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Rimbunan Hijau v. Oriental Wood Processing

September 23, 2005

J. Tinga

Facts:

1. Rimbunan and Niugini are unlicensed foreign corporations who entered into a contract to

sell and export PNG round logs to Oriental Wood Processing (domestic corporation) for a

total purchase price of $543, 699.52.

a. Rimbunan and Niugini are foreign corporation organized and existing under the laws

of Papua New Guinea.

i. Niugini is Rimbunans subsidiary with the same set of directors and officers.

b. Oriental Wood Processing is a private domestic corporation.

c. PNG round logs are mixed group of series of Papua New Guinea round logs.

2. Oriental Wood only managed to pay $199, 958 in installments via telegraphic transfers to

Rimbunans bank account.

3. When Oriental refused to pay the remaining balance of $343, 741. 52, Rimbunan instituted

a complaint for sum of money against Oriental in the RTC Bulacan.

4. Oriental filed a motion to dismiss- alleging the following:

a. Rimbunanan and Niugini have no legal capacity to sue in our jurisdiction.b. Rimbunan and Niugini had been doing business in the Philippines without a license

and had made 14 transactions with Oriental involving round logs with a total

amount of $4M.

c. Such transactions as stated above constitute a continuity of commercial dealings in

the progressive prosecution of the purpose and object of Rimbunans organization.

5. Rimbunan and Niugini filed a motion to Expunge Orientals Motion to Dismiss.

a. In this motion, R&N argued that Oriental is ESTOPPED from questioning their

capacity to sue when they entered a contract with them.

6. Rimbunan and Niugini also filed a motion to Declare Defendant (Oriental) in

default.a. This is for the failure of Oriental to pay the balance of the exported logs.

7. RTC Bulacan ruled in favor of Rimbunan. In dismissing Orientals motion to dismiss,

RTC decided that:

a. Rimbunan and Niugini were merely suing on an isolated transaction.

b. Also, Oriental is ESTOPPED in questioning the personality of Rimbunan and Niugini

since Oriental acknowledged their personalities by entering into a contract with

them.

8. Oriental elevated the matter to the CA via SPECIAL CIVIL ACTION FOR CETIORARI UNDER

RULE 65. CA reversed the decision of the RTC because: (basically affirmed the

arguments of Oriental)

a. Based on the facts, petitioners dealings constituted doing business in the

Philippines.

b. Rimbunan and Niugini never [having denied] but even admitted [that their acts

and transactions] constitute not merely incidental or casual performance of

business, but are of such character as distinctly to indicate a purpose on [their] part

to do business in the Philippines.

9. With this, Rimbunan and Niugini went to the SC via PETITION for review on

certiorari.

Issue

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1. Whether or not the CA was correct in granting the extraordinary remedy of certiorari. NO.

2. Whether or not Rimbunan and Niugini have legal capacity to sue in our jurisdiction. YES.

Held/Ratio

On the CAs grant of the extraordinary remedy of certiorariA. First of all, Oriental should not have appealed the denial of their motion to dismiss through a

special civil action for certiorari.

1. An order denying a motion to dismiss is an interlocutory order which neither terminates

nor finally disposes of a case as it leaves something to be done by the court before the

case is finally decided on the merits. As such, the general rule is that the denial of a

motion to dismiss cannot be questioned in a special civil action for certiorari

which is a remedy designed to correct errors of jurisdiction and not errors of

judgment.

B. Second, CA granted the extraordinary remedy of certiorari 1)without regard to the evidence

on Rimbunans legal capacity to sue and; 2) no showing of grave abuse of discretion.

2. CA had substituted its evaluation of the motion to dismiss and the opposition thereto for

that of the trial courts, without regard to the evidence which was still to be presentedon the issue of whether or not petitioners are doing business in the Philippines or merely

suing on an isolated transaction. It must be remembered that the standard of grave abuse

of discretion is error of jurisdiction as distinguished from error of judgment.

a. What the CA essentially do is that they ruled against Rimbunan based on mere

allegations of Oriental (those in the motion to dismiss) and NOT based on evidence.

b. Moreover, CA relied on Oriental assertion that Rimbunan did not deny the

allegations to the motion to dismiss and therefore can constitute hard evidence

against Rimbunan.

3. No showing or evidence that there was grave abuse of discretion to justify the grant of

extraordinary remedy of certiorari.

On Rimbunan and Niuginis legal capacity to sueRimbunan and Niugini have legal capacity to sue because Oriental is stopped from questioning

their capacity when they entered into a contract with Rimbunan.

A. The ascertainment of whether a foreign corporation is merely suing on an isolated transaction

or is actually doing business in the Philippines requires the elicitation of at least a

preponderant set of facts (preponderance of evidence). It simply cannot be answered

through conjectures or acceptance of unsubstantiated allegations.

B. Courts could not afford to dismiss a litigants complaint on the basis of a half-baked

conclusion that a party is incapacitated to sue in this jurisdiction with no evidence to show for

it. The issue has to be determined in accordance with the facts presented, not on the basis of

unsubstantiated allegations.

C. The rule is that a party is estopped to challenge the personality of a corporation after having

acknowledged the same by entering into a contract with it. And the doctrine of estoppel to

deny corporate existence applies to foreign as well as to domestic corporations; one who

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has dealt with a corporation of foreign origin as a corporate entity is estopped to deny its

existence and capacity.

SC grants the petition. Reversed CAs decision.