Home Insurance Co. v.

Eastern Shipping Lines

123 SCRA 424 (1983)

Facts:

The petitioner is a foreign insurance company duly authorized to do business in the Philippines
through its agent, Mr. VICTOR H. BELLO, of legal age and with office address at Oledan Building, Ayala
Avenue, Makati, Rizal.

In L-34382, S. Kajita & Co., on behalf of Atlas Consolidated Mining & Development Corporation,
shipped on board the SS "Eastern Jupiter' from Osaka, Japan, 2,361 coils of "Black Hot Rolled Copper
Wire Rods." The said VESSEL is owned and operated by defendant Eastern Shipping Lines (CARRIER). The
shipment was covered by a bill of lading, with arrival notice to Phelps Dodge Copper Products
Corporation of the Philippines (CONSIGNEE) at Manila. The shipment was insured with Home Insurance
Co. The Consignee ultimately received at its warehouse that, out of the 2,361 coils, 73 coils were loose
and partly cut, and 28 coils were entangled, partly cut, and which had to be considered as scrap.
Petitioner paid the consignee under its insurance policy the amount therein, by virtue of which plaintiff
became subrogated to the rights and actions of the CONSIGNEE. Plaintiff made demands for payment
against the CARRIER and the TRANSPORTATION COMPANY for reimbursement of the aforesaid amount
but each refused to pay the same.

In L-34383, Hansa Transport Kontor shipped from Bremen, Germany, 30 packages of Service
Parts of Farm Equipment and Implements on board the VESSEL, SS "NEDER RIJN" owned by the N. V.
Nedlloyd Lijnen and represented in the Philippines by its local agent, the Columbian Philippines, Inc.
(CARRIER). The shipment was covered by bill of lading for transportation to, and delivery at, Manila, in
favor of the consignee, international Harvester Macleod, Inc. (CONSIGNEE). The shipment was insured
with petitioner. Out of the packages discharged from the vessel, 9 packages are in bad order and one
package is short-delivered. Hence, petitioner paid the CONSIGNEE under its Insurance Cargo Policy, by
virtue of which plaintiff became subrogated to the rights and actions of the CONSIGNEE. Demands were
made on defendants CARRIER and CONSIGNEE for reimbursement thereof but they failed and refused to
pay the same.

Issue:

Whether the petitioner has no capacity to sue.

Ruling:

Sec. 68. No foreign corporation or corporations formed, organized, or existing under any laws
other than those of the Philippine Islands shall be permitted to transact business in the Philippine
Islands until after it shall have obtained a license for that purpose from the chief of the Mercantile
Register of the Bureau of Commerce and Industry, (Now Securities and Exchange Commission. See RA
5455) upon order of the Secretary of Finance (Now Monetary Board) in case of banks, savings, and loan
banks, trust corporations, and banking institutions of all kinds, and upon order of the Secretary of
Commerce and Communications (Now Secretary of Trade. See 5455, section 4 for other requirements)
in case of all other foreign corporations. ...

xxx xxx xxx

 Sec. 69. No foreign corporation or corporation formed, organized, or existing under any laws
other than those of the Philippine Islands shall be permitted to transact business in the Philippine
Islands or maintain by itself or assignee any suit for the recovery of any debt, claim, or demand
whatever, unless it shall have the license prescribed in the section immediately preceding. Any officer,
director, or agent of the corporation or any person transacting business for any foreign corporation not
having the license prescribed shag be punished by imprisonment for not less than six months nor more
than two years or by a fine of not less than two hundred pesos nor more than one thousand pesos, or by
both such imprisonment and fine, in the discretion of the court.

As early as 1924, this Court ruled in the leading case of Marshall Wells Co. v. Henry W. Elser &
Co. (46 Phil. 70) that the object of Sections 68 and 69 of the Corporation Law was to subject the foreign
corporation doing business in the Philippines to the jurisdiction of our courts.The Corporation Law must
be given a reasonable, not an unduly harsh, interpretation which does not hamper the development of
trade relations and which fosters friendly commercial intercourse among countries.

Our ruling that the lack of capacity at the time of the execution of the contracts was cured by
the subsequent registration is also strengthened by the procedural aspects of these cases.

Therefore, petitioner has legal capacity to sue.

Subic Bay Metropolitan Authority v. Universal International Group of Taiwan

340 SCRA 359 (2000)

Facts:

A Lease and Development Agreement was executed by Universal International Group of Taiwan(UIG)
and Subic Bay Metropolitan Authority(SBMA) under which respondent UIG shall lease from petitioner
SBMA the Binictican Golf Course and appurtenant facilities thereto to be transformed into a world class
18-hole golf course, golf club/resort, commercial tourism and residential center. The contract in
pertinent part contains pre-termination clauses, that in case the tenant or any of its subsidiaries shall
commit any material breach or violation of any of the conditions, covenants or agreements made by
tenant or such subsidiary, the landlord may terminate the lease.

SBMA sent a letter to private respondent UIG calling its attention to its alleged several contractual
violations in view of UIG’s failure to deliver its various contractual obligations, primarily its failure to
complete the rehabilitation of the Golf Course in time for the APEC Leaders Summit, and to pay
accumulated lease rentals and utilities, and to post the required performance bond. UIG, in a letter,
interposed as an excuse the alleged default of its main contractor FF Cruz, resulting in their filing of suit
against the latter, and committed itself to comply with its obligations within a few days. UIG, however,
failed to comply with its undertakings. Thereafter, SBMA sent a letter to UIG declaring the latter in
default of its contractual obligations to SBMA under Section 22.1 of the Lease and Development
Agreement and required it to show cause why petitioner SBMA should not pre-terminate the
agreement. Private respondents paid the rental arrearages but the other obligations remained
unsatisfied.

A letter of pre-termination was served by SBMA requiring UIG to vacate the premises. Thereafter,
Petitioner served the formal notice of closure of Subic Bay Golf Course and took over possession of the
subject premises. On even date, UIG filed a complaint against petitioner SBMA for Injunction and
Damages with prayer for a writ of temporary restraining order and writ of preliminary injunction.

Issue:

Whether UIG has legal capacity to sue.

Ruling:

As a general rule, unlicensed foreign non-resident corporations cannot file suits in the
Philippines. Section 133 of the Corporation Code specifically provides:

Sec. 133. No foreign corporation transacting business in the Philippines without a license, or its
successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any
court or administrative agency of the Philippines, but such corporation may be sued or proceeded
against before Philippine courts or administrative tribunals on any valid cause of action recognized
under Philippine laws.

A corporation has legal status only within the state or territory in which it was organized. For this
reason, a corporation organized in another country has no personality to file suits in the Philippines. In
order to subject a foreign corporation doing business in the country to the jurisdiction of our courts, it
must acquire a license from the SEC and appoint an agent for service of process.[15] Without such license,
it cannot institute a suit in the Philippines.
It should be stressed, however, that the licensing requirement was never intended to favor domestic
corporations who enter into solitary transactions with unwary foreign firms and then repudiate their
obligations simply because the latter are not licensed to do business in this country. After contracting with
a foreign corporation, a domestic firm is estopped from denying the formers capacity to sue.
The rule is that a party is estopped to challenge the personality of a corporation after having
acknowledged the same by entering into a contract with it. And the doctrine of estoppel to deny corporate
existence applies to foreign as well as to domestic corporations; one who has dealt with a corporation of
foreign origin as a corporate entity is estopped to deny its existence and capacity. The principle will be
applied to prevent a person contracting with a foreign corporation from later taking advantage of its
noncompliance with the statutes, chiefly in cases where such person has received the benefits of the
contract.
In this case, SBMA is estopped from questioning the capacity to sue of UIG. In entering into the LDA
with UIG, SBMA effectively recognized its personality and capacity to institute the suit before the trial
court.