Atlantic Mutual Insurance Co. v. Cebu Stevedoring Co.
REITERATIONFacts
The Antecedents: Plaintiffs-appellants, Atlantic Mutual Insurance Company and Continental Insurance Company, foreign corporations, sued defendant-appellee, Cebu Stevedoring Co., Inc., a domestic corporation, for recovery of P15,980.30. The claim arose from damage to a shipment of copra that the defendant, as a common carrier, undertook to carry. The plaintiffs, having insured the copra and paid the shipper/consignee for the damage, sought reimbursement from the defendant as subrogees. Procedural History: The defendant moved to dismiss the complaint on the grounds that the plaintiffs lacked legal personality to sue in Philippine courts and that the complaint failed to state a cause of action, both based on the alleged non-compliance with Section 69 of the Corporation Law, which requires foreign corporations transacting business in the Philippines to obtain a license. The Petition: The trial court initially found the complaint deficient for failing to allege that the plaintiffs were licensed to transact business in the Philippines and gave them an opportunity to amend. The plaintiffs manifested that they could not comply and would await dismissal to appeal. The trial court subsequently issued an order of dismissal. The plaintiffs appealed, contending that a license is not required for foreign corporations not engaged in business in the Philippines, particularly for isolated transactions.
Issue(s)
Whether a foreign corporation not engaged in business in the Philippines needs a license to sue in Philippine courts. Whether the complaint sufficiently alleged the plaintiffs' capacity to sue.
Ruling
The orders appealed from are affirmed, with costs against plaintiffs-appellants.
Ratio Decidendi
On the issue of whether a foreign corporation not engaged in business in the Philippines needs a license to sue in Philippine courts: The Supreme Court held that the contention of the appellants is correct as far as it goes. Citing Marshall-Wells Co. vs. Elser & Co., the Court reiterated that Section 69 of the Corporation Law means that no foreign corporation shall be permitted to transact business in the Philippines unless it has the required license, and until compliance, it shall not be permitted to maintain any suit in local courts. The object of the statute is not to prevent single acts but to prevent acquiring a domicile for business without amenability to suit. The law does not intend to exclude a foreign corporation obtaining an isolated order from seeking redress in Philippine courts. Therefore, a license is not required if the foreign corporation is not doing business in the Philippines and sues on an isolated transaction. On the issue of whether the complaint sufficiently alleged the plaintiffs' capacity to sue: The Supreme Court found that merely stating that the plaintiffs are foreign corporations does not resolve the issue. The averment conjures two possibilities: either they are engaged in business in the Philippines, in which case they must be licensed to sue, or they are not so engaged, and if the transaction is isolated, no license is required. In either case, the qualifying circumstance is an essential part of the element of plaintiffs' capacity to sue and must be affirmatively pleaded. The Court noted that under the Revised Rules of Court (Section 4, Rule 8), facts showing the capacity of a party to sue must be averred. It would be unfair to impose upon the appellee the burden of asserting and proving the contrary when these matters are peculiarly within the knowledge of the appellants. Thus, the complaint was deficient for failing to allege compliance with the licensing requirement or exemption therefrom.
Main Doctrine
A foreign corporation not engaged in business in the Philippines is not barred from seeking redress in Philippine courts for isolated transactions, even if it has not obtained a license pursuant to Section 69 of the Corporation Law. However, the capacity to sue, or the exemption therefrom, must be affirmatively pleaded in the complaint.