b. Corporations (RA 11232, Secs. 2, 4, and 18)

Foreign Corporations Doing Business

Doing business implies a continuity of commercial dealings, and contemplates to that extent the performance of acts, or the exercise of some of the functions normally incident to and in progressive prosecution of commercial gain or of the purpose and object of the business organization. The following acts shall not be deemed “doing business” in the Philippines:

• Mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor;
• Having a nominee director or officer to represent its interests in such corporation;
• Appointing a representative or distributor domiciled in the Philippines which transacts business in the representative’s or distributor’s own name and account;
• The publication of a general advertisement through any print or broadcast media;
• Maintaining a stock of goods in the Philippines solely for the purpose of having the same processed by another entity in the Philippines;
• Consignment by a foreign entity of equipment with a local company to be used in the processing of products for export;
• Collecting information in the Philippines; and
• Performing services auxiliary to an existing isolated contract of sale which are not on a continuing basis, such as installing in the Philippines machinery it has manufactured or exported to the Philippines, servicing the same, training domestic workers to operate it, and similar incidental services. (Sec.1, IRR of Foreign Investments Act)

Retroactivity in ratification of contracts

GR: Retroactivity applies in ratification of contracts.

XPN: When the rights of innocent third persons will be prejudiced, ratification cannot operate retroactively to prejudice those rights.

NOTE: Ratification does not require the conformity of the contracting party who has no right to bring the action for annulment.

Q: The Senior Vice President of TERP Construction Corp., Escalona, made a commitment to Banco Filipino Savings and Mortgage Bank that TERP Corp. would pay interest differentials to the same. However, after TERP Corp. subsequently paid the interests as agreed upon, it thereafter refused to pay its unpaid balance because it argues that Escalona was not authorized to make such commitment. Is act of Escalona, as Senior Vice President of TERP Corp. binding upon it?

A: YES. A corporation exercises its corporate powers through its board of directors. This power may be validly delegated to its officers, committees, or agencies. An officer’s authority may be actual or apparent. Apparent authority is ascertained from the corporation’s manner of holding out an officer or agent as authorized, or its acquiescence in acts of that nature with actual or constructive knowledge. Actual authority may be express or implied. Express actual authority refers to the corporate powers expressly delegated by the board of directors. Implied actual authority, on the other hand, can be measured by his or her prior acts which have been ratified by the corporation or whose benefits have been accepted by the corporation.

Here, TERP Corp.'s subsequent act of twice paying the additional interest Escalona committed to Banco Filipino Bank is considered a ratification of Escalona's acts. Moreover, Escalona likewise had apparent authority to transact on behalf of petitioner. Here, Banco Filipino Bank relied on Escalona’s apparent authority to promise interest payments, considering that Escalona was TERP Corp.’s then senior vice president. His apparent authority was further demonstrated by TERP Corp. paying Banco Filipino Bank after Escalona promised it. (Terp Construction Corporation v. Banco Filipino Savings and Mortgage bank, G.R. No. 221771, September 18, 2019)