A. A foreign company has been exporting goods to a Philippine company for several years now. When the Philippine company failed to pay the latest exportation, the foreign company sued to collect in the Philippines. The Philippine company interposed the defense that the foreign company was doing business in the Philippines without a license; hence, could not sue before a Philippine court. Is this defense tenable? Explain your answer. (3%)
B. Define:
1. Doctrine of apparent authority (2%)
2. Trust fund doctrine (2%)
Suggested answer only. Not an official answer and not legal advice.
No, the defense is untenable. Apparent authority estops a company from denying an agent's authority. The trust fund doctrine holds corporate capital in trust for creditors. Under jurisprudence, mere exportation of goods without local commercial
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Quick check
May an unlicensed foreign corporation that merely exported goods from abroad file a collection suit in Philippine courts?
An unlicensed foreign corporation may sue in Philippine courts if its transaction consists of mere exportation from abroad rather than doing business locally.
What is the legal consequence under Section 150 of the Revised Corporation Code if a foreign corporation does business in the Philippines without a license?
Under Section 150 of the Revised Corporation Code, an unlicensed foreign corporation doing business locally cannot maintain a suit in Philippine courts.
Under the doctrine of apparent authority, when is a corporation bound by the acts of its officer or agent?
The doctrine of apparent authority estops a corporation from denying an agent's authority when it held the agent out as authorized to third parties in good faith.
What is the core principle underlying the trust fund doctrine in Philippine corporate law?
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Which primary statute governs foreign corporation licensing, corporate agency, and the trust fund doctrine in the Philippines?
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Learn more about these topics
1. Unlicensed Foreign Exporter
Under Section 150 of the Revised Corporation Code (Republic Act Number 11232) and established jurisprudence, a foreign corporation doing business in the Philippines without a license cannot maintain any suit or proceeding in Philippine courts. However, isolated transactions or mere exportation of goods from abroad into the Philippines without establishing a local office, agency, or performing commercial acts within the country do not constitute doing business. Consequently, an unlicensed foreign exporter retains the legal capacity to file a collection suit before Philippine courts against a defaulting local buyer.
2. Apparent Authority Doctrine
Under Philippine corporate law and agency principles, the doctrine of apparent authority provides that if a corporation knowingly permits an officer or agent to act within an ostensible scope of authority, or clothes the agent with apparent power to act on its behalf, the corporation is estopped from denying such authority against third parties who relied thereon in good faith. The doctrine prevents corporate entities from repudiating contracts or transactions executed by officers whom they held out as authorized representatives.
3. Trust Fund Doctrine
Under Section 122 of the Revised Corporation Code and corporate jurisprudence, the trust fund doctrine dictates that the capital stock, subscribed shares, and corporate assets of a corporation constitute a trust fund reserved primarily for the payment of corporate debts and the protection of creditors. Under this doctrine, corporate capital cannot be distributed to stockholders, refunded, or diverted to their benefit until all corporate liabilities and outstanding claims of creditors have been fully satisfied.