Cargill v. Intra Strata Assurance Co.

Doctrines: 

• Where a foreign corporation does business in the Philippines without the proper license, it cannot maintain any action or proceeding before Philippine Courts. 
• The determination of whether a foreign corporation is doing business in the Philippines must be based on the facts of each case; Court gives emphasis to the importance of the element of continuity of commercial activities to constitute doing business in the Philippines. 
• A foreign company that merely imports goods from a Philippines exporter, without opening an office or appointing an agent in the Philippines is not doing business in the Philippines. 

Facts: Petitioner is a corporation organized and existing under the laws of the State of Delaware, USA. Petitioner and Northern Mindanao Corporation (NMC) executed a contract whereby NMC agreed to sell to petitioner 20,000 to 24,000 metric tons of molasses. The contract was amended three times.

In compliance with the terms of the third amendment of the contract, respondent Intra Strata Assurance Corporation issued a a performance bond to guarantee NMC’s delivery of the molasses, and a surety bond to guarantee the repayment of downpayment as provided in the contract. 

NMC was only able to deliver 219.551 metric tons of molasses out of the agreed 10,500 metric tons. Thus, petitioner sent demand letters to respondent claiming payment under the performance and surety bonds. When respondent refused to pay, petitioner filed a complaint for sum of money against NMC and respondent. 

NMC and respondent entered into a compromise agreement which the trial court approved. However, NMC still failed to comply with its obligation. The trial court ruled in favor of Cargill and ordered Intra Strata to solidarily pay Cargill. CA reversed the decision.

Issue: Whether or not petitioner is doing or transacting business in the Philippines in contemplation of the law and established jurisprudence

Held: No. In this case, petitioner and NMC amended their contract three times to give a chance to NMC to deliver to petitioner the molasses, considering that NMC already received the minimum price of the contract. There is no showing that the transactions between petitioner and NMC signify the intent of petitioner to establish a continuous business or extend its operations in the Philippines. 

The contract between petitioner and NMC involved the purchase of molasses by petitioner from NMC. It was NMC, the domestic corporation, which derived income from the transaction and not petitioner. To constitute “doing business,” the activity undertaken in the Philippines should involve profit-making. Besides, under Section 3(d) of RA 7042, “soliciting purchases” has been deleted from the enumeration of acts or activities which constitute “doing business.” 

Petitioner is a foreign company merely importing molasses from a Philipine exporter. A foreign company that merely imports goods from a Philippine exporter, without opening an office or appointing an agent in the Philippines, is not doing business in the Philippines.