Marshall-Wells Co. vs Henry W. Elser & Co.

SUMMARY: A foreign corporation sued a domestic corporation over an unpaid bill. The latter claims the
former has no personality to sue, not having a license as required under the law. The Court ruled that a strict
and literal reading of the provision on licenses would be greatly impractical, and finds that the
noncompliance would not bar redress from Philippine courts, but must properly be pleaded as an affirmative
defense in a proceeding, wherein the evidence must show that the plaintiff is a foreign orporation doing
business in the Philippines without having obtained a license.

FACTS:

 Marshall-Wells Company (Marshall-Wells), an Oregon corporation, sued Henry W. Elser & Co.
(Henry), a domestic corporation, in CFI Manila for the unpaid balance on a bill of goods
 Defendant demurred on the ground that plaintiff has no legal capacity to sue
- Plaintiff has not complied with laws covering foreign corporations desiring to do business in the
Philippines
- Demurrer was sustained by the trial judge

ISSUE: W/N obtaining the license prescribed in the Corporation Law is a condition precedent to the
maintaining of any kind of action in Philippine courts by a foreign corporation – NO; noncompliance must be
pleaded as an affirmative defense

1. Corporations have no legal status beyond the bounds of the sovereignty by which they are created.
a. A state may restrict the right of a foreign corporation to engage in business within its limits and
sue in its courts.
b. BUT, by virtue of state comity, a corporation created by the laws of one state is usually allowed
to transact business and sue in other states.
2. Defendant calls for a literal meaning of a provision in the Corporation Law: “No foreign corporation
shall be permitted to maintain…any suit…unless it shall have the license…”
3. Plaintiff asks the court to give the law a common sense interpretation.
4. Court: The object of the statute was to subject the foreign corporation doing business in the
Philippines to the jurisdiction of its courts, not to prevent it from performing single acts, but to
prevent it from acquiring a domicile for the purpose of business without taking the necessary steps
to render it amenable to suit in the courts
a. It was never the purpose of the law to exclude a foreign corporation which happens to obtain an
isolated order for business from securing redress in the courts.
b. The Court rules this way for practical considerations, and that it understands the law to simply
mean that no foreign corporation shall be permitted “to transact business in the Philippine
Islands” unless it shall have the license required, and until then, it shall not be permitted to
maintain any suit.
c. The noncompliance of a foreign corporation with the statute may be pleaded as an affirmative
defense; it must thereafter appear that the plaintiff is a foreign corporation, that it is doing
business in the Philippines, and that it has not obtained the proper license.

DISPOSITIVE: Appeal GRANTED.