SECOND DIVISION

[G.R. No. 73722. February 26, 1990.]

THE COMMISSIONER OF CUSTOMS , petitioner, vs. K.M.K. GANI,

INDRAPAL & CO., and the HONORABLE COURT OF TAX APPEALS ,
respondents.

Armando S. Padilla for private respondent.

DECISION

SARMIENTO , J : p

This is a review of the decision of the Court of Tax Appeals disposing as follows:
WHEREFORE, the subject ten (10) cartons of Articles are hereby released to the
carrying airline for immediate transshipment to the country of destination under
the terms of the contract of carriage. No costs.
SO ORDERED. 1

The pertinent facts may be summarized thus:

On September 11, 1982, two (2) containers loaded with 103 cartons of merchandise
covered by eleven (11) airway bills of several supposedly Singapore-based consignees
arrived at the Manila International Airport on board Philippine Air Lines (PAL) Flight PR 311
from Hongkong. The cargoes were consigned to these different entities: K.M.K Gani
(hereafter referred to as K.M.K.) and Indrapal and Company (hereafter referred to as
INDRAPAL), the private respondents in the petition before us; and Sin Hong Lee Trading
Co., Ltd., AAR TEE Enterprises, and C. Ratilal, all purportedly based in Singapore.
While the cargoes were at the Manila International Airport, a "reliable source" tipped off the
Bureau of Customs that the said cargoes were going to be unloaded in Manila. Forthwith,
the Bureau's agency on such matters, the Suspected Cargo and Anti-Narcotics (SCAN),
dispatched an agent to verify the information. Upon arriving at the airport, the SCAN agent
saw an empty PAL van parked directly alongside the plane's belly from which cargoes
were being unloaded. When the SCAN agent asked the van's driver why he was at the site,
the driver drove away in his vehicle. The SCAN agent then sequestered the unloaded
cargoes. llcd

The seized cargoes consisted of 103 cartons "containing Mogadon and Mandrax tablets,
Sony T.V. sets 1 546R/176R kw, Sony Betamax SL5800, and SL5000, Cassette Stereos
with Headphone (ala walkman), Casio Calculators, Pioneer Car Stereos, Yamaha Watches,
Eyeglass Frames, Sunglasses, Plastic Utility Bags, Perfumes, etc." These goods were
transferred to the International Cargo Terminal under Warrant of Seizure and Detention and
thereafter subjected to Seizure and Forfeiture proceedings for "technical smuggling."
CD Technologies Asia, Inc. 2016 cdasiaonline.com
 At the hearing, Atty. Armando S. Padilla entered his appearance for the consignees K.M.K.
and INDRAPAL. The records of the case do not show any appearance of the consignees in
person. Atty. Padilla moved for the transshipment of the cargoes consigned to his clients.
On the other hand, the Solicitor General avers that K.M.K. and INDRAPAL did not present
any testimonial or documentary evidence. The Collector of Customs at the then Manila
International Airport (MIA), now Ninoy Aquino International Airport (NAIA), ruled for the
forfeiture of all the cargoes in the said containers (Seizure Identi cation No. 4993-82,
dated July 14, 1983). Consequently, Atty. Padilla ostensibly on behalf of his two clients,
K.M.K. and INDRAPAL appealed the order to the Commissioner of Customs. 2
The Commissioner of Customs af rmed the nding of the Collector of Customs (Customs
Case No. 83-85, January, 1984), of the presence of the intention to import the said goods
in violation of the Dangerous Drugs Act 3 and Central Bank Circular No. 808 in relation to
the Tariff and Customs Code. 4
The Commissioner added the following findings of fact: 5
1. There is a direct ight from Hongkong to Singapore, thus making the
transit through Manila more expensive, tedious, and circuitous.
2. The articles were grossly misdeclared, considering that Singapore is a
free port.
3. The television sets and betamax units seized were of the American
standard which is popularly used in Manila, and not of the European
standard which is used in Singapore.
4. One of the shippers is a Filipino national with no business connection
with her alleged consignee in Singapore.
5. The alleged consignee of the prohibited drugs con scated has no
authority to import Mogadon or Mandrax.
Upon these ndings, the Commissioner concluded that there was an "intent to unlade" in
Manila, thus, an attempt to smuggle goods into the country.
Taking exception to these ndings, Atty. Armando S. Padilla, again as counsel of the
consignees K.M.K and Indrapal, appealed to the respondent Court of Tax Appeals (CTA).
He argued in the CTA that K.M.K. and INDRAPAL were "entitled to the release of their
cargoes for transshipment to Singapore so manifested and covered by the Airway bills as
in transit, . . . contending that the goods were never intended importations into the
Philippines and the same suffer none of any af liating breaches allegedly found
attributable to the other shipments under the Customs and related laws." 6
The CTA reversed the decision of the Commissioner of Customs. Hence this petition.
The petitioner raises the following errors:
1. THE COURT OF TAX APPEALS ERRED IN ENTERTAINING THE PETITION
FOR REVIEW NOTWITHSTANDING HEREIN PRIVATE RESPONDENTS' FAILURE
TO ESTABLISH THEIR PERSONALITY TO SUE IN A REPRESENTATIVE CAPACITY.

2. THE COURT OF TAX APPEALS ERRED IN RULING THAT THE SUBJECT

GOODS WERE IMPORTATIONS NOT INTENDED FOR THE PHILIPPINES BUT FOR
SINGAPORE, THUS, NOT VIOLATING THE LAW ON TECHNICAL SMUGGLING
UNDER THE TARIFF AND CUSTOMS CODE.
CD Technologies Asia, Inc. 2016 cdasiaonline.com
 The issues before us are therefore: (1) whether or not the private respondents failed to
establish their personality to sue in a representative capacity, hence making their action
dismissable, and (2) whether or not the subject goods were importations intended for the
Philippines in violation of the Tariff and Customs Code. cdphil

We answer both questions in the affirmative.

The law is clear: "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." 7
However, the Court in a long line of cases has held that a foreign corporation not engaged
in business in the Philippines may not be denied the right to le an action in the Philippine
courts for an isolated transaction. 8
Therefore, the issue on whether or not a foreign corporation which does not have a license
to engage in business in this country can seek redress in Philippine courts boils down as
to whether it is doing business or merely entered into an isolated transaction in the
Philippines.
The fact that a foreign corporation is not doing business in the Philippines must be
disclosed if it desires to sue in Philippine courts under the "isolated transaction rule."
Without this disclosure, the court may choose to deny it the right to sue. 9
In the case at bar, the private respondents K.M.K. and INDRAPAL aver that they are "suing
upon a singular and isolated transaction." But they failed to prove their legal existence or
juridical personality as foreign corporations. Their unveri ed petition before the
respondent Court of Tax Appeals merely stated:
1. That petitioner "K.M.K. Gani" is a single proprietorship doing business in
accordance with the laws of Singapore with address at 99 Green eld Drive,
Singapore, Rep. of Singapore, while Petitioner "INDRAPAL and COMPANY" is a
rm doing business in accordance with the laws of Singapore with of ce address
at 97 High Street, Singapore 0641, Republic of Singapore, and summons as well
as other Court process may be served to the undersigned lawyer;
2. That the Petitioner's (sic) are sueing (sic) upon a singular and isolated
transaction. 1 0

We are cognizant of the fact that under the "isolated transaction rule," only foreign
corporations and not just any business organization or entity can avail themselves of the
privilege of suing before Philippine courts even without a license. Counsel Armando S.
Padilla stated before the respondent Court of Tax Appeals that his clients are "suing upon
a singular and isolated transaction." But there is no proof to show that K.M.K. and
INDRAPAL are indeed what they are represented to be. It has been simply stated by
Attorney Padilla that K.M.K. Gani is "a single proprietorship," while INDRAPAL is "a rm,"
and both are "doing business in accordance with the laws of Singapore . . .," with speci ed
addresses in Singapore. In cases of this nature, these allegations are not suf cient to
clothe a claimant of suspected smuggled goods of juridical personality and existence. The
"isolated transaction rule" refers only to foreign corporations. Here the petitioners are not
foreign corporations. They do not even pretend to be so. The rst paragraph of their
petition before the Court, containing the allegation of their identities, does not even aver
CD Technologies Asia, Inc. 2016 cdasiaonline.com
 their corporate character. On the contrary, K.M.K. alleges that it is a "single proprietorship"
while INDRAPAL hides under the vague identi cation as a " rm," although both describe
themselves with the phrase "doing business in accordance with the laws of Singapore."
Absent such proof that the private respondents are corporations (foreign or not), the
respondent Court of Tax Appeals should have barred their invocation of the right to sue
within Philippine jurisdiction under the "isolated transaction rule" since they do not qualify
for the availment of such right.
As we had stated before:
But merely to say that a foreign corporation not doing business in the Philippines
does not need a license in order to sue in our courts does not completely resolve
the issue in the present case. The proposition, as stated, refers to the right to sue;
the question here refers to pleading and procedure. It should be noted that insofar
as the allegations in the complaint have a bearing on appellant's capacity to sue,
all that is averred is that they are both foreign corporations existing under the
laws of the United States. This averment conjures two alternative possibilities:
either they are engaged in business in the Philippines or they are not so engaged.
If the rst, they must have been duly licensed in order to maintain this suit; if the
second, if (sic) the transaction sued upon is singular and isolated, no such license
is required. In either case, the qualifying circumstance is an essential part of the
element of plaintiff's capacity to sue and must be affirmatively pleaded. 1 1

In this connection, we note also a fatal defect in the pleadings of the private respondents.
There is no allegation as to who is the duly authorized representative or resident agent in
our jurisdiction. All we have on record are the pleadings led by Attorney Armando S.
Padilla who represents himself as the counsel for the private respondents.
xxx xxx xxx
It is incumbent on plaintiff to allege suf cient facts to show that he is concerned
with the cause of action averred, and is the party who has suffered injury by
reason of the acts of defendant; in other words, it is not enough that he alleges a
cause of action existing in favor of someone, but he must show that it exists in
favor of himself. The burden should not be placed on defendant to show that
plaintiff is not the aggrieved person and that he has sustained no damages. It is
also necessary for plaintiff to allege facts showing that the causes of action
alleged accrued to him in the capacity in which he sues, and for this purpose it is
necessary for someone for one who sues otherwise than in his individual capacity
to allege his authority.

xxx xxx xxx

The plaintiff must show, in his pleading, his right and interest in the subject
matter of the suit; and a complaint which does not show that plaintiff has the
requisite interest to enable him to maintain his action should be dismissed for
insufficiency . . . 1 2

xxx xxx xxx

The appearance of Atty. Armando S. Padilla as counsel for the two claimants would not
suf ce. Generally, a "lawyer is presumed to be properly authorized to represent any cause
in which he appears, and no written power of attorney is required to authorize him to
CD Technologies Asia, Inc. 2016 cdasiaonline.com
 appear in court for his client." 1 3 Nevertheless, although the authority of an attorney to
appear for and on behalf of a party may be assumed, it can still be questioned or
challenged by the adverse party concerned. 1 4
The presumption established under the provision of Section 21, Rule 138 of the Revised
Rules of Court is disputable. 1 5 The requirement for the production of authority is essential
because the client will be bound by his acquiescence resulting from his knowledge that he
was being represented by said attorney. 1 6
The Solicitor General, representing the petitioner-appellant, not only questions the
authority of Atty. Armando S. Padilla to represent the private respondents but also the
latter's capacity to sue: LLpr

. . . While it is alleged that the summons and court processes may be served to
herein private respondents' counsel who led the unveri ed petition before the
Court of Tax Appeals, the allegation would be insuf cient for the purpose of
binding foreign corporations as in the instant case. To be sure, the admitted
absence of special power of attorney in favor of their counsel, the relationship
with the latter, if at all, is merely that of a lawyer-client relationship and de nitely
not one of a principal-agent. Such being the case, said counsel cannot bind nor
compromise the interest of private respondents as it is possible that the latter
may disown the former's representation to avoid civil or criminal liability. In this
respect, the Court cannot assume jurisdiction over the person of private
respondents, notwithstanding the filing of the unverified petition in question.

Apart from the foregoing, Section 4, Rule 8, Revised Rules of Court mandates that
facts showing the capacity of a party to sue or be sued; or the authority of a party
to sue or be sued in a representative capacity; or the legal existence of an
organized association of person (sic) that is made a party, must be averred. In like
manner, the rule is settled that in case where the law denies a foreign corporation
to maintain a suit unless it has previously complied with certain requirements,
then such compliance or exemption therefrom, becomes a necessary averment in
the complaint (Atlantic Mutual Inc. Co. v. Cebu Stevedoring Co., Inc. 17 SCRA
1037; vide: Sec. 4, Rule 8, Revised Rules of Court). In the case at bar, apart from
merely alleging that private respondents are foreign corporation (sic) and that
summons may be served to their counsel, their petition in the Court of Tax
Appeals is bereft of any other factual allegation to show their capacity to sue or
be sued in a representative capacity in his jurisdiction. 1 7

The representation and the extent of the authority of Atty. Padilla have thus been expressly
challenged. But he ignored such challenge which leads us to the only conclusion that he
has no authority to appear for such clients if they exist, which we even doubt. In cases like
this, it is the duty of the government of cials concerned to require competent proof of the
representation and authority of any claimant of any goods coming from abroad and seized
by our customs authorities or otherwise appearing to be illegally imported. This desired
meticulousness, strictness if you may, should extend to their representatives and counsel.
Our government has lost considerable sums of money due to such dubious claims or
claimants.
Apropos the second issue, suf ce it to state that we agree with the ndings, already
enumerated and discussed at the outset, made by the Collector of Customs in his
decision, dated July 14, 1983, which was af rmed and ampli ed by the decision of the
Commissioner of Customs, that those constitute suf cient evidence to support the
conclusion that there was an intention to unlade the seized goods in the Philippines
CD Technologies Asia, Inc. 2016 cdasiaonline.com
 instead of its supposed destination, Singapore. There is no need of belaboring them
anymore.
WHEREFORE, the petition is GRANTED; the decision of the Court of Tax Appeals is SET
ASIDE, and the decision of the petitioner is hereby REINSTATED.
No costs.
SO ORDERED.
Melencio-Herrera, Paras, Padilla and Regalado, JJ., concur.

Footnotes

1. Rollo, 59.

2. Rollo, 55.
3. Republic Act No. 6425 (1972) as amended by Pres. Decree No. 44.
4. Republic Act No. 1937 as amended by Pres. Decree No. 34.
The pertinent provisions are as follows:

Sec. 2530. Property subject to Forfeiture Under Tariff and Customs Law Any
vehicle, vessel or aircraft, cargo, article and other subjects shall, under the following
conditions be subjected to forfeiture:
xxx xxx xxx
(f) Any article the importation or exportation of which is effected or attempted
contrary to law, or any articles of prohibited importation or exportation, and all other
articles which, in the opinion of the collector, have been used, are or were entered to be
used as instruments in the importation or exportation of the former;
xxx xxx xxx
(i) Any package of imported article which is found by the examining of cial to
contain any article not speci ed in the invoice or entry including all other packages
purportedly containing imported articles similar to those declared in the invoice or entry
to be contents of the misdeclared package: Provided, that the Collector is of the opinion
that the misdeclaration was contrary to law;
xxx xxx xxx
(m) Any article sought to be imported or exported:

(1) Without going through a customhouse, whether the act was consummated,
frustrated or attempted;

xxx xxx xxx

3) On the strength of a false declaration or af davit executed by the owner,
importer, exporter or consignee concerning the importation of such article;

4) On the strength of a false invoice or other document executed by the owner,

importer, exporter or consignee concerning the importation or exportation of such article;
CD Technologies Asia, Inc. 2016 cdasiaonline.com
 and

5) Through any other practice or device contrary to law by means of which such
articles were entered through a customhouse to the prejudice of the government.

5. Rollo, 21-22.
6. Rollo, 55-56.
7. Corporation Code, sec. 133 (formerly sec. 69); Top-Weld Man. Inc. v. Eced S.A. et al., L-
44944, August 9, 1985, 138 SCRA 118; Far East Int.'l Import Export Corp. v. Nankai Kogyo
Co. Ltd., L-13525, November 30, 1962, 6 SCRA 725; Mentholatum v. Mangaliman, 72
Phil. 524.
8. Bulakhidas v. Navarro, L-49695, April 7, 1986, 142 SCRA 1; Antam Consolidated, Inc. v.
C.A., No. 61523, July 31, 1936, 143 SCRA 288; Univ. Rubber Products Inc. v. C.A., No. L-
30266, June 29, 1984, 130 SCRA 104.
9. Atlantic Mutual Insurance Co. v. Cebu Stevedoring Co., No. L-18961, August 31, 1966, 17
SCRA 1037.
10. Rollo, 39. Petition for Review, CTA Case No. 3831.
11. Atlantic Mutual Insurance Co. v. Cebu Stevedoring Co., supra, note 9 at 1040.
12. 71 C.J.S. 187, Pleading.

13. Section 21, Rule 138, Revised Rules of Court, cited in Republic vs. Soriano, G.R. 76944,
promulgated on December 20, 1988.
14. Aberca vs. Ver, No. 69866, promulgated on April 15, 1988, 160 SCRA 590.

15. Azotes vs. Blanco, 78 Phil. 739; Garostiaga vs. Sarte, 68 Phil. 4; Tan Lua vs. O'Brien, 55
Phil. 53.

16. Tan Lua vs. O'Brien, supra.

17. Petition, 6-8; Rollo, 11-13.

CD Technologies Asia, Inc. 2016 cdasiaonline.com