GR L 49695; (April, 1986) (Digest)
G.R. No. L-49695 April 7, 1986
HATHIBHAI BULAKHIDAS, petitioner, vs. THE HONORABLE PEDRO L. NAVARRO, as Presiding Judge of the Court of First Instance of Rizal, Seventh Judicial District, Pasig, Metro Manila, Branch 11 and DIAMOND SHIPPING CORPORATION, respondents.
FACTS
Petitioner Hathibhai Bulakhidas, a foreign partnership, filed a complaint for damages against domestic corporation Diamond Shipping Corporation before the Court of First Instance of Rizal. The complaint alleged that the respondent shipping corporation failed to deliver goods to their proper destination. Crucially, the petitioner explicitly pleaded in its complaint that it was “a foreign partnership firm not doing business in the Philippines” and was “suing under an isolated transaction.”
The respondent corporation filed a motion to dismiss the complaint, arguing that the petitioner lacked the capacity to sue and that the complaint failed to state a cause of action. The trial court granted the motion and dismissed the complaint. It ruled that the petitioner, being a foreign corporation or partnership not doing business in the Philippines, could not exercise the right to maintain suits in Philippine courts. This order of dismissal prompted the petitioner to elevate the case to the Supreme Court via a petition for review on certiorari.
ISSUE
Whether a foreign corporation not engaged in business in the Philippines can institute an action in Philippine courts based on an isolated transaction.
RULING
Yes. The Supreme Court set aside the trial court’s order of dismissal and remanded the case for further proceedings. The legal logic is firmly established in jurisprudence. The prohibition under Sections 68 and 69 of the Corporation Law (now the Revised Corporation Code) against an unlicensed foreign corporation maintaining any suit in Philippine courts applies only to those foreign corporations that are “doing,” “engaging in,” or “transacting” business in the country. The object of these provisions is to prevent a foreign corporation from acquiring a business domicile in the Philippines without submitting to local jurisdiction, not to deny it access to courts for isolated or single transactions.
The Court cited controlling precedents, including Aetna Casualty and Surety Co. vs. Pacific Star Lines, which held that a foreign corporation not engaged in business in the Philippines may not be denied the right to file an action for isolated transactions. The test for “doing business” implies a continuity of commercial dealings, not a single or sporadic act. In this case, the petitioner’s complaint sufficiently alleged the qualifying circumstance that it was not engaged in business locally and was suing on an isolated transaction, which distinguishes it from cases like Atlantic Mutual Insurance Co. vs. Cebu Stevedoring Co. where no such allegation was made. Therefore, the petitioner possesses the legal capacity to sue.