August 12, 1968 OFFICIAL GAZETTE order of the court below dated August 2, 1958.
the court below dated August 2, 1958. After the defendant had .answered the
- (No. 28130-R. April 17, 1967]
Wing on Company, plaintiff and appellee, vs. A. Syyap .& Co., Inc., defendant
and appellant.
1. Obligations, and Contracts; Isolated Transactions; Foreign
Corporations; Right to Sub in This Jurisdiction.Since an isolated act, contract, or
transaction does not constitute doing or transacting business within the meaning of
the law (Secs. 68 and 69, the Corporation Law, as amended; Pacific Micrini- sian
Lines, Inc. vs. Del Rosario, 5D Phil. 5271; Mentholathum Co., Inc.,' et al, vs.
Mangaliman, 40 0. G. 1838; General Corp. of thd Philippines & Mayon Investment
Co. vs. Union Insurance of the Society of Canton, 48 O. G. No. 1, p. 73), a foreign
juridical person or entity, not duly licensed to transact business in the Philippines,
has the legal personality to bring asd main- a tain a suit in this jurisdiction arising
from such isolated transaction. * .. = , &
2. Id.; Id.; Id.; Id.; Forum Non Conveniens.In the application
- of the principle of forum non conveniens, unless the balance is strongly in favor of
the resident defendant, the non-residents ' , . choice of forum should rarely be
disturbed. The consideration of inadequacy to enforce the judgment precisely
constitutes a . problem to the non-resident if the local courts decline to assume
jurisdiction on the basis of said principle.
3. Id.; Id.; Id.; Id.; Venue.In an isolated transaction of- a foreign
juridical person or entity, not> duly licensed to transact business in the Philippines, a
personal action affecting ,.the transaction and originally cognizable in a Court of
First Instance may be commenced by the foreign entity in the place or province
where the defendant resides or may be found and the court of such place can take
cognizance thereof (Sec. 2 (b), Rule 4, Rules of ' Court; Marshall-Wells Co* vs.
Henry W. Elser Co., 46 Phil. 70; Kelsens Principles of International Law 52 ed., pp.
254-256).
4. Id.; Evidence; Special Defenses; Payment; Burden of Proof.
Allegations of payment are special defenses and the defendant has the burden of
proving payment or discharge of the obligation by a preponderance of evidence
(Kneedler vs. Paterno. et al., 85 Phil. 189; Vda. de Atas vs. Hautea, CA-G.R. No.
636-R, June 17, 1947; Behon, Meyer & Co. vs. Rosatzin, 5 Phil. 662),
APPEAL from a judgment of the Court of First Instance of Manila. Luis B. Reyes, J.
The facts are stated in the opinion of the Court.
Apolvnar F. Tolentino for defendant and appellant.
Bienvenido A. Tan, Jr. for plaintiff and appellee. Nolasco,
' This, is an appeal interposed by the defendant from- the judgment of the Court of
First of Manila in Civil Case No. 36827 for recovery of sum of- money. ,
On July 9, 1958, the defendant filed a motion to dismiss, the final
determination of which was deferred until after the trial of the present case in the
complaint, the plaintiff filed an amended complaint which . was admitted by the trial
court on February 21, 1959.
In its amended complaint, the plaintiff alleges that it is a juridical person duly
organized and existing under and* by virtue of the laws of New York State, U.S.A.,
with prin- . cipal offices located in New York I, New York; that between the months
of May and August, 1948, the defendant, a domestic corporation, ordered from the
plaintiff various . quantities of clothing materials with a total value of" $22,246.04
(P44,492.08), which were shipped on credit to, and received by the defendant, with
the undertaking that the same would be paid after delivery in Manila; that after the
sale of the merchandise, it was agreed that the profits realized would be divided
between the plaintiff and the defendant; that the defendant had only paid the plaintiff
the sum of $3,530.00 (P7,060.00) as of the date of the institution of the action,
thereby leaving a balance of P37,432.08 still due and payable, plus plaintiffs share
of whatever profits were realized from the sale of the merchandise; and that, despite
its promises, the defendant has failed and refused to pay the said balance, nor has it
made an accounting or division of the profits as agreed upon. In its amended
complaint, the plaintiff prayed that the defendant be ordered to pay the former the
amount of F37,432.08, plus legal'interest from the filing of the case until the same is
fully paid; that the defendant be ordered to pay the plaintiff P10,000.00 as
reimbursement for attorneys fees; and that the defendant be ordered to make an
accounting of the profits realized from the sale of the merchandise in question and to
divide the same with the plaintiff, as agreed upon.
In its answer with counterclaim to the amended complaint, the defendant
denied the allegations in paragraph 1 thereof concerning the juridical personality of
the plaintiff and denied that it ordered the goods in question from the plaintiff or that
there was an agreement between the plaintiff and the defendant that the profits
realized from the sale of-the goods would be divided between them. Defendant
alleged further that it dealt with one Murray Kern of New York regarding the
clothing materials in question, who, in turn, contracted with the plaintiff; that the
agreement between the defendant and Murray Kern was that any profits which might
be realized from the sale of the goods received by it from Murray Kern would be
equally divided between them; and that out of the value of the merchandise in
question, which amounted to $22,246.04 (P44,492.08), it had already paid the
amount of $14,839.85, leaving a balance of $7,858.37 only. As a special defense,
defendant alleged that the plaintiff had no legal capacity to sue and be sued, it being
a foreign corporation not duly licensed to transact business in the Philippines. The
defendant prayed that the complaint be dismissed and that the plaintiff be ordered
to pay it the amount of To,000.00 as damages and P2,000.00 as attorneys fees, plus
the costs. ? -* _
After the corresponding trial of the case, the lower court rendered a decision on July
1, 1962, the dispositive part of which reads as follows:
Wherefore, judgment is hereby rendered in favor of plaintiff and against defendant
as follows: __. .. $
(i) Ordering defendant to pay plaintiff the amount of P37,432.08, with legal interest
from the filing of the complaint until the same is fully paid; ; ' - >.
- (2) Ordering defendant to pay plaintiff the sum of P3,000.00 as and for attorneys
fees;
(3) Ordering defendant to make an accounting of the profits realized from the sale of
the merchandise subject matter of this com-' plaint and dividing the same with
plaintiff as agreed upon;
(4) Dismissing the counterclaim of defendant; and
(5) Ordering-defendant to pay the costs. JV
From the said judgment, the defendant appealed to this Court and assigned the
following alleged errors committed by the court a quo: * ':s
1. The lower'court never acquired jurisdiction over the person of the plaintiff,
hence, the lower court had no jurisdiction to try and decide the instant case.; -
2. The lower Court erred in not declining jurisdiction over the present case
3. The lower court erred in not holding that plaintiff-appellee had
no legal capacity to sue. '
4. The lower court erred in not holding that the complaint does not state a cause of
action.
5. The lower court erred in holding that the defendant-appellant is still indebted to
plaintiif-appellee in the amount of P37,432.08.
The evidence for the plaintiff shows that Wing On Company is a foreign
partnership, with business address in New York County, New York, U.S.A. (Exhibit
A). Sometime in the year 1948, the defendant, A. Syyap & Co., Inc., thru its agent,
Murray Kern, in New York,, negotiated with the.plaintiff for the purchase of clothing
materials under the agreement that the defendant would pay the plaintiff the value
thereof after the sale of the goods by the defendant and that the profits derived from
such sale would be divided between them. Accordingly, in' the said year, 1948, the
plaintiff shipped to. the defendant the clothing materials in question, -worth
$22,246.04, which were received by the latter and eventually sold by it. The
defendant, however, was able to pay the plaintiff only the sum of $3,530.00 on
account of the value of the merchandise in question (Exhibit G), leaving a balance of
$18,716.04. Despite, however, plaintiffs demands on the defendant and its agents,
Murray Kern, and the promises of the defendant to pay the account in full (Exhibits
E-l, E-3, E-4, E-5, E-7, E-10 and E-12), the defendant failed to settle the said
account. Neither was there any accounting or divi-
sion of the profits made by the defendant as agreed upon by the parties; hence, the
present action was instituted. (Deposition of Norman Ma, pp. 2-4, Exhibit C;
Deposition of Murray Kern, pp. 2-7, Exhibit D.)
* On the other hand, the defendant tried to establish by its evidence that it dealt
directly with Murray Kern and that the latter was not its agent in New York in the
transaction in question. It claimed that the agreement involving the merchandise,,
which is the subject matter of this suit, .was concluded verbally in New York
between Murray Kern and the representative of the defendant named Oscar Garcia
when the latter went to the United States of America in 1948, as manager of
defendants Indent Depart-, ment. According to Angel Syyap and defendants
accountant, Aldrico Arroyo, the plaintiff and the defendant, together with Murray
Kern, mere partners in the transaction with the agreement that the goods would be
sent by the partners in New York to the defendant in the Philippines on consignment
basis to be sold by the latter, the value thereof 'to be remitted by the defendant to his
partners in New York after the sale of the goods and the profits from such sale would
be divided among the three partners.
On the other handi according to Oscar Garcia, Murray" Kern represented the plaintiff
in the deal, and the agreement was that the defendant would sell the merchandise in
question and the profits therefrom were to be divided equally between the defendant
and the plaintiff, the former to remit to the plaintiff the value of the goods after the
sale, as well as the share of the profits pertaining to the latter. In 1948, the defendant
.received the clothing materials in dispute with a total value of $22,246.04 or
P44,492.08. The defendant claims, however, that it had already paid to the plaintiff
the amount of $14,839.85 of the account, leaving a balance of $7,858.37 (Exhibits 9
and 9-A). Angel Syyap, too, alleged that he had already remitted to Murray Kern
the 2/3 portion of the profits derived from the sale of the goods in question.
From the evidence on * record, there appears to be no dispute that the clothing
materials, which are the subject matter of this action, worth $22,246.04
(P44,492.08), were shipped from the United States to, and received by the defendant
here in the Philippines. Thereafter, there was a verbal agreement that the defendant
would pay for the cost of said merchandise and that there would be a division of
profits derived from the sale thereof. It appears, too, that the plaintiff, Wing On
Company, is a foreign partnership, which is not duly licensed to transact business in
the Philippines (Exhibit A) and that the transaction in question, was an isolated
transaction.
Appellant now contends that the court a, qicp had no jurisdiction to try and decide
the case for the reasons that the action was filed by one who is not the agent or
representative of the plaintiff authorized to bring and. maintain the suit .and that the
plaintiff had no legal capacity to sue the defendant. We find this contention to be
untenable.
The record shows that the motion to admit * amended complaint, dated February 1G,
1959, and the amended complaint attached thereto were signed and filed by Atty.
Bienvenido A. Tan, Jr. as counsel for the plaintiff. Considering that the authority
of said counsel to appear for the plaintiff was never questioned in the court a quo, it
is to be presumed that said counsel was properly authorized to file the amended
complaint and to appear for his client. It is only now, before this Court, however,
where his authority, to appear has been questioned for the first time by the de- .
fendant. Needless to say, we are satisfied that said counsel was duly authorized by
the plaintiff to file the complaint and to appear in its behalf in the case at bar.
(Section 21', Rule 138, Rules of Court; Republic of the Philippines vs. Philippine
Resources Development Corp. and the Court of Appeals, 55 O.G. 2881-2882.) The
provisions of Section 21, Rule 127 of the Old Rules of Court (now Section 23 of
Rule 138, Rules of Court) invoked by the appellant, to our mind, are not in point.
On the question of the legal capacity of the plaintiff to sue in Philippine Courts, it is
our opinion that the rulings of the Supreme Court in Marshall-Wells Co. vs. Henry
W. Elser and Co., 46 Phil. 70; Pacific Vegetable Oil Corp. vs. Singzon, L-7917,
April 29, 1955, Eastboard Navigation Ltd. vs. Juan Ysmael & Co., L-9090,
September 10, 1957, Mentholathum Co., Inc., et al. vs. Mangaliman, et al., 40 O.G.
1838 and Pacific Micrinisian Lines, Inc. vs. Del Rosario, 50 Phil. 5271, are
applicable to the case at bar, to sustain the finding that the plaintiff herein had legal
capacity to sue. In the case of Marshall-Wells Co. vs. Henry W. Elser, Co., supra, the
Supreme Court stated:
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 businesswithout 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 thir
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 and
County of San Francisco and Hebbard [1908], 153 Cal. 533; 5 Thompson on
Corporations 2d ed., Chap. 184.)
From the above-quoted portion of the decision, we believe' that, by its fair
and reasonable intendment, the same applies with equal force to other foreign
juridical persons which are not corporations, such as the plaintiff company involved
in the present litigation.; In the case at bar, the facts show that the transaction in
question was an isolated act, contract or transaction. As such, it does not constitute
.doing or transacting business within the meaning of the law; (Sections 68 and
69,the Corporatons Law, as amended;.Pacific Micrinisian Lines, Inc. vs. Del Rosario,
supra;, Mentholathum Co., Inc., et al. vs.- Mangaliman, supra; General Corp. of the
Philippines & Mayon Investment Co. vs. Union Insurance of the Society of Canton,
48 O.G. No. 1, p. 73.) Consquently, the plaintiff, although a foreign juridical person
or entity, not duly licensed to transact business in the Philippines, has the legal
personality to bring and maintain the present suit arising from the transaction in
question. In short, in this particular case, the obtaining of a license to transact
business is not a condition precedent to the institution of- the action. (Marshall-Wells
Co. vs. Henry W. Elser, supra; Pacific Vegetable Oil Corp. vs. Singzon, supra;
Mexico Refractories vs. Picspa Corp. ICAl 49 O.G. 3913.) 'It is only when the
foreign corporation is doing or transacting business within the purview of the law-
that it has to have a license before it can sue in our courts.
Appellant contends, too, that the trial court should have declined jurisdiction over the
present suit, pursuant to the principle of forum non -conveniens in Private
International Law that where the ends of justice strongly indicate that the
controversy may be more suitably tried elsewhere, then jurisdiction should be
declined and the parties relegated to relief to be sought in another forum.' There, is
no merit in this contention.
' We believe that the facts surrounding the present case do not warrant the
application of qny recognized rules of Private International Law. It is a well-
established practice in the application of the principle of forum 1turn conveniens that
unless the balance is strongly in favor of the defendant, the plaintiffs choice of
forum should rarely be disturbed, .and that, furthermore, the consideration of
inadequacy- to.enforce the judgment, which is one of the important factors to be
considered in the application of said principle, would precisely constitute a problem
to the plaintiff if the local courts decline to assume jurisdiction on the basis of said
principle, considering that the defendant is a resident of the Philippines. "
It is true that the agreement in question involving the purchase of clothing materials
was entered into in New York, U.S.A. The goods, however, were delivered to, and
received and sold by the- defendant in this jurisdiction. Considering that, as above-
stated,, the Wing On Company of New York may sue in Philippine courts in
connection with the transaction in question and, considering, further, . that the
present suit arising from said transaction is in the nature of a personal action, the
case may be commenced -- and tried where the defendant-resides or may be found,
or where the plaintiff resides, at the election of the plaintiff. (Section 2b, Rule 4 of
the Rules of Court.) Consequently, venue in the instant case was not improperly laid
and the court a quo did not err in taking cognizance of the case. - (Marshall-Wells
Co. vs. Henry W. Elser Co., supra; Kel- - sens Principles of International Law, 52
Ed. pp. 264-256.)
Likewise, appellant claims that this case is barred by prescription on the ground that
the cause of action, if any, * accrued in 1948 when the merchandise in question, was
re- - ceived by the defendant. .While it is true that the contract' in dispute was oral
and, therefore, under Article 1145 of the Civil Code, any action upon it must be
commenced within six years, it cannot also be gainsaid that the prescription of Wherefore, finding the judgment appealed from to be in accordance with-Jaw and
actions is interrupted when they are filed before the court; when.there is a written the evidence, the same is hereby affirmed in tato, with costs against defendant-
extrajudicial demand by the creditors, and when there is any written appellant.
acknowledgment of the debt by the debtor. (Article 1155, Civil Code). . It is so ordered.
** As examination of the exhibits of record shows that on October 30, 1951,. or only Villa/mor and Perez, JJ., concur.
three years after the accrual of -plaintiffs cause of action, the defendant sent a letter
to * the plaintiff through the latters Norman Ma acknowledging that the account in Judgment affirmed. '
question had been outstanding for a long time and promising to settle the same as
soon as possible (Exhibit E-l). Subsequently, in 1953, 1954 and 1956, defendant sent
five more letters to the plaintiff, reiterating its promise to liquidate the account in
question (Exhibits E-3, E-6, E-7 and E-10) and stating definitely that the defendant
would commence payment thereof at PI,800.00 a month beginning January, 1957
(Exhibit E- 12). On July 9,1958, the present suit was Instituted with the filing of the
original complaint. Considering all these circumstances, it is obvious that plaintiffs
action has not prescribed, for the reason that the prescriptive period was interrupted
and such interruption dated as far back as in October, 1951 (Exhibit E-l).
Finally, appellant assails the finding of the trial court /
that it had paid to the plaintiff the amount of $3,530.00, leaving only a balance of
$18,716.04 (P37,432.08).
The plaintiff admitted the payment to it of $3,530.00 by the defendant on
the account in controversy. Defendant, relies upon its Exhibit 9-A to support its
claim that, it had already paid the plaintiff the amount of $14,839.85 on account of
the value of the merchandise thereby leaving a balance of only $7,858.37. It is to be
noted that Exhibit 9-A is merely a statement of accountability of the account in
question prepared by defendant's accountant and attached to defendant's letter of
June 25,1954 (Exhibit 9) to its agent, Murray' Kern, in New York, XI.S.A. Certainly,
this statement of accountability, which was never confirmed by the plaintiff, is not
the best evidence, of payment by the defendant of the obligation in question to the
extent specified therein. In fact, it is to be noted that the correctness of said statement
of accountability was even repudiated by defendants own agent, Murray Kern, to
whom it was sent. (Deposition of-Kern, Question. No. 6 and answer, Cross-,
interrogatories, Exhibit D.) Undoubtedly, the best evidence to prove payment would
be receipts showing the same. Other evidence may be presented in lieu thereof, if
such receipts are not available. The fact of payment may also be established, not only
by documentary evidence, but also by parol evidence specially in civil cases where
preponderance of evidence is the rule. (Montfort vs. Aguinaldo, L-4104, May 2,
1952. Allegations of payment,. however, are special defenses and the defendant has
the burden of proving the alleged payment* by a preponderance of evidence.-
(Kneedler vs. Paterno, et al, 85 Phil. 189; Vda. de Atas vs. Hautea, CA-G.R. No.
636-R, June 17, 1947.) In the case at bar, however, no receipts or other satisfactory
evidence was presented by the defendant to prove its alleged . payment in question to
the plaintiff. ' Considering that.the plaintiff has satisfactorily proven the existence of
defendants obligation, the burden of proof was upon said defendant to show that it
had been discharged. (Behn, Meyer & Co. vs. Rosatzin, 5 Phil. 662.) This, the
defendant has failed to do in the instant case. We see, therefore, no reason why the
findings of the lower court on this regard should be disturbed. *