Title
Agilent Technologies Singapore vs. Integrated Silicon Technology Phil. Corp.
Case
G.R. No. 154618
Decision Date
Apr 14, 2004
Agilent, a foreign corporation, sued Integrated Silicon for equipment recovery; CA dismissed citing litis pendentia, but SC reversed, ruling distinct causes of action and reinstating the case.
foreign corporation
licensed to do business
specific performance

Case Summary (G.R. No. 154618)

Factual Background

The controversy arose from a five-year Value Added Assembly Services Agreement (VAASA) dated April 2, 1996 between Integrated Silicon and Hewlett-Packard Singapore (Components Operation), under which Integrated Silicon manufactured and assembled fiber-optic components for export and HP-Singapore consigned raw materials and paid for finished products. With Integrated Silicon's consent, HP-Singapore assigned its rights and obligations under the VAASA to petitioner on September 19, 1999. Disputes later emerged concerning the alleged oral promise to extend the VAASA and the possession of equipment, machinery and materials at Integrated Silicon's plant.

Trial Court Proceedings

Integrated Silicon filed Civil Case No. 3110-2001-C for Specific Performance and Damages on May 25, 2001, alleging breach of an oral agreement to extend the VAASA and seeking an order compelling execution of a written extension, compliance with the extended VAASA, and damages. Petitioner filed Civil Case No. 3123-2001-C on July 2, 2001, seeking Specific Performance, Recovery of Possession, Sum of Money with Replevin, a Preliminary Mandatory Injunction, and Damages, praying for a Writ of Replevin or, alternatively, a writ of preliminary mandatory injunction to recover equipment and materials left in Integrated Silicon’s plant. Respondents moved to dismiss Civil Case No. 3123-2001-C on multiple grounds including lack of legal capacity to sue, litis pendentia, forum shopping, and failure to state a cause of action. On September 4, 2001, the trial court denied the motion to dismiss and granted petitioner's application for a writ of replevin.

Court of Appeals Proceedings

Respondents filed a petition for certiorari with the Court of Appeals without first seeking reconsideration of the trial court's September 4, 2001 Order. The trial judge in Branch 92 inhibited himself and the case was re-raffled to Branch 35. The Court of Appeals granted respondents' petition, held that the trial court lacked jurisdiction because of the pendency of Civil Case No. 3110-2001-C, annulled and set aside the September 4, 2001 Order, and ordered the dismissal of Civil Case No. 3123-2001-C.

Issues on Review

This Court considered principally whether the Court of Appeals erred in: (1) entertaining respondents' certiorari petition despite respondents' failure to file a motion for reconsideration in the trial court; and (2) annulling the trial court's Order and dismissing Civil Case No. 3123-2001-C on grounds of litis pendentia and forum shopping. Ancillary issues included whether petitioner, an unlicensed foreign corporation, had legal capacity to sue in the Philippines and whether petitioner had stated a cause of action against individual respondents.

Motion for Reconsideration Requirement

The Supreme Court held that respondents prematurely resorted to certiorari. The Court reiterated that a petition for certiorari under Rule 65 is an extraordinary remedy and that ordinary remedies, such as a motion for reconsideration, must first be exhausted unless patent nullity or exceptional circumstances exist. The Court found no patent nullity in the trial court's Order and no extraordinary urgency analogous to precedents relied upon by respondents. The Court of Appeals therefore committed reversible error in taking cognizance of respondents' petition for certiorari instead of dismissing it for failure to first file a motion for reconsideration.

Analysis of Litis Pendentia

The Court recited the requisites for litis pendentia: identity of parties; identity of rights asserted and reliefs prayed for founded on the same facts; and such identity that a judgment in one case would amount to res judicata in the other. The Court agreed with the Court of Appeals that there was substantial identity of parties. The Court, however, found that the second and third requisites were absent. The causes of action and reliefs in Civil Case No. 3110-2001-C (claim for specific performance of a purported oral promise to extend the VAASA and consequential damages) were distinct from those in Civil Case No. 3123-2001-C (replevin and recovery of possession of equipment and materials and damages). Ownership and petitioner's right to possession were not contingent on an extension of the VAASA. Because the controlling facts and legal issues differ, a judgment in one would not necessarily operate as res judicata in the other, and litis pendentia did not obtain.

Forum Shopping Analysis

Applying the test in Buan v. Lopez, the Court held that forum shopping exists where the elements of litis pendentia are present or a final judgment in one case would be res judicata in the other. Because litis pendentia was absent, the parallel forum-shopping contention failed. The Court acknowledged possible practical inconveniences and the risk of adverse consequences if replevin were executed and the respondent later prevailed in the VAASA action, but observed that the remedy of consolidation, stipulations, and discovery exist to mitigate duplicative proceedings. Dismissal of Civil Case No. 3123-2001-C was not the proper remedy.

Capacity to Sue — Doing Business Test

Respondents alleged that petitioner, an unlicensed foreign corporation, lacked capacity to sue because it was doing business in the Philippines without a license. The Court reviewed Corporation Code, sec. 133, the jurisprudential tests from Mentholatum v. Mangaliman (substance and continuity tests), and the statutory definition in Foreign Investments Act of 1991, sec. 3, par. (d) with its Implementing Rules, and earlier cases such as Merrill Lynch Futures, Commissioner of Internal Revenue v. Japan Airlines, and Communication Materials and Design, Inc. v. Court of Appeals. Applying those principles and the exemptions in Section 1 of the Implementing Rules of the FIA, the Court concluded that petitioner's activities under the VAASA — maintaining a stock of goods in the Philippines for processing and consigning equipment for processing for export — fell within activities that do not constitute doing business in the Philippines. On the evidence presented, petitioner was not doing business in the Philippines and therefore needed no license to sue. Consequently, respondents' motion to dismiss for lack of legal capacity lacked merit.

Estoppel Doctrine and Actions by Contracting Parties

The Court reaffirmed precedent that an unlicensed foreign corporation doing business in the Philippines may, in some circumstances, sue where the Philippine counterparty has contracted with and benefited from the foreign corporation, under the doctrine of estoppel. Although the Court did not rest its decision on estoppel, it noted the settled rule that a party who has recognized a corporation by contract may be estopped from later challenging its corporate personality.

Cause of Action Against Individual Respondents

The Court addressed respondents' contention that petitioner failed to state a cause of action against the individual defendants. The Court noted that a motion to dismiss admits the factual allegations of the complaint and that the complaint alleged that the individual respondents committed or permitted acts prejudicial to petitioner. Whether the individuals retained interests in Integrated Silicon or otherwise are liable is a factual matter for trial. The motion to

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