Corp Law Topic: Principal Place of Business
Well established in our jurisprudence is the rule that the residence of a corporation is the place where its principal office is located, as stated in its Articles of Incorporation.
Petitioner [herein Respondent] Goldstar Elevator Philippines, Inc. (GOLDSTAR for brevity) is a domestic corporation primarily engaged in the business of marketing, distributing, selling, importing, installing, and maintaining elevators and escalators, with address at 6th Floor, Jacinta II Building, 64 EDSA, Guadalupe, Makati City.
On the other hand, private respondent [herein petitioner] Hyatt Elevators and Escalators Company (HYATT for brevity) is a domestic corporation similarly engaged in the business of selling, installing and maintaining/servicing elevators, escalators and parking equipment, with address at the 6th Floor, Dao I Condominium, Salcedo St., Legaspi Village, Makati, as stated in its Articles of Incorporation.
On February 23, 1999, HYATT filed a Complaint for unfair trade practices and damages under Articles 19, 20 and 21 of the Civil Code of the Philippines against LG Industrial Systems Co. Ltd. (LGISC) and LG International Corporation (LGIC).
Alleging among others, that: in 1988, it was appointed by LGIC and LGISC as the exclusive distributor of LG elevators and escalators in the Philippines under a ‘Distributorship Agreement’; x x x LGISC, in the latter part of 1996, made a proposal to change the exclusive distributorship agency to that of a joint venture partnership; while it looked forward to a healthy and fruitful negotiation for a joint venture, however, the various meetings it had with LGISC and LGIC, through the latter’s representatives, were conducted in utmost bad faith and with malevolent intentions; in the middle of the negotiations, in order to put pressures upon it, LGISC and LGIC terminated the Exclusive Distributorship Agreement; x x x [A]s a consequence, [HYATT] suffered P120,000,000.00 as actual damages.
On March 17, 1999, LGISC and LGIC filed a Motion to Dismiss raising the following grounds: (1) lack of jurisdiction over the persons of defendants, summons not having been served on its resident agent; (2) improper venue; and (3) failure to state a cause of action.
The [trial] court denied the said motion in an Order dated January 7, 2000.
On December 4, 2000, HYATT filed a motion for leave of court to amend the complaint, alleging that subsequent to the filing of the complaint, it learned that LGISC transferred all its organization, assets and goodwill, as a consequence of a joint venture agreement with Otis Elevator Company of the USA, to LG Otis Elevator Company (LG OTIS, for brevity). Thus, LGISC was to be substituted or changed to LG OTIS, its successor-in-interest.
Likewise, the motion averred that x x x GOLDSTAR was being utilized by LG OTIS and LGIC in perpetrating their unlawful and unjustified acts against HYATT. Consequently, in order to afford complete relief, GOLDSTAR was to be additionally impleaded as a party-defendant.
Hence, in the Amended Complaint, HYATT impleaded x x x GOLDSTAR as a party-defendant, and all references to LGISC were correspondingly replaced with LG OTIS.
On January 8, 2001, the [trial] court admitted the Amended Complaint.
On April 12, 2002, x x x GOLDSTAR filed a Motion to Dismiss the amended complaint, raising the following grounds: (1) the venue was improperly laid, as neither HYATT nor defendants reside in Mandaluyong City, where the original case was filed xxx
In the Order dated May 27, 2002, which is the main subject of the present petition, the [trial] court denied the motion to dismiss: the court resolves to rule that the complaint sufficiently states a cause of action and that the venue is properly laid.
The appellate court held that the venue was clearly improper, because none of the litigants "resided" in Mandaluyong City, where the case was filed.
According to the appellate court, since Makati was the principal place of business of both respondent and petitioner, as stated in the latter’s Articles of Incorporation, that place was controlling for purposes of determining the proper venue. The fact that petitioner had abandoned its principal office in Makati years prior to the filing of the original case did not affect the venue where personal actions could be commenced and tried.
Issue:
Whether or not the venue was improper.
Held:
Yes, petition denied.
Section 2 of Rule 4 of the 1997 Revised Rules of Court:
"Sec. 2. Venue of personal actions. – All other actions may be commenced and tried where the plaintiff or any of the principal plaintiff resides, or where the defendant or any of the principal defendant resides, or in the case of a non-resident defendant where he may be found, at the election of the plaintiff."
Since both parties to this case are corporations, there is a need to clarify the meaning of "residence." The law recognizes two types of persons: (1) natural and (2) juridical. Corporations come under the latter in accordance with Article 44(3) of the Civil Code.
Residence is the permanent home -- the place to which, whenever absent for business or pleasure, one intends to return. Residence is vital when dealing with venue.
A corporation, however, has no residence in the same sense in which this term is applied to a natural person. This is precisely the reason why the Court in Young Auto Supply Company v. Court of Appeals ruled that "for practical purposes, a corporation is in a metaphysical sense a resident of the place where its principal office is located as stated in the articles of incorporation."
The residence of a corporation is the place where its principal office is established.
It now becomes apparent that the residence or domicile of a juridical person is fixed by "the law creating or recognizing" it. Under Section 14(3) of the Corporation Code, the place where the principal office of the corporation is to be located is one of the required contents of the articles of incorporation, which shall be filed with the Securities and Exchange Commission (SEC).
In the present case, there is no question as to the residence of respondent. What needs to be examined is that of petitioner. the latter’s principal place of business is Makati, as indicated in its Articles of Incorporation. Since the principal place of business of a corporation determines its residence or domicile, then the place indicated in petitioner’s articles of incorporation becomes controlling in determining the venue for this case.
Jurisprudence has, however, settled that the place where the principal office of a corporation is located, as stated in the articles, indeed establishes its residence. This ruling is important in determining the venue of an action by or against a corporation.
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