G.R. No. L-29072. June 7, 1971.
PHILIPPINE COLUMBARY ENTERPRISES CO., RUFINO DY CHIN, and FERMIN DY, petitioners, vs. HON. GREGORIO T. LANTIN, in his capacity as Judge of the Court of First Instance of Manila, Br. VII, and KATOH & CO., LTD., respondents.

FACTS

Private respondent Katoh & Co., Ltd., a Japanese corporation, filed a complaint for collection of sums for ten shipments of steel products ordered by petitioners in 1966. The complaint alleged the plaintiff was not engaged in business in the Philippines, characterizing the transactions as exports consummated in Tokyo. Petitioners moved to dismiss on the ground that the plaintiff lacked legal capacity to sue, contending the alleged transactions themselves constituted doing business in the Philippines without the required license under the Corporation Law. They manifested readiness to present evidence that respondent maintained a regular office and conducted continuous business locally.
The respondent judge initially set hearings for the reception of evidence on the motion. However, after respondent company objected and filed a motion suggesting deferment, the judge issued the assailed order dated March 28, 1968. He deferred the determination of the motion to dismiss until trial on the merits, reasoning that the ground of lack of capacity did not appear indubitable. Petitioners’ motion for reconsideration was denied, prompting this certiorari petition.

ISSUE

Whether the respondent judge committed grave abuse of discretion in deferring the resolution of the motion to dismiss based on the plaintiff’s alleged lack of capacity to sue until the trial on the merits.

RULING

The Supreme Court dismissed the petition, finding no grave abuse of discretion. The ruling hinged on the distinction between a motion to dismiss for lack of legal capacity to sue and one for failure to state a cause of action. A motion to dismiss for lack of capacity to sue asserts the plaintiff does not have the legal qualification to sue, such as a foreign corporation transacting business without a license. In contrast, a motion to dismiss for failure to state a cause of action tests the sufficiency of the allegations in the complaint.
The Court held that the complaint sufficiently alleged a cause of action. It expressly stated the plaintiff was a foreign corporation not engaged in business in the Philippines, with transactions consummated abroad. These allegations, taken as true for purposes of the motion, did not indubitably establish that the plaintiff was transacting business in the country without a license. Petitioners’ contrary assertions—that the acts constituted doing business locally—were essentially matters of defense, involving factual contradictions of the complaint’s allegations. Such factual issues could not be resolved in a motion to dismiss for failure to state a cause of action but must be pleaded in an answer and proven during trial. Deferring the resolution avoided a duplication of proceedings. The Court also noted that petitioners’ fear of waiving their defense by filing a counterclaim was unfounded, as a counterclaim is an action against the plaintiff, to which the licensing requirement for a foreign corporation to sue does not apply.