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MERRILL LYNCH FUTURES, INC. V. CA

Facts:

Petitioner ML Futures (A foreign Corporation not licensed to do business in the

Philippines) and respondent spouses Lara entered into a "Futures Customer Agreement",in virtue of which the former agreed to act as the Lara's broker for the purchase and saleof future contracts in the U.S. and the latter was well aware that ML Futures was notlicensed to do business in the country. Sps. Lara became indebted to ML Futures which thelatter asked them to pay. However, Sps. Lara refused to pay alleging that the transactionswere null and void because ML Futures had no license to operate as financial futurebroker. They further averred that they had not doing business with ML Futures but withanother corporation, Merrill Lynch, Pierce, Fenner & Smith, Inc. (MLPI)

As a consequence of such refusal by Sps. Lara, Ml Futures filed a complaint with the RTC

Quezon for the recovery of a debt and interest thereon. Preliminary attachment issued ExParte and Respondent sps. were duly served with Summons. Respondents sps. then filed aMotion to Dismiss on the grounds that (1) ML Futures had no leal capacity to sue and (2)the complaints state no cause of action.

ML Futures filed an Opposition to the respondent's motion to dismiss. However,Respondent sps. filed a reply reaffirming their lack of awareness that ML Futures had nolicense to operate business in the country. ML Futures filed a rejoinder alleging that it hadgiven the sps. a disclosure statement by which the latter were made aware that thetransactions they were agreeing on would take place outside the Philippines and that all the

funds in the training program must be placed with ML Futures.Trial Court rendered its decision in favor of sps. Lara by granting their Motion to Dismissand denied the Motion for Reconsideration filed by ML Futures.

CA affirmed the decision of the trial court.

Issue:

WON, the court erred in granting the Motion to Dismiss filed by respondent sps.

Ruling:

YES. SC reversed and set aside the decision of the lower court and ruled in favor ofPetitioner.

First, Motion to Dismiss on the ground that petitioner has no legal capacity to sue may beunderstood on two senses: one, that the petitioner is prohibited or incapacitated to institutesuit in the Philippine Courts or two, that it is not a real party in interest. In the instant case,Sps. Lara contended that ML Futures had no capacity to sue them because the transactions

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