Atty.

Fairy Faith Rabago-Agustin LLB106 Statutory Construction October 21, 2017

Surallah E. Reyes-Abeto L103, Friday, 6:30PM-8:30PM
Case Digest Assignment

G.R. No. L-34382 July 20, 1983

The Home Insurance Company, petitioner, vs. Eastern Shipping Lines and/or Angel Jose
Transportation, Inc. and Hon. A. Melencio-Herrera, Presiding Judge of the Manila Court
of First Instance, Branch XVII, respondents.

G.R. No. L-34383 July 20, 1983

The Home Insurance Company, petitioner, vs. N. V. Nedlloyd Lijnen; Columbian
Philippines, Inc., and/or Guacods, Inc., and Hon. A. Melencio-Herrera, Presiding Judge
of the Manila Court of First Instance, Branch XVII, respondents.

Facts:

These are consolidated petitions for review on certiorari are the decisions of the Court of

First Instance of Manila, Branch XVII, dismissing the complaints in Civil Case No. 71923

and in Civil Case No. 71694, on the ground that plaintiff therein, now appellant, had failed

to prove its capacity to sue.

The facts of G.R. No. L-34382 are as follows:

On or about January 13, 1967, 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 former is owned and operated

by defendant Eastern Shipping Lines. The shipment was covered by Bill of Lading No. O-

MA-9, with arrival notice to Phelps Dodge Copper Products Corporation of the Philippines,

its consignee, at Manila. The shipment was insured with plaintiff against all risks in the

amount of P1,580,105.06 under its Insurance Policy No. AS-73633.

The coils discharged from the vessel numbered 2,361, of which 53 were in bad order.

What the consignee ultimately received at its warehouse was the same number of 2,361

coils with 73 coils loose and partly cut, and 28 coils entangled, partly cut, and which had

to be considered as scrap. Upon weighing at consignee's warehouse, the 2,361 coils

were found to weight 263,940.85 kilos as against its invoiced weight of 264,534.00 kilos

or a net loss/shortage of 593.15 kilos, according to Exhibit "A", or 1,209,56 lbs., according

to the claims presented by the consignee against the plaintiff (Exhibit "D-1"), the carrier

(Exhibit "J-1"), and the transportation company (Exhibit "K- l").

For the loss/damage suffered by the cargo, plaintiff paid the consignee under its

insurance policy the amount of P3,260.44, 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

While the facts of G.R. L-34383 are:

That on or about December 22, 1966, the 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 defendant, N. V. Nedlloyd Lijnen, and

represented in the Philippines by its local agent, the defendant Columbian Philippines,

Inc. The shipment was covered by Bill of Lading No. 22 for transportation to, and delivery

at, Manila, in favor of the consignee, international Harvester Macleod, Inc. The shipment

was insured with plaintiff company under its Cargo Policy No. AS-73735 "with average

terms" for P98,567.79.

The packages discharged from the vessel numbered 29, of which seven packages were

found to be in bad order. What the consignee ultimately received at its warehouse was

the same number of 29 packages with 9 packages in bad order. Out of these 9 packages,

1 package was accepted by the consignee in good order due to the negligible damages

sustained. Upon inspection at the consignee's warehouse, the contents of 3 out of the 8

cases were also found to be complete and intact, leaving 5 cases in bad order. The

contents of these 5 packages showed several items missing in the total amount of
$131.14; while the contents of the undelivered 1 package were valued at $394.66, or a

total of $525.80 or P2,426.98.

For the short-delivery of 1 package and the missing items in 5 other packages, plaintiff

paid the consignee under its Insurance Cargo Policy the amount of P2,426.98, 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: WON the insurance contract is enforceable in relation to the corporations lack of
capacity to sue

Ruling:

The lower court in its ruling declared that pursuant to the basic public policy reflected in

the Corporation Law, the insurance contracts executed before a license was secured

must be held null and void. This was so since the petitioner had not yet secured the

necessary licenses and authority when the insurance contracts which formed the basis

of these cases were executed. The lower court then ruled that the contracts could not be

validated by the subsequent procurement of the license.

The pertinent provisions in question of the old Corporation Law, Act 1459 are as follows:

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

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.

In 1924 the Supreme Court ruled in the case of Marshall Wells Co. v. Henry W. Elser &

Co. (46 Phil. 70) stating 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 Court said that:

The object of the statute was to subject the foreign corporation doing business in the

Philippines to the jurisdiction of its courts. The object of the statute was not to prevent the

foreign corporation from performing single acts, but to prevent it from acquiring a domicile

for the purpose of business without taking the steps necessary to render it amenable to

suit in the local courts. The implication of the law is that it was never the purpose of the

Legislature to exclude a foreign corporation which happens to obtain an isolated order for

business from the Philippines, from securing redress in the Philippine courts, and thus, in

effect, to permit persons to avoid their contracts made with such foreign corporations. The

effect of the statute preventing foreign corporations from doing business and from

bringing actions in the local courts, except on compliance with elaborate requirements,

must not be unduly extended or improperly applied. It should not be construed to extend

beyond the plain meaning of its terms, considered in connection with its object, and in

connection with the spirit of the entire law. (State vs. American Book Co. [1904], 69 Kan,

1; American De Forest Wireless Telegraph Co. vs. Superior Court of City & Country of

San Francisco and Hebbard [1908], 153 Cal., 533; 5 Thompson on Corporations, 2d ed.,

chap. 184.)

To repeat, the objective of the law was to subject the foreign corporation 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.

The objectives enunciated in the 1924 decision are even more relevant today when we

view commercial relations in terms of a world economy, when the tendency is to re-

examine the political boundaries separating one nation from another insofar as they

define business requirements or restrict marketing conditions.

In the case of General Corporation of the Philippines v. Union Insurance Society of

Canton Ltd et al. (87 Phil. 313) insurance contracts were entered into without the

necessary license or authority. When summons was served on the agent, the defendant

had not yet been registered and authorized to do business. The registration and authority

came a little less than two months later. This Court ruled:

Section 14, Rule 7 of the Rules of Court makes no distinction as to corporations with

or without authority to do business in the Philippines. The test is whether a foreign

corporation was actually doing business here. Otherwise, a foreign corporation illegally

doing business here because of its refusal or neglect to obtain the corresponding license

and authority to do business may successfully though unfairly plead such neglect or illegal

act so as to avoid service and thereby impugn the jurisdiction of the local courts. It would

indeed be anomalous and quite prejudicial, even disastrous, to the citizens in this

jurisdiction who in all good faith and in the regular course of business accept and pay for

shipments of goods from America, relying for their protection on duly executed foreign

marine insurance policies made payable in Manila and duly endorsed and delivered to

them, that when they go to court to enforce said policies, the insurer who all along has

been engaging in this business of issuing similar marine policies, serenely pleads

immunity to local jurisdiction because of its refusal or neglect to obtain the corresponding

license to do business here thereby compelling the consignees or purchasers of the

goods insured to go to America and sue in its courts for redress.

There is no question that the contracts are enforceable. The requirement of registration

affects only the remedy. The petitions are granted and the decisions of the respondent

court are reversed and set aside.