Cargill v. Intra Strata Assurance
REITERATIONFacts
The Antecedents: Cargill, Inc., a Delaware corporation, entered into a contract on 16 August 1989 with Northern Mindanao Corporation (NMC), a Philippine entity, for the purchase of 20,000-24,000 metric tons of molasses at $44 per metric ton, deliverable from 1 January to 30 June 1990, secured by a Letter of Credit (LC) from Bank of the Philippine Islands with a 'red clause' allowing NMC to draw up to $500,000 upon documents. The contract was amended thrice: first on 11 January 1990 raising price to $47.50/MT; second on 18 June 1990 reducing quantity to 10,500 MT at $55/MT; third on 22 August 1990 scheduling shipments in Dec 1990-Feb 1991 and requiring NMC's performance bond of $451,500 (P11,287,500) issued by Intra Strata Assurance Corp. on 10 October 1990, plus surety bond of P9,978,125 for downpayment repayment. NMC drew $500,000 under the red clause LC but delivered only 219.551 MT out of 10,500 MT. Cargill demanded payment from Intra Strata under the bonds, which was refused. A compromise agreement was executed where NMC promised P3M cash and 6,991 MT delivery by Dec 1991, but NMC again defaulted. Procedural History: Cargill filed a sum-of-money complaint on 12 April 1991 against NMC and Intra Strata before the RTC. Parties compromised, approved by RTC Decision on 13 December 1991, but NMC's non-compliance led to trial against Intra Strata. On 23 November 1994, RTC ruled for Cargill, ordering Intra Strata to pay P16,993,200 plus interest from 10 Oct 1990, P200K attorney's fees, and costs, dismissing counterclaim. Intra Strata appealed to CA (CA-G.R. CV No. 48447), which reversed on 26 May 2005, dismissing complaint for Cargill's lack of license as foreign corporation doing business. The Petition: Cargill petitioned under Rule 45, arguing: (1) it was not doing/transacting business per law/jurisprudence; (2) Intra Strata estopped from invoking capacity defense; (3) seeking review of CA factual findings conflicting with RTC; (4) $500K advance properly released under LC red clause with documents, as testified by BPI officer.
Issue(s)
Whether petitioner Cargill, an unlicensed foreign corporation, was doing or transacting business in the Philippines so as to lack capacity to sue under Sec. 133, Corp. Code. Whether the CA's findings of fact are reviewable and whether the $500K advance was properly released under the LC.
Ruling
The petition is GRANTED. The CA Decision dated 26 May 2005 in CA-G.R. CV No. 48447 is REVERSED, and the RTC Decision dated 23 November 1994 is REINSTATED.
Ratio Decidendi
On Issue 1 (Doing Business and Capacity to Sue): The Court held Cargill not doing business, thus having capacity to sue, as respondent failed to prove systematic/regular activities implying continuity under Sec. 133, Corp. Code, RA 7042 Sec. 3(d), and RA 5455. 'Doing business' requires continuity of commercial dealings for profit within Philippine territory, performed in own name/account on continuing basis; mere isolated importation via independent broker (Agrotex), without office/agent/control, falls under RA 7042 exclusions (e.g., appointing domiciled distributors transacting in own name). Amendments (three times) mirrored Antam Consolidated v. CA (three transactions to recover from single failure, not continuity); NMC derived income, Cargill none, and 'soliciting purchases' deleted in RA 7042. Cited B. Van Zuiden: exporting/importing without territorial acts needs no license to avoid burdening trade. No estoppel needed as no doing business found; burden on respondent unproven. Factors: no PH office, broker independent per contract (Exh. T). On Issue 2 (Review of Facts and LC Compliance): SC reviews CA facts conflicting with RTC (e.g., AMA Computer, Producers Bank); CA erred finding doing business sans evidence. RTC correct: $500K released per red clause with documents, per BPI Head testimony (TSN 14 Jun 1993: bank pays only on conforming docs, reimbursed by Cargill); records pre-1991 destroyed but compliance presumed, justifying bond claims.
Main Doctrine
The phrase 'doing business' by a foreign corporation in the Philippines requires acts that imply a continuity of commercial dealings or arrangements, contemplating the performance of acts or works normally incident to commercial gain or the business organization's purpose, as defined under RA 5455, RA 7042 Sec. 3(d), and Corp. Code precedents. Mere isolated transactions, even if amended multiple times to enforce a single obligation, do not constitute doing business absent systematic, regular activities manifesting permanence. Activities like appointing non-exclusive independent brokers for solicitation, without offices or direct profit from Philippine sources, fall under RA 7042 exclusions and do not trigger licensing under Sec. 133, Corp. Code. Profit-making within the Philippines is essential; pure importation where the domestic seller derives income does not qualify, as clarified post-deletion of 'soliciting purchases' in RA 7042. Jurisdiction over foreign corporations demands actual territorial transactions on a continuing basis in their own name and account; otherwise, no license is required, protecting global trade flows.