Avon Insurance PLC., et al. v. CA (G.R. No. 97642)

Facts:

Respondent Yupangco Cotton Mills engaged to secure with Worldwide Security and Insurance Co. several of its properties which were then covered by reinsurance treaties between Worldwide Security and several foreign reinsurance companies, including herein petitioners. These reinsurance agreements had been made through an international broker acting for Worldwide Security. While the policies are in effect, Yupangco’s properties were razed in fire giving rise to their indemnification. Worldwide acknowledged a remaining balance and assigned to Yupangco all reinsurance proceeds still collectible from all the reinsurance companies. Thus, as assignee and original insured, Yupangco instituted a collection suit against petitioners. Petitioners averred that they are foreign corporations not doing business in the Philippines therefore cannot be subject to the jurisdiction of its courts. CA found for Yupangco.

Issue:

Whether or not petitioners are foreign corporations doing business in the Philippines.

Ruling: NO.

To qualify the petitioners’ business of reinsurance within the Philippine forum, resort must be made to the established principles in determining what is meant by “doing business in the Philippines.” The term ordinarily implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of the functions normally incident to and in progressive prosecution of the purpose and object of its organization.

As it is, private respondent has made no allegation or demonstration of the existence of petitioners’ domestic agent, but avers simply that they are doing business not only abroad but in the Philippines as well. It does not appear at all that the petitioners had performed any act which would give the general public the impression that it had been engaging, or intends to engage in its ordinary and usual business undertakings in the country. The reinsurance treaties between the petitioners and Worldwide Surety and Insurance were made through an international insurance broker, and not through any entity or means remotely connected with the Philippines. Moreover, there is authority to the effect that a reinsurance company is not doing business in a certain state merely because the property or lives which are insured by the original insurer company are located in that state. The reason for this is that a contract of reinsurance is generally a separate and distinct arrangement from the original contract of insurance, whose contracted risk is insured in the reinsurance agreement. Hence, the original insured has generally no interest in the contract of reinsurance.

Indeed, if a foreign corporation does not do business here, there would be no reason for it to be subject to the State’s regulation. As we observed, in so far as the State is concerned, such foreign corporation has no legal existence. Therefore, to subject such corporation to the courts’ jurisdiction would violate the essence of sovereignty.

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