PHILSECO’s capital stock at bidding, Kawasaki/PHI in effect now owns more than 40% of the stock.

HELD: In arguing that PHILSECO, as a shipyard, was a public utility, JG Summit relied on sec. 13, CA No. 146. On the other hand, Kawasaki/PHI argued that PD No. 666 explicitly stated that a “shipyard” was not a “public utility.” But the SC stated that sec. 1 of PD No. 666 was expressly repealed by sec. 20, BP Blg. 391 and when BP Blg. 391 was subsequently repealed by EO 226, the latter law did not revive sec. 1 of PD No. 666. Therefore, the law that states that a shipyard is a public utility still stands.A shipyard such as PHILSECO being a public utility as provided by law is therefore required to comply with the 60%-40% capitalization under the Constitution. Likewise, the JVA between NIDC and Kawasaki manifests an intention of the parties to abide by this constitutional mandate. Thus, under the JVA, should the NIDC opt to sell its shares of stock to a third party, Kawasaki could only exercise its right of first refusal to the extent that its total shares of stock would not exceed 40% of the entire shares of stock. The NIDC, on the other hand, may purchase even beyond 60% of the total shares. As a government corporation and necessarily a 100% Filipino-owned corporation, there is nothing to prevent its purchase of stocks even beyond 60% of the capitalization as the Constitution clearly limits only foreign capitalization.

Kawasaki was bound by its contractual obligation under the JVA that limits its right of first refusal to 40% of the total capitalization of PHILSECO. Thus, Kawasaki cannot purchase beyond 40% of the capitalization of the joint venture on account of both constitutional and contractual proscriptions.

COLUMBIA PICTURES VS CA

FACTS: Petitioners filed a complaint for violation of PD 49 or the Decree on the Protection of intellectual Property,with the NBI against Sunshine Home Video Inc. owned and operated by Danilo A. Pelindario. On November 14, 1987, NBI Senior Agent Lauro C. Reyes applied for a search warrant against Sunshine Home Video Inc. On the basis of affidavits and depositions, a search warrant was issued. The search warrant was served on December 14, 1987 wherein pirated video tapes and other equipments were seized. Pelindario filed a Motion to Lift the Order of the Search Warrant but was denied. A Motion for Reconsideration was filed and the Court granted it relying on the ruling in 20th Century Fox Film Corp. vs. C.A., decided on August 19, 1988, which provides that the master tapes of the copyrighted films from which the pirated films were copied must be presented in the issuance of a search warrant in order for the court to determine probable cause.

ISSUE: Whether or not the petitioners have the capacity to sue.

RULING:    Petitioners have the capacity to sue respondent. Any foreign corporation not doing business in the Philippines may maintain an action in our courts upon any cause of action, provided that the subject matter and the defendant are within the jurisdiction of the court.  It is not the absence of the prescribed license but “doing business” in the Philippines without such license which debars the foreign corporation from access to our courts. ALack of Capacity to sue should not be confused with Lack of personality to sue.  While the former refers to a plaintiff’s general disability to sue, the latter refers to the fact that the plaintiff is not the real party- in-interest.  Correspondingly, the first can be a ground for a motion to dismiss based on the ground of lack of legal capacity to sue, whereas the second can be used as a ground for a motion to dismiss based on the fact that the complaint, on the face thereof, evidently states no cause of action. The ground available for barring recourse to our courts by an unlicensed foreign corporation doing or transacting business in the Philippines should properly be lack of capacity to sue, not lack of personality to sue.

CIR VS SEAGATE TECHNOLOGY

FACTS: Seagate Technology (Seagate) is registered with the Philippine export Zone Authority (PEZA) and has been issued a PEZA certificate . It is also a VAT registered entity . An administrative claim for refund of VAT input taxes in the amount of PHP 28,369.88 was filed on October 4, 1999. No final action as been

received by Seagate from the CIR on its claim for VAT refund. Seagate thus elevated the case to the CTA by way of petition for review in order to toll the running of the two year prescriptive period.

ISSUE: Whether or not Segeate is entitled to the refund or issuance of Tax Credit Certificate

RULING: Yes. Seagate is a PEZA registered enterprise. As a PEZA registered enterprise within a special economic zone, Seagate is entitled in the fiscal incentives and benefits, provided for in either PD66 or EO 226. It shall moreover enjoy all privileges, benefits, advantages, or exemptions under both RA 7227 and RA 7844. Seagate enjoys preferential tax treatment. It is not subject to internal revenue laws and regulations and is even entitled to tax credits. The VAT on capital goods is an internal revenue from which Seagate as an entity is exempt. Although the transactions involving such tax is are not exempt, Seagate as a VAT registered person however is entitled to their credits VAT is a uniform tax ranging at present from 0-10% levied on every importation of goods, whether or not in the course of trade or business, or imposed on each sale, barter, exchange or lease of goods or properties, or on each rendition of services in the course of trade or business as they pass along the production and distribution chain, the tax being limited only to the value added to such goods, properties or services by the seller, transferor or lessor It is an indirect tax that may be shifted or passed on to the buyer, transferee or lessee of the goods, properties, or services . The law that originally impose the VAT in the country, as well as subsequently amendments of that law, has been drawn from the tax credit method. Under the present method that relied on invoices, and entity can credit against or subtract from the VAT charged on its sales or outputs the Vat paid on its purchases, inputs and imports. If at the end of a taxable quarter the output taxes charged by a seller are equal to the input taxes passed on by the suppliers, no payment is required. It is when the output taxes exceed the input taxes tha the excess has to be paid. If, however, the input taxes exceed the output taxes, the excess shall be carried over to the succeeding quarter or quarters. Should the input taxes result from zero rated or effectively zero rated transactions or from the acquisition of capital goods, any excess over the output taxes shall instead be refunded to the taxpayer or credited against other internal revenue taxes.

JG SUMMIT HOLDINGS VS CA

FACTS: The National Investment and Development Corporation (NIDC), a government corporation, entered into a Joint Venture Agreement (JVA) with Kawasaki Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI) for the construction, operation and management of the Subic National Shipyard Inc.,

(SNS) which subsequently became the Philippine Shipyard and Engineering Corporation (PHILSECO). Under the JVA, the NDC and KAWASAKI will contribute P330M for the capitalization of PHILSECO in the proportion of 60%-40% respectively. One of its salient features is the grant to the parties of the right of first refusal should either of them decide to sell, assign or transfer its interest in the joint venture. NIDC transferred all its rights, title and interest in PHILSECO to the Philippine National Bank (PNB). Such interests were subsequently transferred to the National Government pursuant to an Administrative Order. When the former President Aquino issued Proclamation No. 50 establishing the Committee on Privatization (COP) and the Asset Privatization Trust (APT) to take title to, and possession of, conserve, manage and dispose of non-performing assets of the National Government, a trust agreement was entered into between the National Government and the APT wherein the latter was named the trustee of the National Government’s share in PHILSECO. In the interest of the national economy and the government, the COP and the APT deemed it best to sell the National Government’s share in PHILSECO to private entities. After a series of negotiations between the APT and KAWASAKI , they agreed that the latter’s right of first refusal under the JVA be “exchanged” for the right to top by 5%, the highest bid for the said shares.

They further agreed that KAWASAKI woul.d be entitled to name a company in which it was a stockholder, which could exercise the right to top. KAWASAKI then informed APT that Philyards Holdings, Inc. (PHI) would exercise its right to top. At the public bidding, petitioner J.G. Summit Holdings Inc. submitted a bid of Two Billion and Thirty Million Pesos (Php2,030,000,000.00) with an acknowledgement of KAWASAKI/PHILYARDS right to top. As petitioner was declared the highest bidder, the COP approved the sale “subject to the right of Kawasaki Heavy Industries, Inc. / PHILYARDS Holdings Inc. to top JG’s bid by 5% as specified in the bidding rules.” On the other hand, the respondent by virtue of right to top by 5%, the highest bid for the said shares timely exercised the same. Petitioners, in their motion for reconsideration, raised, inter alia, the issue on the maintenance of the 60%-40% relationship between the NIDC and KAWASAKI arising from the Constitution because PHILSECO is a landholding corporation and need not be a public utility to be bound by the 60%-40% constitutional limitation.

ISSUE: Whether or not the respondent is prohibited to possess the disputed property considering the prohibition stipulated in the 1987 Constitution against foreign owned companies.

RULING: The court upheld the validity of the mutual rights of first refusal under the JVA between KAWASAKI and NIDC. The right of first refusal is a property

right of PHILSECO shareholders, KAWASAKI and NIDC, under the terms of their JVA. This right allows them to purchase the shares of their co-shareholder before they are offered to a third party. The agreement of co-shareholders to mutually grant this right to each other, by itself, does not constitute a violation of the provisions of the Constitution limiting land ownership to Filipinos and Filipino corporations. As PHILYARDS correctly puts it, if PHILSECO still owns the land, the right of first refusal can be validly assigned to a qualified Filipino entity in order to maintain the 60%-40% ration. This transfer by itself, does not amount to a violation of the Anti-Dummy Laws, absent proof of any fraudulent intent. The transfer could be made either to a nominee or such other party which the holder of the right of first refusal feels it can comfortably do business with. Alternatively, PHILSECO may divest of its landholdings, in which case KAWASAKI, in exercising its right of first refusal, can exceed 40% of PHILSECO’s equity. In fact, in can even be said that if the foreign shareholdings of a landholding corporation exeeds 40%, it is not the foreign stockholders’ ownership of the shares which is adversely affected but the capacity of the corporation to won land—that is, the corporation becomes disqualified to own land. This finds support under the basic corporate law principle that the corporation and its stockholders are separate judicial entities. In this vein, the right of first refusal over shares pertains to the shareholders whereas the capacity to own land pertains to the corporation. Hence, the fact that PHILSECO owns land cannot deprive stockholders of their right of first refusal. No law disqualifies a person from purchasing shares in a landholding corporation even if the latter will exceed the allowed foreign equity, what the law disqualifies is the corporation from owning land.

INDOPHIL TEXTILE MILL WORKERS UNION v CALICA

FACTS: Indophil Union is a legitimate labor organization duly registered with the DOLE and the exclusivebargaining unit of all rank and file employees of Indophil Textile Mills. On April 1987, the Union and Indophil excecuted a CBA effective April 1, 1987 to March 31, 1990. On November 1987, Indophil Acrylic was formed and registered with the SEC. In 1998, Acrylic became international and hired workers according to its criteria and standards. Sometime in July 1989, the workers of Acrylicunionize and a duly certified CBA was executed. In 1990, the Union claimed that the plant facilities built and set up by Acyrlic should be considered as an extension or expansion of Indophil pursuant to Sec. 1(c) of

Art.1 of the CBA to wit: This agreement shall apply to all companies, facilities, andi nstallations and to any extension and expansion thereat. The union sough that Acrylic be considered part of the bargaining unit.Their contention is that the articles of incorporation of the two corporation establish that the two entities are engaged in the same kind of business, which is the manufacture and sale of yarns of various counts and kinds and of other materials of kindred character or nature. Furthermore, they emphasize that the two corporations have practically the same incorporators, directors and officers.Also the two corporation have their facilities in the same compound. That many of Indophil’s own machineries such as dyeing machines, reeler, broiler, were transferred to and are now being used bythe Acrylic plant. That services of a number of units, departments or sections of private respondents are provided by Acrylic and that the employees of Indophil are the same persons manning andservicing the units of Acrylic. Both parties submitted the issue to LA Calica. Calica ruled for Indophiland stated that Acrylic is not extension of Indophil an hence their CBA does not extend to the employees of Acrylic.

ISSUE: WON Acrylic is a separate and distinct entity from Indophil for purposes of union representation. WON the operations in Acrylic are an extension or expansion of Indophil.

HELD: Acrylic is not an alter ego or an adjunct or a business conduit of Indophil because it has a separate legitimate business purpose. Indophil engages in the manufacture of yarns while Acrylic is to manufacture, buy, sell at wholesale basis, barter, import, export and otherwise deal in various kinds of yarns. Two corporations cannot be treated as single bargaining unit just because they have related businesses. The Union seeks to pierce the veil of Acrylic alleging that the corporation is a device to evade the application of the CBA. However the CA held that said doctrine is only used on the existence of valid grounds. In the case at bar, the fact that the business of Indophil and Acrylic are related that sometimes the employees of Indophil are the same persons manning and providing for auxiliary services to the units of Acrylic, and that the physical plants, offices, and facilities are situated in the same compound. It is the SC’s considered opinion that these facts are not sufficient to justify the piercing of the corporation veil of Acrylic. Furthermore, the legal entity is disregarded only if sought to hold the officers and stockholders liable. In the instant case, the Union does not seek relief from Indophil.

LA CHEMISE LACOSTE VS FERNANDEZ

Facts: La chemise Lacoste is a French corporation and the actual owner of the trademarks “Lacoste,”“Chemise Lacoste,” “Crocodile Device” and a composite mark consisting of the word “Lacoste” and arepresentation of a crocodile/alligator, used on clothings and other goods sold in many parts of the

world andwhich has been marketed in the Philippines (notably by Rustans) since 1964. In 1975 and 1977, HemandasQ. Co. was issued certificate of registration for the trademark “Chemise Lacoste and Q Crocodile Device”both in the supplemental and Principal Registry. In 1980, La Chemise Lacoste SA filed for the registration ofthe “Crocodile device” and “Lacoste”. Games and Garments (Gobindram Hemandas, assignee of HemandasQ.Co.) opposed the registration of “Lacoste.”In 1983, La Chemise Lacoste filed with the NBI a letter-complaint alleging acts of unfair competitioncommitted by Hemandas and requesting the agency’s assistance. A search warrant was issued by the trialcourt. Various goods and articles were seized upon the execution of the warrants. Hemandas filed motion toquash the warrants, which the court granted. The search warrants were recalled, and the goods ordered to bereturned. La Chemise Lacoste filed a petition for certiorari.Intellectual Property Law, 2004 ( 5 )

ISSUE: Whether the proceedings before the patent office is a prejudicial question that need to be resolvedbefore the criminal action for unfair competition may be pursued.

HELD: No. The proceedings pending before the Patent Office do not partake of the nature of a prejudicialquestion which must first be definitely resolved.

 The case which suspends the criminal action must be a civilcase, not a mere administrative case, which is determinative of the innocence or guilt of the accused. Theissue whether a trademark used is different from another’s trademark is a matter of defense and will be betterresolved in the criminal proceedings before a court of justice instead of raising it as a preliminary matter in anadministrative proceeding.Inasmuch as the goodwill and reputation of La Chemise Lacoste products date back even before 1964,Hemandas cannot be a l lowed to cont inue the t rademark “Lacoste” for the reason that he was the f i rs t registrant in the Supplemental Register of a trademark used in international commerce. Registration in theSupplemental Register cannot be given a posture as if the registration is in the Principal Register. It must benoted that one may be declared an unfair competitor even if his competing trademark is registered. LaChemise Lacoste is world renowned mark, and by virtue of the 20 November 1980 Memorandum of theMinister of Trade to the director of patents in compliance with the Paris Convention for the protection of industrial property, effectively cancels the registration of contrary claimants to the enumerated marks, whichinclude “Lacoste.”