Case Summary (G.R. No. 176951)
Petitioner
Steelcase, Inc.
Respondent
Design International Selections, Inc. (DISI)
Key Dates
- Circa 1986–1987: Oral dealership agreement entered into.
- January 1999: Agreement terminated; Steelcase files complaint for unpaid accounts (US$600,000).
- April 26, 1999: RTC admits Amended Complaint.
- November 15, 1999: RTC dismisses complaint, grants DISI’s TRO, denies Second Amended Complaint.
- May 29, 2000: RTC denies Steelcase’s motion for reconsideration.
- March 31, 2005: Court of Appeals affirms RTC orders.
- March 23, 2006: CA denies reconsideration.
- April 18, 2012: Supreme Court decision under review.
Applicable Law
- 1987 Philippine Constitution (Decision date post-1990)
- Corporation Code of the Philippines, Sec. 133 (Doing business without license)
- Republic Act No. 7042 (Foreign Investments Act of 1991), Sec. 3(d)
- Implementing Rules and Regulations of R.A. 7042, Rule I, Sec. 1(f)
Facts
Steelcase appointed DISI as non-exclusive dealer to market and sell its furniture in the Philippines. DISI transacted with end-users in its own name, paid for goods, and bore freight and taxes. In January 1999, Steelcase sought payment of US$600,000. DISI counterclaimed, seeking injunctions and damages, and challenged Steelcase’s capacity to sue on grounds of unlicensed business operations.
Issues
- Whether Steelcase was “doing business” in the Philippines without a license and thus barred from suing.
- Whether DISI is estopped from challenging Steelcase’s capacity to sue.
Court’s Ruling
Supreme Court reverses the CA and RTC. Steelcase did not engage in “doing business” under R.A. 7042’s definition and its appointment of DISI as an independent distributor falls within the statutory exception. Even assuming a violation, DISI is estopped from contesting Steelcase’s capacity to sue. Complaint reinstated; case remanded to RTC.
Analysis of “Doing Business” Doctrine
- R.A. 7042 Sec. 3(d) excludes from “doing business” the appointment of a distributor who transacts in its own name and for its own account.
- Implementing Rules elaborate that only representatives under the full control of the foreign entity constitute “doing business.”
- DISI was independently owned (1979), marketed multiple brands, negotiated quotations, added profit margins, and remitted payment before shipment.
- Alleged acts—letters to Phinma, cancellation of Visteon orders, shipments via Modernform, and management expectations—did not result in direct sales by Steelcase and reflect sound business oversight, not control.
- No evidence justified piercing Modernform’s corporate veil despite Steelcase’s minority share.
Estoppel Doctrine
- DISI entered into and benefited from the dealership for 12 years, building Steelcase’s market goodwill and earning performance awards.
- DISI knew or should have known of Steelcase’s licensing status and remained silent u
Case Syllabus (G.R. No. 176951)
Facts
- Steelcase, Inc. (Steelcase) is a Michigan, U.S.A. corporation manufacturing office furniture and distributing through worldwide dealers.
- Design International Selections, Inc. (DISI) is a Philippine corporation engaged in the distribution of furniture.
- In 1986 or 1987, Steelcase and DISI entered into an oral dealership agreement: DISI would market, sell, distribute, install, and service Steelcase products to end-users in the Philippines.
- The relationship lasted until January 1999, when the agreement was terminated after a breach, without either party admitting fault.
- On January 18, 1999, Steelcase sued DISI for an unpaid account of US$600,000, seeking actual, exemplary, and attorney’s fees.
- On February 4, 1999, DISI filed its answer with compulsory counterclaims, praying (a) for a TRO and preliminary injunction restraining Steelcase from independent sales in the Philippines, (b) dismissal of the complaint for lack of merit and lack of capacity to sue, and (c) actual, moral, and exemplary damages with costs.
- On April 26, 1999, the RTC admitted Steelcase’s first amended complaint. On November 15, 1999, the RTC dismissed the complaint, granted DISI a TRO, set aside the April 26 order, and denied Steelcase’s motion to admit its second amended complaint. The RTC found Steelcase was “doing business” in the Philippines without a license.
- The RTC denied reconsideration on May 29, 2000. Steelcase appealed to the Court of Appeals (CA).
- On March 31, 2005, the CA affirmed the RTC, citing Steelcase’s (1) letter to Phinma about imminent distribution rights, (2) unilateral order cancellations, (3) continued shipments via Modernform, and (4) operational impositions on DISI as proof of doing business with