G.R. No. 47401 ; March 15, 1941
CENTRAL REPUBLIC BANK & TRUST CO., plaintiff-appellee, vs. P.L. BUSTAMANTE, defendant-appellant.

FACTS

The plaintiff, Central Republic Bank and Trust Co., is a corporation authorized to do business in the State of Illinois, U.S.A., with its principal office in Chicago. It has never engaged in business in the Philippine Islands. The defendant, P.L. Bustamante, does business in the Philippines under the name “General Trading Co., Inc.,” but neither entity is registered with the Bureau of Commerce under Act No. 3883 . The defendant, on behalf of General Trading Co., purchased goods from Stall & Dean, a partnership organized under the laws of Illinois (also without a license to do business in the Philippines), on various dates in 1931 and 1932. On May 12, 1932, the defendant and Stall & Dean settled their accounts, resulting in a balance of P1,565.65 in favor of Stall & Dean. In June 1932, Stall & Dean endorsed this balance to the plaintiff, and the defendant was notified of this assignment. On June 14, 1932, the defendant sent a letter to the plaintiff acknowledging the assignment of the account, confirming the amount (after a deduction), and requesting an extension until July 31 to pay, citing a crisis and delayed collections from schools. The plaintiff filed an action to recover the sum of P3,191.30 from the defendant. The defendant, in his answer, raised as a special defense that the plaintiff is a foreign corporation not authorized to do business in the Philippines and therefore cannot maintain any action in its courts. The Court of First Instance of Manila decided in favor of the plaintiff. The defendant appealed to the Court of Appeals, which elevated the case to the Supreme Court as it involved a pure question of law.

ISSUE

Whether a foreign corporation (organized in the United States), which has not obtained a license to do business in the Philippines, can maintain an action in the courts of this country for the collection of a credit.

RULING

Yes. The Supreme Court affirmed the decision of the lower court, ordering the defendant to pay the plaintiff. The Court ruled that the case is identical to Marshall Wells Co. vs. Elser & Company (46 Phil. 70). The object of the law (referring to Sections 68 and 69 of Act No. 1459 , the Corporation Law) is to subject foreign corporations doing business in the Philippines to the jurisdiction of its courts. The object was not to prevent a foreign corporation from performing certain acts, but to prevent it from acquiring a business domicile without taking the necessary steps to subject itself to suit in local courts. The law was never intended to exclude a foreign corporation that, by chance, obtains an isolated business order in the Philippines from obtaining a remedy in its courts, thereby allowing persons to evade contracts made with such foreign corporations. The effect of the law, which prevents unlicensed foreign corporations from doing business and suing in local courts, must not be unduly extended or improperly applied. It should not be interpreted to go beyond the clear meaning of its terms, considered in relation to its object and the spirit of the law.