Title
Signetics Corp. vs. Court of Appeals
Case
G.R. No. 105141
Decision Date
Aug 31, 1993
A foreign corporation, Signetics, challenged Philippine court jurisdiction over a lease dispute, alleging it ceased operations; the Supreme Court upheld jurisdiction based on complaint allegations, rejecting prior proof requirements.
foreign corporation
local company
jurisdiction
A

Case Summary (G.R. No. 105141)

Factual Background

Signetics Corporation entered the Philippine market through a wholly owned domestic subsidiary, Signetics Filipinas Corporation (SigFil). SigFil entered into a lease of land with Fruehauf Electronics Phils., Inc. The complaint alleged that Signetics caused SigFil to insert language in the lease excluding certain "machineries, equipment and accessories" from a cost-free transfer provision. Fruehauf asserted claims for damages, accounting or return of machinery and equipment, transfer of title, and surrender of possession of buildings and improvements on the leased premises. The complaint further alleged that Signetics transferred all shares of SigFil to TEAM Holdings Limited on November 21, 1986, and that SigFil thereafter changed its corporate name to Technology Electronics Assembly and Management (T.E.A.M.) Pacific Corporation on January 12, 1987, which Fruehauf characterized as a devious scheme to perpetuate fraud and shield Signetics.

Service of Summons and Special Appearance

Service of summons on Signetics Corporation was effected through TEAM Pacific Corporation, pursuant to the address averred in the complaint. By special appearance, Signetics filed a motion to dismiss on May 14, 1990, asserting lack of jurisdiction over its person. Signetics invoked Section 14, Rule 14 and the rule stated in Pacific Micronisian Line, Inc. v. Del Rosario and Pelington to the effect that the fact of doing business in the Philippines must first be established before service on a foreign corporation is valid and jurisdiction can be acquired.

Trial Court Proceedings and Ruling

The trial court denied the motion to dismiss. The court quoted Wang Laboratories, Inc. v. Mendoza for the proposition that a single act may constitute doing business when it indicates a purpose to do other business, and further emphasized that even a foreign corporation not doing business in the Philippines may be sued for acts done against persons in the Philippines. The court found Signetics’ motion to dismiss to lack sufficient merit and denied it. A motion for reconsideration by Signetics was likewise denied on March 11, 1991, with the trial court reaffirming the applicability of Wang Laboratories as prevailing jurisprudence.

Court of Appeals Proceedings and Ruling

Signetics Corporation filed a petition for certiorari and prohibition with the Court of Appeals (CA-G.R. SP No. 24758), accompanied by an application for preliminary injunction. The Court of Appeals dismissed the petition and affirmed the orders of the trial court on February 20, 1992. A motion for reconsideration in the Court of Appeals was denied. Signetics then elevated the matter to the Supreme Court by a petition for review on certiorari.

Issues Presented to the Supreme Court

The principal issue was whether the lower courts correctly assumed jurisdiction over Signetics Corporation, a foreign corporation, where the complaint contained allegations that Signetics had engaged in business in the Philippines and had used a domestic subsidiary and a later-named corporate entity as its local conduit. Subsidiary issues included whether allegations in the complaint suffice in lieu of proof to confer personal jurisdiction and whether a foreign corporation that ceased doing business at the time of suit could still be required to answer for acts that accrued while it was doing business.

Petitioner's Contentions

Signetics Corporation contended that the complaint contained only mere allegations and not proof of doing business in the Philippines. Petitioner urged that, under Pacific Micronisian, the fact of doing business must be established prior to valid service and that allegations alone were insufficient. Signetics argued that its only connection was a passive equity investment in SigFil, which it claimed had been transferred to TEAM Holdings, and that authorities such as Wang Laboratories and Facilities Management Corporation were inapplicable or merely obiter dicta because those foreign corporations were found actually to have been doing business in the Philippines.

Respondent's Assertions and Allegations of Corporate Conduit and Fraud

Fruehauf Electronics Phils., Inc. alleged that Signetics organized SigFil as its operating entity in the Philippines, entered into the lease through that conduit, and later caused a transfer of SigFil shares to TEAM Holdings Limited followed by a corporate name change to TEAM Pacific Corporation to conceal ownership and perpetuate fraud. Fruehauf invoked doctrines allowing extraterritorial service under Section 17, Rule 14 because the relief sought concerned property in the Philippines. Fruehauf also filed a "Manifestation" during proceedings on a motion to sell attached properties, which the trial court interpreted as demonstrating Signetics’ continuing interest in the subject property and supporting the claim that TEAM Pacific acted as Signetics’ agent or alter ego.

Supreme Court's Legal Analysis

The Court affirmed the Court of Appeals and the trial court. The Court recognized that Pacific Micronisian Line, Inc. v. Del Rosario and Pelington held that service under the pertinent section requires that the foreign corporation be doing business in the Philippines; the Court noted that the quoted passage treated doing business as a sine qua non for the mode of service addressed in that decision. The Court, however, explained that jurisdiction and venue are ordinarily determined by the allegations of the complaint. The Court observed that the complaint in this case contained cumulative allegations that Signetics became interested in doing business in the Philippines, established SigFil as its local operating entity, entered into the lease by means of that entity, transferred shares to TEAM Holdings Limited, and that SigFil thereafter assumed the name TEAM Pacific Corporation in what Fruehauf alleged was a deceptive scheme. The Court found these allegations, taken together, to be sufficient at the pleading stage to support service on TEAM Pacific as an agent and to permit the trial court to assume jurisdiction for the purposes of proceeding to trial.

Treatment of Precedent and Factual Distinctions

The Court distinguished Hyopsung Maritime Co., Ltd. v. Court of Appeals, in which the factual matrix showed that the contract and shipment were consummated entirely in Korea and the petitioner had no Philippine agent, rendering Philippine courts without reach. The Supreme Court held that the present facts differed materially. The Court further reiterated that a foreign corporation not engaged in business in the Philippines may nevertheless be sued for

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