14. TPI v. Kingford (No COL in Enforcement of Arbitral Award)

8/9/2019 14. TPI v. Kingford (No COL in Enforcement of Arbitral Award)

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G.R. No. 185582 February 29, 2012

TUNA PROCESSING, INC.,v.PHILIPPINE KINGFORD, INC.,

PEREZ, J.:

Can a foreign corporation not licensed to do business in the Philippines, but which collects royalties fromentities in the Philippines, sue here to enforce a foreign arbitral award?

n this Petition for Review on Certiorari under Rule 45,!1" petitioner

#una Processing, nc$ %#P&, a foreigncorporation not licensed to do business in the Philippines, prays that the 'esolution!2" dated 21 (o)ember 200*of the 'egional #rial Court %'#C& of +aati City be declared )oid and the case be remanded to the '#C for furtherproceedings$ n the assailed 'esolution, the '#C dismissed petitioner-s Petition for Conrmation, Recognition,and Enforcement of Foreign Arbitral Award!." against respondent Philippine /ingford, nc$ %/ingford&, acorporation duly organied and eisting under the laws of the Philippines,!" on the ground that petitioner lacedlegal capacity to sue$!3"

The Antecedents 4n 1 5anuary 200.,

/anemitsu 6amaoa %hereinafter referred to as the 7licensor8&, copatentee of $;$Patent (o$ 3,*,<19, Philippine =etters Patent (o$ .11.*, and ndonesian Patent (o$ >000.911 %collecti)ely

referred to as the 76amaoa Patent8&,

!<"

and )e %3& Philippine tuna processors, namely:1$ @ngel ;eafood Corporation,

2$ Aast @sia Fish Co$,

.$ nc$, +ommy Bina #una 'esources,

$ ;anta Cru ;eafoods, nc$, and

3$ respondent /ingford %collecti)ely referred to as the 7sponsors87licensees8&!D"

entered into a +emorandum of @greement %+4@&,!*" pertinent pro)isions of which read:

1$ Back!o"#$ a#$ o%&'c()v'*. #he =icensor, coowner of $;$Patent (o$ 3,*,<19, Philippine

Patent (o$ .11.*, and ndonesian Patent (o$ >000.911 wishes to form an alliance with;ponsors for purposes of enforcing his three aforementioned patents, granting licenses underthose patents, and collecting royalties$

#he ;ponsors wish to be licensed under the aforementioned patents in order to practice theprocesses claimed in those patents in the nited ;tates, the Philippines, and ndonesia, enforcethose patents and collect royalties in conEunction with =icensor$

$ E*(a%+)*-'#( o T"#a P!oc'**o!*, I#c. #he parties hereto agree to the establishment of #una Processors, nc$ %7#P8&, a corporation established in the ;tate of California, in order toimplement the obEecti)es of this @greement$

3$ Ba#k acco"#(. #P shall open and maintain ban accounts in the nited ;tates, which will be

used eclusi)ely to deposit funds that it will collect and to disburse cash it will be obligated tospend in connection with the implementation of this @greement$

<$ O/#'!*)0 o TPI. #P shall be owned by the ;ponsors and =icensor$ =icensor shall be

assigned one share of #P for the purpose of being elected as member of the board of directors$ #he remaining shares of #P shall be held by the ;ponsors according to theirrespecti)e euity shares$ !9"

#he parties liewise eecuted a ;upplemental +emorandum of @greement!10" dated 13 5anuary 200. and an@greement to @mend +emorandum of @greement!11" dated 1 5uly 200.$

>ue to a series of e)ents not mentioned in the petition, the

licensees, including respondent /ingford,withdrew from petitioner #P and correspondingly reneged on their obligations$!12" Petitioner submitted the

dispute for arbitration before the nternational Centre for >ispute 'esolution in the ;tate of California, nited;tates and won the case against respondent$!1." Pertinent portions of the award read:

1.$1 Githin thirty %.0& days from the date of transmittal of this @ward to the Parties, pursuant tothe terms of this award, the total sum to be paid by RESPONDENT KINGFORD toCLAIANT TPI,is the sum of ONE ILLION SEEN HUNDRED FIFT3 THOUSAND EIGHT HUNDRED FORT3 SI4 DOLLARS AND TEN CENTS 61,75,89:.1;.A; For breach of the OA by not paying past due assessments, RESPONDENT KINGFORD shallpay CLAIANT the total sum of T<O HUNDRED T<ENT3 NINE THOUSAND THREE HUNDREDAND FIFT3 FIE DOLLARS AND NINET3 CENTS 622=,>55.=; which is 20Hof OA assessments since ;eptember 1, 2003!I" B; For breach of the OA in failing to cooperate with CLAIANT TPI in fullling the obEecti)es of

the OA, RESPONDENT KINGFORD shall pay CLAIANT the total sum of T<O HUNDREDSEENT3 ONE THOUSAND FOUR HUNDRED NINET3 DOLLARS AND T<ENT3 CENTS6271,9=.2;!I"!1" a#$

http://sc.judiciary.gov.ph/jurisprudence/2012/february2012/185582.htm#_ftn1

































C; For )iolation of THE LANHA ACT and infringement of the 3AAOKA :1= PATENT,RESPONDENT KINGFORD shall pay CLAIANT the total sum of ONE ILLION T<O HUNDREDFIFT3 THOUSAND DOLLARS AND NO CENTS 61,25,.;$ !13"

#o enforce the award, petitioner #P led on 10 4ctober 200D a Petition for Conrmation, Recognition,

and Enforcement of Foreign Arbitral Award before the '#C of +aati City$ #he petition was raJed to Kranch 130presided by 5udge Almo +$ @lameda$

@t Kranch 130, respondent /ingford led a +otion to >ismiss$!1<" @fter the court denied the motion for

lac of merit,!1D" respondent sought for the inhibition of 5udge @lameda and mo)ed for the reconsideration of theorder denying the motion$!1*" 5udge @lameda inhibited himself notwithstanding 7!t"he unfounded allegations andunsubstantiated assertions in the motion$8!19"

5udge Cedric 4$ 'ui of Kranch <1, to which the case was reraJed, in turn, granted respondent-s +otion for 'econsideration and dismissed the petition on the ground thatthe petitioner laced legal capacity to sue in the Philippines$!20"

Petitioner #P now sees to nullify, in this instant Petition for Review on Certiorari under Rule 45, theorder of the trial court dismissing its Petition for Conrmation, Recognition, and Enforcement of Foreign Arbitral

Award$

Issue

#he core issue in this case is whether or not the court a quo was correct in so dismissing the petition on

the ground of petitioner-s lac of legal capacity to sue$

Our Ruling

#he petition is impressed with merit$

#he Corporation Code of the Philippine epressly pro)ides:

S'c. 1>>. Doing business without a license. (o foreign corporation transactingbusiness in the Philippines without a license, or its successors or assigns, shall be permitted tomaintain or inter)ene in any action, suit or proceeding in any court or administrati)e agency of thePhilippinesI but such corporation may be sued or proceeded against before Philippine courts oradministrati)e tribunals on any )alid cause of action recognied under Philippine laws$

t is pursuant to the aforeuoted pro)ision that the court a quo dismissed the petition! #hus:

Lerein plaintiM #P-s 7Petition, etc$8 acnowledges that it 7is a foreign corporation establishedin the ;tate of California8 and 7was gi)en the eclusi)e right to license or sublicense the 6amaoaPatent8 and 7was assigned the eclusi)e right to enforce the said patent and collect correspondingroyalties8 in the Philippines$ #P liewise admits that it does not ha)e a license to do business in thePhilippines$

#here is no doubt, therefore, in the mind of this Court that #P has been doing business in the

Philippines, but sans a license to do so issued by the concerned go)ernment agency of the 'epublicof the Philippines, when it collected royalties from 7)e %3& Philippine tuna processors!," namely!,"@ngel ;eafood Corporation, Aast @sia Fish Co$, nc$, +ommy Bina #una 'esources, ;anta Cru;eafoods, nc$ and respondent Philippine /ingford, nc$8 #his being the real situation, #P cannot be

permitted to maintain or inter)ene in any action, suit or proceedings in any court or administrati)eagency of the Philippines$8 @ priori, the 7Petition, etc$8 etant of the plaintiM #P should bedismissed for it does not ha)e the legal personality to sue in the Philippines$!21"

#he petitioner counters, howe)er, that it is entitled to see for the recognition and enforcement of thesubEect foreign arbitral award in accordance with 'epublic @ct (o$ 92*3 % Alternative "ipute Reolution Act of #$$4&,!22" the Con)ention on the 'ecognition and Anforcement of Foreign @rbitral @wards

drafted during thenited (ations Conference on nternational Commercial @rbitration in 193* %%ew &or' Convention&, and the(C#'@= +odel =aw on nternational Commercial @rbitration %(odel )aw&,!2." as none of these specicallyreuires that the party seeing for the enforcement should ha)e legal capacity to sue$ t anchors its argumenton the following:

n the present case, enforcement has been eMecti)ely refused on a ground not found in the

! Alternative "ipute Reolution Act of 200", %ew &or' Convention, or (odel )aw! t is for thisreason that #P has brought this matter before this most Lonorable Court, as it !i"s imperati)e toclarify whether the Philippines- international obligations and ;tate policy to strengthen arbitration asa means of dispute resolution may be defeated by misplaced technical considerations not found inthe rele)ant laws$!2"

;imply put, how do we reconcile the pro)isions of the Corporation Code of the Philippine on one hand,and the Alternative "ipute Reolution Act of #$$4, the %ew &or' Convention and the (odel )aw on the other?

n se)eral cases, this Court had the occasion to discuss the nature and applicability of the Corporation

Code of the Philippine, a general law, )ia)i other special laws$ #hus, in *oruga v! Arcena, +r!,!23" this CourtreEected the application of the Corporation Code and applied the (ew Central Kan @ct$ t ratiocinated:

/oruga-s in)ocation of the pro)isions of the Corporation Code is misplaced$ n an earlier

case with similar antecedents, we ruled that:7#he Corporation Code, howe)er, is a general law applying to all types of corporations, while the (ew Central Kan @ct regulates specically bans and othernancial institutions, including the dissolution and liuidation thereof$

@s between ageneral and special law, the latter shall pre)ail N generalia specialibus nonderogant $8 %Amphasis supplied&!2<"






























Further, in the recent case of acienda )uiita, -ncorporated v! Preidential Agrarian Reform Council,!2D" this Courtheld:

Githout doubt, the Corporation Code is the general law pro)iding for the formation,

organiation and regulation of pri)ate corporations$ 4n the other hand, '@ <<3D is the special lawon agrarian reform$ @s between a general and special law, the latter shall pre)ailOgeneraliapecialibu non derogant $!2*"

Following the same principle, the

Alternative "ipute Reolution Act of #$$4 shall apply in this case asthe Act, as its title . An Act to -ntitutionali/e the 0e of an Alternative "ipute Reolution 12tem in the

Philippine and to Etablih the 3ce for Alternative "ipute Reolution, and for 3ther Purpoe . wouldsuggest, is a law especially enacted 7to acti)ely promote party autonomy in the resolution of disputes or thefreedom of the party to mae their own arrangements to resol)e their disputes$8!29" t specically pro)ideseclusi)e grounds a)ailable to the party opposing an application for recognition and enforcement of the arbitralaward$!.0"

nasmuch as the Alternative "ipute Reolution Act of #$$4, a municipal law, applies in the instantpetition, we do not see the need to discuss compliance with international obligations under the %ew &or' Convention and the (odel )aw! @fter all, both already form part of the law$

n particular, the

Alternative "ipute Reolution Act of #$$4 incorporated the %ew &or' Convention in the@ct by specically pro)iding:

;AC$ 2$ Application of the %ew &or' Convention! #he (ew 6or Con)ention shall go)ernthe recognition and enforcement of arbitral awards co)ered by the said Con)ention$

;AC$ 3$ Reection of a Foreign Arbitral Award! @ party to a foreign arbitration proceeding

may oppose an application for recognition and enforcement of the arbitral award in accordance withthe procedural rules to be promulgated by the ;upreme Court only on those grounds enumeratedunder @rticle of the (ew 6or Con)ention$ @ny other ground raised shall be disregarded by theregional trial court$

t also epressly adopted the (odel )aw, to wit:

;ec$ 19$ Adoption of the (odel )aw on -nternational Commercial Arbitration! nternationalcommercial arbitration shall be go)erned by the +odel =aw on nternational Commercial @rbitration%the 7+odel =aw8& adopted by the nited (ations Commission on nternational #rade =aw on 5une21, 19*3 $8

(ow, does a foreign corporation not licensed to do business in the Philippines ha)e legal capacity to sue

under the pro)isions of the Alternative "ipute Reolution Act of #$$4? Ge answer in the aQrmati)e$ ;ec$ 3 of the Alternative "ipute Reolution Act of #$$4 pro)ides that the opposing party in an

application for recognition and enforcement of the arbitral award may raise only those grounds that wereenumerated under @rticle of the %ew &or' Convention, to wit:

Article 6

1$ 'ecognition and enforcement of the award may be refused, at the reuest of the party

against whom it is in)oed, only if that party furnishes to the competent authority where therecognition and enforcement is sought, proof that: %a& #he parties to the agreement referred to in article were, under the law applicable tothem, under some incapacity, or the said agreement is not )alid under the law to which the partiesha)e subEected it or, failing any indication thereon, under the law of the country where the awardwas madeI or %b& #he party against whom the award is in)oed was not gi)en proper notice of theappointment of the arbitrator or of the arbitration proceedings or was otherwise unable to presenthis caseI or %c& #he award deals with a diMerence not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the

submission to arbitration, pro)ided that, if the decisions on matters submitted to arbitration can beseparated from those not so submitted, that part of the award which contains decisions on matterssubmitted to arbitration may be recognied and enforcedI or %d& #he composition of the arbitral authority or the arbitral procedure was not in accordancewith the agreement of the parties, or, failing such agreement, was not in accordance with the lawof the country where the arbitration too placeI or %e& #he award has not yet become binding on the parties, or has been set aside or suspendedby a competent authority of the country in which, or under the law of which, that award was made$ 2$ 'ecognition and enforcement of an arbitral award may also be refused if the competentauthority in the country where recognition and enforcement is sought nds that: %a& #he subEect matter of the diMerence is not capable of settlement by arbitration under thelaw of that countryI or %b& #he recognition or enforcement of the award would be contrary to the public policy of that

country$ Clearly, not one of these eclusi)e grounds touched on the capacity to sue of the party seeing the recognitionand enforcement of the award$












Pertinent pro)isions of the 1pecial Rule of Court on Alternative "ipute Reolution,!.1" which waspromulgated by the ;upreme Court, liewise support this position$

'ule 1.$1 of the ;pecial 'ules pro)ides that 7!a"ny party to a foreign arbitration may petition the court to

recognie and enforce a foreign arbitral award$8 #he contents of such petition are enumerated in 'ule 1.$3$!.2" Capacity to sue is not included$ 4ppositely, in the 'ule on local arbitral awards or arbitrations in instanceswhere 7the place of arbitration is in the Philippines,8!.." it is specically reuired that a petition 7to determine anyuestion concerning the eistence, )alidity and enforceability of such arbitration agreement8!." a)ailable to theparties before the commencement of arbitration andor a petition for 7Eudicial relief from the ruling of the arbitraltribunal on a preliminary uestion upholding or declining its Eurisdiction8!.3" after arbitration has alreadycommenced should state 7!t"he facts showing that the persons named as petitioner or respondent ha)e legal

capacity to sue or be sued$8!.<"

ndeed, it is in the best interest of Eustice that in the enforcement of a foreign arbitral award, we

deny a)ailment by the losing party of the rule that bars foreign corporations not licensed to do business inthe Philippines from maintaining a suit in our courts$

Ghen a party entersinto a contract containing a foreign arbitration clause and, as in this case, in fact submits itself toarbitration, it becomes bound by the contract, by the arbitration and by the result of arbitration, concedingthereby the capacity of the other party to enter into the contract, participate in the arbitration and cause theimplementation of the result$ @lthough not on all fours with the instant case, also worthy to consider is thewisdom of then @ssociate 5ustice Flerida 'uth P$ 'omero in her >issenting 4pinion in Aet Privati/ation 7rut v!Court of Appeal,!.D" to wit:

@rbitration, as an alternati)e mode of settlement, is gaining adherents in legal and

Eudicial circles here and abroad$ f its tested mechanism can simply be ignored by an aggrie)edparty, one who, it must be stressed, )oluntarily and acti)ely participated in the arbitrationproceedings from the )ery beginning, it will destroy the )ery essence of mutuality inherent inconsensual contracts$!.*"

Clearly, on the matter of capacity to sue, a foreign arbitral award should be respected not because it is

fa)ored o)er domestic laws and procedures, but because 'epublic @ct (o$ 92*3 has certainly erased any conRictof law uestion$

Finally, e)en assuming, only for the sae of argument, that the court a quo correctly obser)ed that

the (odel )aw, not the %ew &or' Convention, go)erns the subEect arbitral award,!.9" petitioner may still seerecognition and enforcement of the award in Philippine court, since the (odel )aw prescribes substantiallyidentical eclusi)e grounds for refusing recognition or enforcement$!0"

Premises considered, petitioner #P, although not licensed to do business in the Philippines, may seerecognition and enforcement of the foreign arbitral award in accordance with the pro)isions of the Alternative"ipute Reolution Act of #$$4$

#he remaining arguments of respondent /ingford are liewise unmeritorious$ Firt! #here is no need to consider respondent-s contention that petitioner #P improperly raised a

uestion of fact when it posited that its act of entering into a +4@ should not be considered 7doing business8 inthe Philippines for the purpose of determining capacity to sue$ Ge reiterate that the foreign corporation-scapacity to sue in the Philippines is not material insofar as the recognition and enforcement of a foreign arbitralaward is concerned$

1econd! 'espondent cannot fault petitioner for not ling a motion for reconsideration of the assailed

'esolution dated 21 (o)ember 200* dismissing the case$ Ge ha)e, time and again, ruled that the prior ling of a motion for reconsideration is not reuired in certiorari under 'ule 3$!1"

7hird! Ghile we agree that petitioner failed to obser)e the principle of hierarchy of courts, which, under

ordinary circumstances, warrants the outright dismissal of the case,!2" we opt to rela the rules following thepronouncement in Chua v! Ang,!." to wit:

!"t must be remembered that !the principle of hierarchy of courts" generally applies tocases in)ol)ing conRicting factual allegations$ Cases which depend on disputed facts for decisioncannot be brought immediately before us as we are not triers of facts$!" @ trict application of thisrule may be ecused when the reason behind the rule is not present in a case, as in the present

case, where the issues are not factual but purely legal$ n these types of uestions, this Court hasthe ultimate say so that we merely abbre)iate the re)iew process if we, because of the uniuecircumstances of a case, choose to hear and decide the legal issues outright$!3"

+oreo)er, the no)elty and the paramount importance of the issue herein raised should be seriously considered$!<" ;urely, there is a need to tae cogniance of the case not only to guide the bench and the bar, but if only tostrengthen arbitration as a means of dispute resolution, and uphold the policy of the ;tate embodied inthe Alternative "ipute Reolution Act of #$$4, to wit:

;ec$ 2$ "eclaration of Polic2! . t is hereby declared the policy of the ;tate to acti)ely

promote party autonomy in the resolution of disputes or the freedom of the party to mae theirown arrangements to resol)e their disputes$ #owards this end, the ;tate shall encourage andacti)ely promote the use of @lternati)e >ispute 'esolution %@>'& as an important means to achie)e

speedy and impartial Eustice and declog court docets$ Fourth! @s regards the issue on the )alidity and enforceability of the foreign arbitral award, we lea)e its

determination to the court a quo where its recognition and enforcement is being sought$





































Fifth! 'espondent claims that petitioner failed to furnish the court of origin a copy of the motion for timeto le petition for re)iew on certiorari before the petition was led with this Court$!D" Ge, howe)er, ndpetitioner-s reply in order$ #hus:

2<$ @dmittedly, reference to 7Kranch <D8 in petitioner #P-s 7+otion for #ime to File a

Petition for 'e)iew on Certiorari under 'ule 38 is a typographical error$ @s correctly pointed outby respondent /ingford, the order sought to be assailed originated from 'egional #rial Court, +aatiCity, Kranch <1$

2D$ pon conrmation with the 'egional #rial Court, +aati City, Kranch <1, a copy of

petitioner #P-s motion was recei)ed by the +etropolitan #rial Court, +aati City, Kranch <D$ 4n *

5anuary 2009, the motion was forwarded to the 'egional #rial Court, +aati City, Kranch <1$!*"

@ll considered, petitioner #P, although a foreign corporation not licensed to do business in thePhilippines, is not, for that reason alone, precluded from ling the Petition for Conrmation, Recognition, andEnforcement of Foreign Arbitral Award before a Philippine court$

<HEREFORE, the 'esolution dated 21 (o)ember 200* of the 'egional #rial Court, Kranch <1, +aatiCity in ;pecial Proceedings (o$ +<3.. is hereby REERSEDand SET ASIDE$ #he case is REANDED toKranch <1 for further proceedings$

SO ORDERED.





Documents

14. TPI v. Kingford (No COL in Enforcement of Arbitral Award)