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CORPORATION LAW | B2015

CASE DIGESTS

Olympia Business
Machines (Phil) v E. Razon
1987
Narvasa, J.
Rods

SUMMARY: Olympia Office Machines (foreign corp)


shipped portable typewriters to its sister company Olympia
Business Machines (Phil) in Manila, insured by California
Insurance (foreign corporation). When the shipment
reached Razon, they were stolen. Olympia (Phil) recovered
on the amount from California Insurance, and both of them
sued Razon for the cost of the lost shipment. Razon was
declared in default twice for failing to appear during pretrial, and it raised the defense of lack of capacity to sue of
California for not being licensed to do business here only
after the first declaration of default. The RTC ruled in favor
of California, but IAC reversed, saying that California had
no capacity to sue, citing the Atlantic Mutual case. The SC
reversed, saying that the case is not in all fours with that
case, and that the defense of lack of capacity to sue was
not raised seasonably. Also, since California is joined by
Olympia, the case should not be dismissed because
Olympia, a domestic corporation, had capacity to sue.
DOCTRINE: (Implied)
The lack of capacity to sue, as a defense, must be raised
seasonably, at the earliest possible opportunity.
A foreign corporation, even if not licensed to do business
here, may be joined by a domestic corporation to be able
to sue. (Not sure, maybe true only for insurance cases)
Even if the case was dismissed, another case may be
instituted wherein the capacity of the foreign corporation
to sue may be integrated in the new pleading.

FACTS:
Olympia Office Machines Ltd, foreign corp with offices in
Hongkong, shipped 300 portable typewriters to its sister
company in Manila, Olympia Business Machines Company
(Phil) Inc. The shipment was insured against all rick by
California Insurance Co., Ltd., another foreign corp. The
typewriters were discharged at Manila ultimately to E.
Razon, in whose possession the shipment was stolen.
Olympia (Phil) filed a claim with California Insurance, and
the claim was fully settled. The latter was subrogated in the
rights of Olympia (Phil) to recover on the lost shipment, and
in the subrogation receipt, it was stated that Olympia (Phil)
would assist California in effecting the recovery of the
amount. Both Olympia (Phil) and California brought suit in
Manila RTC against E. Razon, the latter refusing to make
good on the loss.
E. Razon failed to appear at the pre-trial and so it was
declared in default. A judgment was rendered for California
and against E. Razon. On MR, it was set aside, and Razon
filed an amended answer alleging that since California is a
foreign corp doing business in the Philippines without a
license, it cannot legally maintain this suit in the Philippines,
by itself, or thru its agent. However, Razon failed to appear
at pre-trial so the first decision was revived by the RTC.
Upon appeal to the IAC, that court held that the errors
assigned by Razon were unmeritorious except the 2 nd
assignment of error which is that Appellee is a foreign
corporation not licensed to do business in the Philippnes,
therefore, cannot legally maintain suit The court further
stated that since California is a foreign corporation not
licensed to do business here, and that there were no
allegations that the transaction it entered into is singular
and isolated, it had no capacity to sue. The IAC cited
Atlantic Mutual Insurance co. v Cebu Stevedoring, and that
the case was on all fours with this case. It held that where
the parties plaintiffs are foreign corps, the specific
circumstance that either they are duly licensed to do

CORPORATION LAW | B2015


CASE DIGESTS

business here, or the transaction sued upon is singular and


isolated is an essential part of the elements of plaintiffs
capacity to sue and must be pleaded as required by Section
4, Rule 8 of the Rules of Court.
ISSUES:
WON the Atlantic Mutual case is applicable here.
RULING:
No, this case has differences with that case.
RATIO:
The Court said that looking at the cases, differences can be
seen.
Atlantic Mutual
2 American firms brought
suit as subrogees of the
shipper/consignee of goods
ensured without joining the
latter
Lack of capacity to sue was
raised by the defendant at
the
earliest
opportunity
through a motion to dismiss

Olympia Business (this case)


The case was brought by
both
the
subrogee,
California, and the subrogor,
Olympia,
a
domestic
corporation
Defendant
was
twice
declared in default, and the
defense was not raised until
after the first declaration of
default was lifted
Pronouncement by the CA
(former
IAC)
that
the
defendant
had
no
meritorious defenses except
that lack of capacity

Hence, the Atlantic Mutual doctrine cannot be applied. The


defendants conduct indicates a lack of valid defense. It was
twice declared in default for failing to appear during pretrial. Even assuming incapacity on the part of
California, no such incapacity may be attributed to its
co-plaintiff, Olympia Business Machines (Phil). Also,
the latter could easily execute a cancellation of the

deed of subrogation or a re-assignment of the right


of action. The dismissal of this case would not bar
Californias institution of the same action, alleging that it
would sue on a single, isolated transaction. But this is
unnecessary, because of the CA declaration of lack of
defense.
DISPOSITIVE: Judgment of RTC reinstated.

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