G.R. No. 171995; April 18, 2012
STEELCASE, INC., Petitioner, vs. DESIGN INTERNATIONAL SELECTIONS, INC., Respondent.

FACTS

Petitioner Steelcase, Inc., a foreign corporation from the USA, and respondent Design International Selections, Inc. (DISI), a domestic corporation, entered into an oral dealership agreement in 1986 or 1987. Under this agreement, DISI was granted the right to market, sell, distribute, install, and service Steelcase’s office furniture products in the Philippines. Their business relationship continued until its termination in January 1999. Subsequently, Steelcase filed a complaint for sum of money against DISI in the Regional Trial Court (RTC) to collect an alleged unpaid account of US$600,000.00.
In its answer, DISI sought the dismissal of the complaint, arguing that Steelcase was doing business in the Philippines without the required license and therefore lacked legal capacity to sue. The RTC dismissed the complaint, ruling that Steelcase was indeed “doing business” in the country without a license, citing its imposition of performance expectations on DISI and its appointment of a local representative. The Court of Appeals affirmed this dismissal, noting acts such as Steelcase’s direct communication with a potential customer and cancellation of orders, which indicated its pursuit of business in the Philippines.

ISSUE

The primary issue is whether Steelcase was “doing business” in the Philippines without a license, thereby barring it from seeking redress in Philippine courts.

RULING

The Supreme Court reversed the lower courts and ruled in favor of Steelcase, holding that it was not “doing business” in the Philippines. The legal logic centers on the statutory definition under the Foreign Investments Act of 1991 (R.A. No. 7042), as amended, which explicitly states that the phrase “doing business” excludes the mere appointment of a local distributor that transacts business in its own name and for its own account. The Court emphasized that the agreement was a simple distributorship where DISI acted as an independent entity, purchasing products from Steelcase and reselling them domestically. Steelcase did not create a subsidiary or engage in systematic business activities within the Philippines.
The Court clarified that isolated acts, such as the cited communications or order cancellations, which were incidental to the termination of the distributorship, do not constitute “doing business.” The test is whether the foreign corporation is engaged in continuity of commercial dealings for profit within the country. Here, Steelcase’s activities were limited to dealing with DISI as an independent contractor. Consequently, as an unlicensed foreign corporation not doing business in the Philippines, Steelcase retained the capacity to sue for the enforcement of a contract related to its isolated transactions. The case was remanded to the RTC for further proceedings on the merits of the collection suit.