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239 Atlantic Mutual Insurance Company & AUTHOR:

Continental Insurance Company vs. Cebu Stevedoring NOTES:


Co., Inc. Both the Atlantic Insurance Company (Atlantic) and
[G.R. No. L-18961; August 31, 1966] Continental Insurance Company (Continental) are foreign
TOPIC: Foreign Corporations; Effects of failure to secure US corporations.
license
PONENTE: Makalintal, J. Section 68 of the Corporation Law provides that a foreign
corporation needs to acquire a license before it may be
permitted to transact business in the Philippines
FACTS:
 Plaintiffs Atlantic and Continental sued Cebu Stevedoring Co, Inc. (Cebu). for recovery of a sum of money on the
following allegations:
o Cebu, a common carrier, delivered a shipment of copra to Procter & Gamble Comp, at Cebu City;
o Upon discharge, some of the copra was found damaged;
o Since the copra was insured with plaintiffs, they paid the shipper and/or consignee the assessment of the
damage, P15,980.30;
o And that as subrogee to the shipper's and/or consignee's rights, plaintiffs demanded settlement from
defendant by reason of its failure to comply with its obligation, as carrier, to deliver the copra in good
order.

 Cebu moved to dismiss on two grounds:


o (1) Plaintiffs had "no legal personality to appear before Philippine courts and with no capacity to sue;" and
o (2) The complaint did not state a cause of action.

 Both grounds were based upon failure of the complaint to allege compliance with section 69 of the Corporation
Law, which states:
SEC. 69. No foreign corporation or corporation formed, organized, or existing under any
laws other than those of the Philippines shall be permitted to transact business in the
Philippines or maintain by itself or assigned any suit for the recovery of any debt, claim,
or demand whatever, unless it shall have the license prescribed in the section
immediately preceding x x x x x

 The Trial Court issued an order stating the complaint was deficient for failure to state that the plaintiffs were duly
licensed to transact business in the Philippines. However, the trial court gave the plaintiffs ten days to amend the
complaint. The plaintiffs moved for to reconsider but this was denied. The trial court ruled in favor of the
defendants and dismissed the case.
ISSUE(S):
Was the Trial Court correct in dismissing the case against the plaintiffs?
More importantly, did the plaintiffs have a right to sue for their claim against defendant Cebu?

HELD/RATIO:
Yes. The Court held that the trial court was correct in dismissing the case because the plaintiffs failed to allege facts
showing its capacity to sue or be sued.

No. The main controversy in this case was the interpretation of Sec. 69 of the Corporation Law as stated above. The Court
held that this provision is interpreted in this manner: A foreign corporation is either engaged in business in the Philippines
or not. If it is engaged, it must have been duly licensed in order to maintain this suit; if not, and if the transaction sued
upon is singular and isolated, no such 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 plaintiffs lost because they did not affirmatively plead that they were licensed to do business in the Philippines, or that
they fell within the exception to this requirement. All that they pleaded was that they were foreign corporations organized
under US law.
CASE LAW/ DOCTRINE:
Facts showing a foreign corporation’s capacity to sue must be pleaded.

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