G.R. No. L-18961 August 31, 1966
Atlantic Mutual Insurance Company and Continental Insurance Company, plaintiffs and appellants, vs. Cebu Stevedoring Co., Inc., defendant and appellee.

FACTS

The plaintiffs-appellants, Atlantic Mutual Insurance Company and Continental Insurance Company, are foreign corporations existing under the laws of the United States. They filed a complaint against the domestic corporation Cebu Stevedoring Co., Inc., for recovery of a sum of money. They alleged that the defendant, a common carrier, undertook to carry a shipment of copra for delivery to Procter & Gamble Company in Cebu City; that upon discharge, a portion of the copra was found damaged; that since the copra was insured with the plaintiffs, they paid the shipper and/or consignee the sum of P15,980.30 upon proper claim; and that as subrogees to the shipper’s and/or consignee’s rights, they demanded settlement from the defendant, which was unsuccessful. The defendant moved to dismiss the complaint on two grounds: (a) that the plaintiffs had no legal personality or capacity to sue, and (b) that the complaint did not state a cause of action. Both grounds were based on the plaintiffs’ failure to allege compliance with Section 69 of the Corporation Law, which requires a foreign corporation to obtain a license before it can transact business in the Philippines or maintain any suit. The trial court found the complaint deficient for failing to allege that the plaintiffs were duly licensed to transact business in the Philippines and gave them an opportunity to amend. The plaintiffs moved for reconsideration and, after denial, filed a manifestation stating they could not comply with the order to amend. The trial court subsequently dismissed the complaint.

ISSUE

Whether the complaint filed by the foreign corporations should be dismissed for failure to allege either that they are duly licensed to transact business in the Philippines or that the transaction sued upon is singular and isolated, thus exempting them from the license requirement under Section 69 of the Corporation Law.

RULING

The Supreme Court affirmed the orders of the trial court dismissing the complaint. The Court held that while a foreign corporation not doing business in the Philippines (i.e., engaged only in an isolated transaction) does not need a license to sue in Philippine courts, the qualifying circumstance of whether it is engaged in business or not is an essential part of the element of the plaintiffs’ capacity to sue and must be affirmatively pleaded in the complaint. The complaint merely alleged that the plaintiffs were foreign corporations existing under U.S. laws, which conjures two possibilities: they are either engaged in business in the Philippines (requiring a license to sue) or they are not (if the transaction is isolated, no license required). The compliance with the license requirement or the existence of an exemption is a matter peculiarly within the knowledge of the plaintiffs, and it would be unfair to impose the burden of proving the contrary on the defendant. Therefore, such facts must be averred in the complaint. The Court noted that this ruling is in line with the amendment in the Revised Rules of Court (Section 4, Rule 8), which requires averment of facts showing the capacity of a party to sue.