G.R. No. 122191 October 8, 1998
Eventually, they were again put in
SAUDI ARABIAN AIRLINES, petitioner,
vs.
COURT OF APPEALS, MILAGROS P. MORADA and HON. RODOLFO A. ORTIZ, in his
capacity as Presiding Judge of Branch 89, Regional Trial Court of Quezon
City, respondents.
QUISUMBING, J.:
This petition for certiorari pursuant to Rule 45 of the Rules of Court seeks to annul and set
aside the Resolution1dated September 27, 1995 and the Decision 2 dated April 10, 1996 of
the Court of Appeals3 in CA-G.R. SP No. 36533,4 and the Orders5 dated August 29,
1994 6 and February 2, 19957 that were issued by the trial court in Civil Case No. Q-93-
18394.8
The pertinent antecedent facts which gave rise to the instant petition, as stated in the
questioned Decision9, are as follows:
On January 21, 1988 defendant SAUDIA hired plaintiff as a Flight
Attendant for its airlines based in Jeddah, Saudi Arabia. . . .
On April 27, 1990, while on a lay-over in Jakarta, Indonesia, plaintiff
went to a disco dance with fellow crew members Thamer Al-Gazzawi
and Allah Al-Gazzawi, both Saudi nationals. Because it was almost
morning when they returned to their hotels, they agreed to have
breakfast together at the room of Thamer. When they were in te (sic)
room, Allah left on some pretext. Shortly after he did, Thamer attempted
to rape plaintiff. Fortunately, a roomboy and several security personnel
heard her cries for help and rescued her. Later, the Indonesian police
came and arrested Thamer and Allah Al-Gazzawi, the latter as an
accomplice.
When plaintiff returned to Jeddah a few days later, several SAUDIA
officials interrogated her about the Jakarta incident. They then
requested her to go back to Jakarta to help arrange the release of
Thamer and Allah. In Jakarta, SAUDIA Legal Officer Sirah Akkad and
base manager Baharini negotiated with the police for the immediate
release of the detained crew members but did not succeed because
plaintiff refused to cooperate. She was afraid that she might be tricked
into something she did not want because of her inability to understand
the local dialect. She also declined to sign a blank paper and a document
written in the local dialect. Eventually, SAUDIA allowed plaintiff to
return to Jeddah but barred her from the Jakarta flights.
Plaintiff learned that, through the intercession of the Saudi Arabian
government, the Indonesian authorities agreed to deport Thamer and
1 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
Allah after two weeks of detention.
service by defendant SAUDI (sic). In September 1990, defendant
SAUDIA transferred plaintiff to Manila.
On January 14, 1992, just when plaintiff thought that the Jakarta
incident was already behind her, her superiors requested her to see Mr.
Ali Meniewy, Chief Legal Officer of SAUDIA, in Jeddah, Saudi Arabia.
When she saw him, he brought her to the police station where the police
took her passport and questioned her about the Jakarta incident.
Miniewy simply stood by as the police put pressure on her to make a
statement dropping the case against Thamer and Allah. Not until she
agreed to do so did the police return her passport and allowed her to
catch the afternoon flight out of Jeddah.
One year and a half later or on lune 16, 1993, in Riyadh, Saudi Arabia, a
few minutes before the departure of her flight to Manila, plaintiff was
not allowed to board the plane and instead ordered to take a later flight
to Jeddah to see Mr. Miniewy, the Chief Legal Officer of SAUDIA. When
she did, a certain Khalid of the SAUDIA office brought her to a Saudi
court where she was asked to sign a document written in Arabic. They
told her that this was necessary to close the case against Thamer and
Allah. As it turned out, plaintiff signed a notice to her to appear before
the court on June 27, 1993. Plaintiff then returned to Manila.
Shortly afterwards, defendant SAUDIA summoned plaintiff to report to
Jeddah once again and see Miniewy on June 27, 1993 for further
investigation. Plaintiff did so after receiving assurance from SAUDIA's
Manila manager, Aslam Saleemi, that the investigation was routinary
and that it posed no danger to her.
In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi
court on June 27, 1993. Nothing happened then but on June 28, 1993, a
Saudi judge interrogated plaintiff through an interpreter about the
Jakarta incident. After one hour of interrogation, they let her go. At the
airport, however, just as her plane was about to take off, a SAUDIA
officer told her that the airline had forbidden her to take flight. At the
Inflight Service Office where she was told to go, the secretary of Mr.
Yahya Saddick took away her passport and told her to remain in Jeddah,
at the crew quarters, until further orders.
On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the
same court where the judge, to her astonishment and shock, rendered a
decision, translated to her in English, sentencing her to five months
imprisonment and to 286 lashes. Only then did she realize that the
Saudi court had tried her, together with Thamer and Allah, for what
happened in Jakarta. The court found plaintiff guilty of (1) adultery; (2)
going to a disco, dancing and listening to the music in violation of
 Islamic laws; and (3) socializing with the male crew, in contravention of
Islamic tradition. 10
Facing conviction, private respondent sought the help of her employer, petitioner SAUDIA.
Unfortunately, she was denied any assistance. She then asked the Philippine Embassy in
Jeddah to help her while her case is on appeal. Meanwhile, to pay for her upkeep, she
worked on the domestic flight of SAUDIA, while Thamer and Allah continued to serve in the
international
flights. 11
Because she was wrongfully convicted, the Prince of Makkah dismissed the case against
her and allowed her to leave Saudi Arabia. Shortly before her return to Manila, 12 she was
terminated from the service by SAUDIA, without her being informed of the cause.
On November 23, 1993, Morada filed a Complaint 13 for damages against SAUDIA, and
Khaled Al-Balawi ("Al-Balawi"), its country manager.
On January 19, 1994, SAUDIA filed an Omnibus Motion To Dismiss 14 which raised the
following grounds, to wit: (1) that the Complaint states no cause of action against Saudia;
(2) that defendant Al-Balawi is not a real party in interest; (3) that the claim or demand set
forth in the Complaint has been waived, abandoned or otherwise extinguished; and (4)
that the trial court has no jurisdiction to try the case.
On February 10, 1994, Morada filed her Opposition (To Motion to Dismiss) 15. Saudia filed a
reply 16 thereto on March 3, 1994.
On June 23, 1994, Morada filed an Amended Complaint 17 wherein Al-Balawi was dropped
as party defendant. On August 11, 1994, Saudia filed its Manifestation and Motion to
Dismiss Amended Complaint 18.
The trial court issued an Order 19 dated August 29, 1994 denying the Motion to Dismiss
Amended Complaint filed by Saudia.
From the Order of respondent Judge denying the Motion to Dismiss, SAUDIA filed on
20
September 20, 1994, its Motion for Reconsideration 21 of the Order dated August 29, 1994.
It alleged that the trial court has no jurisdiction to hear and try the case on the basis of
Article 21 of the Civil Code, since the proper law applicable is the law of the Kingdom of
Saudi Arabia. On October 14, 1994, Morada filed her Opposition 22(To Defendant's Motion
for Reconsideration).
In the Reply 23 filed with the trial court on October 24, 1994, SAUDIA alleged that since its
Motion for Reconsideration raised lack of jurisdiction as its cause of action, the Omnibus
Motion Rule does not apply, even if that ground is raised for the first time on appeal.
Additionally, SAUDIA alleged that the Philippines does not have any substantial interest in
the prosecution of the instant case, and hence, without jurisdiction to adjudicate the same.
2 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
Respondent Judge subsequently issued another Order 24 dated February 2, 1995, denying
SAUDIA's Motion for Reconsideration. The pertinent portion of the assailed Order reads as
follows:
Acting on the Motion for Reconsideration of defendant Saudi Arabian
Airlines filed, thru counsel, on September 20, 1994, and the Opposition
thereto of the plaintiff filed, thru counsel, on October 14, 1994, as well
as the Reply therewith of defendant Saudi Arabian Airlines filed, thru
counsel, on October 24, 1994, considering that a perusal of the plaintiffs
Amended Complaint, which is one for the recovery of actual, moral and
exemplary damages plus attorney's fees, upon the basis of the
applicable Philippine law, Article 21 of the New Civil Code of the
Philippines, is, clearly, within the jurisdiction of this Court as regards
the subject matter, and there being nothing new of substance which
might cause the reversal or modification of the order sought to be
reconsidered, the motion for reconsideration of the defendant, is
DENIED.
SO ORDERED. 25
Consequently, on February 20, 1995, SAUDIA filed its Petition for Certiorari and Prohibition
with Prayer for Issuance of Writ of Preliminary Injunction and/or Temporary Restraining
Order 26 with the Court of Appeals.
Respondent Court of Appeals promulgated a Resolution with Temporary Restraining
Order 27 dated February 23, 1995, prohibiting the respondent Judge from further
conducting any proceeding, unless otherwise directed, in the interim.
In another Resolution 28 promulgated on September 27, 1995, now assailed, the appellate
court denied SAUDIA's Petition for the Issuance of a Writ of Preliminary Injunction dated
February 18, 1995, to wit:
The Petition for the Issuance of a Writ of Preliminary Injunction is
hereby DENIED, after considering the Answer, with Prayer to Deny Writ
of Preliminary Injunction (Rollo, p. 135) the Reply and Rejoinder, it
appearing that herein petitioner is not clearly entitled thereto (Unciano
Paramedical College, et. Al., v. Court of Appeals, et. Al., 100335, April 7,
1993, Second Division).
SO ORDERED.
On October 20, 1995, SAUDIA filed with this Honorable Court the instant Petition 29
for
Review with Prayer for Temporary Restraining Order dated October 13, 1995.
However, during the pendency of the instant Petition, respondent Court of Appeals
rendered the Decision 30dated April 10, 1996, now also assailed. It ruled that the
Philippines is an appropriate forum considering that the Amended Complaint's basis for
recovery of damages is Article 21 of the Civil Code, and thus, clearly within the jurisdiction
of respondent Court. It further held that certiorari is not the proper remedy in a denial of a
Motion to Dismiss, inasmuch as the petitioner should have proceeded to trial, and in case
of an adverse ruling, find recourse in an appeal.
On May 7, 1996, SAUDIA filed its Supplemental Petition for Review with Prayer for
Temporary Restraining Order 31 dated April 30, 1996, given due course by this Court. After
both parties submitted their Memoranda, 32 the instant case is now deemed submitted for
decision.
Petitioner SAUDIA raised the following issues:
I outset. It maintains that private respondent's claim for alleged abuse of rights occurred in
The trial court has no jurisdiction to hear and try Civil Case No. Q-93-
18394 based on Article 21 of the New Civil Code since the proper law
applicable is the law of the Kingdom of Saudi Arabia inasmuch as this
case involves what is known in private international law as a "conflicts
problem". Otherwise, the Republic of the Philippines will sit in judgment
of the acts done by another sovereign state which is abhorred.
II
Leave of court before filing a supplemental pleading is not a
jurisdictional requirement. Besides, the matter as to absence of leave of
court is now moot and academic when this Honorable Court required
the respondents to comment on petitioner's April 30, 1996
Supplemental Petition For Review With Prayer For A Temporary
Restraining Order Within Ten (10) Days From Notice Thereof. Further,
the Revised Rules of Court should be construed with liberality pursuant
to Section 2, Rule 1 thereof.
III
Petitioner received on April 22, 1996 the April 10, 1996 decision in CA-
G.R. SP NO. 36533 entitled "Saudi Arabian Airlines v. Hon. Rodolfo A.
Ortiz, et al." and filed its April 30, 1996 Supplemental Petition For
Review With Prayer For A Temporary Restraining Order on May 7, 1996
at 10:29 a.m. or within the 15-day reglementary period as provided for
under Section 1, Rule 45 of the Revised Rules of Court. Therefore, the
decision in CA-G.R. SP NO. 36533 has not yet become final and executory
and this Honorable Court can take cognizance of this case. 33
From the foregoing factual and procedural antecedents, the following issues emerge for
our resolution:
I.
3 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
WHETHER RESPONDENT APPELLATE COURT ERRED IN HOLDING
THAT THE REGIONAL TRIAL COURT OF QUEZON CITY HAS
JURISDICTION TO HEAR AND TRY CIVIL CASE NO. Q-93-18394
ENTITLED "MILAGROS P. MORADA V. SAUDI ARABIAN AIRLINES".
II.
WHETHER RESPONDENT APPELLATE COURT ERRED IN RULING THAT
IN THIS CASE PHILIPPINE LAW SHOULD GOVERN.
Petitioner SAUDIA claims that before us is a conflict of laws that must be settled at the
the Kingdom of Saudi Arabia. It alleges that the existence of a foreign element qualifies the
instant case for the application of the law of the Kingdom of Saudi Arabia, by virtue of
the lex loci delicti commissi rule. 34
On the other hand, private respondent contends that since her Amended Complaint is
based on Articles 19 35 and 21 36 of the Civil Code, then the instant case is properly a matter
of domestic law. 37
Under the factual antecedents obtaining in this case, there is no dispute that the interplay
of events occurred in two states, the Philippines and Saudi Arabia.
As stated by private respondent in her Amended Complaint 38 dated June 23, 1994:
2. Defendant SAUDI ARABIAN AIRLINES or SAUDIA is a foreign airlines
corporation doing business in the Philippines. It may be served with
summons and other court processes at Travel Wide Associated Sales
(Phils.). Inc., 3rd Floor, Cougar Building, 114 Valero St., Salcedo Village,
Makati, Metro Manila.
xxx xxx xxx
6. Plaintiff learned that, through the intercession of the Saudi Arabian
government, the Indonesian authorities agreed to deport Thamer and
Allah after two weeks of detention. Eventually, they were again put in
service by defendant SAUDIA. In September 1990, defendant SAUDIA
transferred plaintiff to Manila.
7. On January 14, 1992, just when plaintiff thought that the Jakarta
incident was already behind her, her superiors reauested her to see MR.
Ali Meniewy, Chief Legal Officer of SAUDIA in Jeddah, Saudi Arabia. When
she saw him, he brought her to the police station where the police took
her passport and questioned her about the Jakarta incident. Miniewy
simply stood by as the police put pressure on her to make a statement
dropping the case against Thamer and Allah. Not until she agreed to do
so did the police return her passport and allowed her to catch the
afternoon flight out of Jeddah.
 8. One year and a half later or on June 16, 1993, in Riyadh, Saudi Arabia,
a few minutes before the departure of her flight to Manila, plaintiff was
not allowed to board the plane and instead ordered to take a later flight
to Jeddah to see Mr. Meniewy, the Chief Legal Officer of SAUDIA. When
she did, a certain Khalid of the SAUDIA office brought her to a Saudi
court where she was asked to sigh a document written in Arabic. They
told her that this was necessary to close the case against Thamer and
Allah. As it turned out, plaintiff signed a notice to her to appear before
the court on June 27, 1993. Plaintiff then returned to Manila.
9. Shortly afterwards, defendant SAUDIA summoned plaintiff to report to
Jeddah once again and see Miniewy on June 27, 1993 for further
investigation. Plaintiff did so after receiving assurance from SAUDIA's
Manila manger, Aslam Saleemi, that the investigation was routinary and
that it posed no danger to her.
10. In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi
court on June 27, 1993. Nothing happened then but on June 28, 1993, a
Saudi judge interrogated plaintiff through an interpreter about the
Jakarta incident. After one hour of interrogation, they let her go. At the
airport, however, just as her plane was about to take off, a SAUDIA
officer told her that the airline had forbidden her to take that flight. At
the Inflight Service Office where she was told to go, the secretary of Mr.
Yahya Saddick took away her passport and told her to remain in Jeddah,
at the crew quarters, until further orders.
11. On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the
same court where the judge, to her astonishment and shock, rendered a
decision, translated to her in English, sentencing her to five months
imprisonment and to 286 lashes. Only then did she realize that the
Saudi court had tried her, together with Thamer and Allah, for what
happened in Jakarta. The court found plaintiff guilty of (1) adultery; (2)
going to a disco, dancing, and listening to the music in violation of
Islamic laws; (3) socializing with the male crew, in contravention of
Islamic tradition.
12. Because SAUDIA refused to lend her a hand in the case, plaintiff
sought the help of the Philippines Embassy in Jeddah. The latter helped
her pursue an appeal from the decision of the court. To pay for her
upkeep, she worked on the domestic flights of defendant SAUDIA while,
ironically, Thamer and Allah freely served the international flights. 39
Where the factual antecedents satisfactorily establish the existence of a foreign element,
we agree with petitioner that the problem herein could present a "conflicts" case.
A factual situation that cuts across territorial lines and is affected by the diverse laws of
two or more states is said to contain a "foreign element". The presence of a foreign element
is inevitable since social and economic affairs of individuals and associations are rarely
confined to the geographic limits of their birth or conception. 40
4 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
The forms in which this foreign element may appear are many. 41 The foreign element may
simply consist in the fact that one of the parties to a contract is an alien or has a foreign
domicile, or that a contract between nationals of one State involves properties situated in
another State. In other cases, the foreign element may assume a complex form. 42
In the instant case, the foreign element consisted in the fact that private respondent
Morada is a resident Philippine national, and that petitioner SAUDIA is a resident foreign
corporation. Also, by virtue of the employment of Morada with the petitioner Saudia as a
flight stewardess, events did transpire during her many occasions of travel across national
borders, particularly from Manila, Philippines to Jeddah, Saudi Arabia, and vice versa, that
caused a "conflicts" situation to arise.
We thus find private respondent's assertion that the case is purely domestic, imprecise.
A conflicts problem presents itself here, and the question of jurisdiction 43 confronts the
court a quo.
After a careful study of the private respondent's Amended Complaint, 44 and the Comment
thereon, we note that she aptly predicated her cause of action on Articles 19 and 21 of the
New Civil Code.
On one hand, Article 19 of the New Civil Code provides:
Art. 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice give everyone his due and
observe honesty and good faith.
On the other hand, Article 21 of the New Civil Code provides:
Art. 21. Any person who willfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall
compensate the latter for damages.
Thus, in Philippine National Bank (PNB) vs. Court of Appeals, 45 this Court held that:
The aforecited provisions on human relations were intended to expand
the concept of torts in this jurisdiction by granting adequate legal
remedy for the untold number of moral wrongs which is impossible for
human foresight to specifically provide in the statutes.
Although Article 19 merely declares a principle of law, Article 21 gives flesh to its
provisions. Thus, we agree with private respondent's assertion that violations of Articles
19 and 21 are actionable, with judicially enforceable remedies in the municipal forum.
Based on the allegations 46 in the Amended Complaint, read in the light of the Rules of
Court on jurisdiction 47 we find that the Regional Trial Court (RTC) of Quezon City
possesses jurisdiction over the subject matter of the suit. 48 Its authority to try and hear the
case is provided for under Section 1 of Republic Act No. 7691, to wit:
 Sec. 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the
"Judiciary Reorganization Act of 1980", is hereby amended to read as
follows:
Sec. 19. Jurisdiction in Civil Cases. — Regional Trial Courts shall exercise
exclusive jurisdiction:
xxx xxx xxx
(8) In all other cases in which demand, exclusive of
interest, damages of whatever kind, attorney's fees,
litigation expenses, and cots or the value of the
property in controversy exceeds One hundred
thousand pesos (P100,000.00) or, in such other cases
in Metro Manila, where the demand, exclusive of the
above-mentioned items exceeds Two hundred
Thousand pesos (P200,000.00). (Emphasis ours)
xxx xxx xxx
And following Section 2 (b), Rule 4 of the Revised Rules of Court — the venue, Quezon City,
is appropriate:
Sec. 2 Venue in Courts of First Instance. — [Now Regional Trial Court]
(a) xxx xxx xxx
(b) Personal actions. — All other actions may be commenced and tried
where the defendant or any of the defendants resides or may be found,
or where the plaintiff or any of the plaintiff resides, at the election of the
plaintiff.
Pragmatic considerations, including the convenience of the parties, also weigh heavily in
favor of the RTC Quezon City assuming jurisdiction. Paramount is the private interest of the
litigant. Enforceability of a judgment if one is obtained is quite obvious. Relative
advantages and obstacles to a fair trial are equally important. Plaintiff may not, by choice of
an inconvenient forum, "vex", "harass", or "oppress" the defendant, e.g. by inflicting upon
him needless expense or disturbance. But unless the balance is strongly in favor of the
defendant, the plaintiffs choice of forum should rarely be disturbed. 49
Weighing the relative claims of the parties, the court a quo found it best to hear the case in
the Philippines. Had it refused to take cognizance of the case, it would be forcing plaintiff
(private respondent now) to seek remedial action elsewhere, i.e. in the Kingdom of Saudi
Arabia where she no longer maintains substantial connections. That would have caused a
fundamental unfairness to her.
5 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
Moreover, by hearing the case in the Philippines no unnecessary difficulties and
inconvenience have been shown by either of the parties. The choice of forum of the plaintiff
(now private respondent) should be upheld.
Similarly, the trial court also possesses jurisdiction over the persons of the parties herein.
By filing her Complaint and Amended Complaint with the trial court, private respondent
has voluntary submitted herself to the jurisdiction of the court.
The records show that petitioner SAUDIA has filed several motions 50 praying for the
dismissal of Morada's Amended Complaint. SAUDIA also filed an Answer In Ex Abundante
Cautelam dated February 20, 1995. What is very patent and explicit from the motions filed,
is that SAUDIA prayed for other reliefs under the premises. Undeniably, petitioner SAUDIA
has effectively submitted to the trial court's jurisdiction by praying for the dismissal of the
Amended Complaint on grounds other than lack of jurisdiction.
As held by this Court in Republic vs. Ker and Company, Ltd.: 51
We observe that the motion to dismiss filed on April 14, 1962, aside
from disputing the lower court's jurisdiction over defendant's person,
prayed for dismissal of the complaint on the ground that plaintiff's
cause of action has prescribed. By interposing such second ground in its
motion to dismiss, Ker and Co., Ltd. availed of an affirmative defense on
the basis of which it prayed the court to resolve controversy in its favor.
For the court to validly decide the said plea of defendant Ker & Co., Ltd.,
it necessarily had to acquire jurisdiction upon the latter's person, who,
being the proponent of the affirmative defense, should be deemed to
have abandoned its special appearance and voluntarily submitted itself
to the jurisdiction of the court.
Similarly, the case of De Midgely vs. Ferandos, held that;
When the appearance is by motion for the purpose of objecting to the
jurisdiction of the court over the person, it must be for the sole and
separate purpose of objecting to the jurisdiction of the court. If his
motion is for any other purpose than to object to the jurisdiction of the
court over his person, he thereby submits himself to the jurisdiction of
the court. A special appearance by motion made for the purpose of
objecting to the jurisdiction of the court over the person will be held to
be a general appearance, if the party in said motion should, for example,
ask for a dismissal of the action upon the further ground that the court
had no jurisdiction over the subject matter. 52
Clearly, petitioner had submitted to the jurisdiction of the Regional Trial Court of Quezon
City. Thus, we find that the trial court has jurisdiction over the case and that its exercise
thereof, justified.
As to the choice of applicable law, we note that choice-of-law problems seek to answer two
important questions: (1) What legal system should control a given situation where some of
the significant facts occurred in two or more states; and (2) to what extent should the
chosen legal system regulate the situation. 53
Several theories have been propounded in order to identify the legal system that should
ultimately control. Although ideally, all choice-of-law theories should intrinsically advance
both notions of justice and predictability, they do not always do so. The forum is then faced
with the problem of deciding which of these two important values should be stressed. 54
Before a choice can be made, it is necessary for us to determine under what category a
certain set of facts or rules fall. This process is known as "characterization", or the
"doctrine of qualification". It is the "process of deciding whether or not the facts relate to
the kind of question specified in a conflicts rule." 55The purpose of "characterization" is to
enable the forum to select the proper law. 56
Our starting point of analysis here is not a legal relation, but a factual situation, event, or
operative fact. 57An essential element of conflict rules is the indication of a "test" or
"connecting factor" or "point of contact". Choice-of-law rules invariably consist of a factual
relationship (such as property right, contract claim) and a connecting factor or point of
contact, such as the situs of the res, the place of celebration, the place of performance, or
the place of wrongdoing. 58
Note that one or more circumstances may be present to serve as the possible test for the
determination of the applicable law. 59 These "test factors" or "points of contact" or
"connecting factors" could be any of the following:
(1) The nationality of a person, his domicile, his residence, his place of
sojourn, or his origin;
(2) the seat of a legal or juridical person, such as a corporation;
(3) the situs of a thing, that is, the place where a thing is, or is deemed to
be situated. In particular, the lex situs is decisive when real rights are
involved;
(4) the place where an act has been done, the locus actus, such as the
place where a contract has been made, a marriage celebrated, a will
signed or a tort committed. The lex loci actus is particularly important in
contracts and torts;
(5) the place where an act is intended to come into effect, e.g., the place
of performance of contractual duties, or the place where a power of
attorney is to be exercised;
(6) the intention of the contracting parties as to the law that should
govern their agreement, thelex loci intentionis;
(7) the place where judicial or administrative proceedings are instituted
or done. The lex fori — the law of the forum — is particularly important
6 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
because, as we have seen earlier, matters of "procedure" not going to the
substance of the claim involved are governed by it; and because the lex
fori applies whenever the content of the otherwise applicable foreign
law is excluded from application in a given case for the reason that it
falls under one of the exceptions to the applications of foreign law; and
(8) the flag of a ship, which in many cases is decisive of practically all
legal relationships of the ship and of its master or owner as such. It also
covers contractual relationships particularly contracts of
affreightment. 60 (Emphasis ours.)
After a careful study of the pleadings on record, including allegations in the Amended
Complaint deemed admitted for purposes of the motion to dismiss, we are convinced that
there is reasonable basis for private respondent's assertion that although she was already
working in Manila, petitioner brought her to Jeddah on the pretense that she would merely
testify in an investigation of the charges she made against the two SAUDIA crew members
for the attack on her person while they were in Jakarta. As it turned out, she was the one
made to face trial for very serious charges, including adultery and violation of Islamic laws
and tradition.
There is likewise logical basis on record for the claim that the "handing over" or "turning
over" of the person of private respondent to Jeddah officials, petitioner may have acted
beyond its duties as employer. Petitioner's purported act contributed to and amplified or
even proximately caused additional humiliation, misery and suffering of private
respondent. Petitioner thereby allegedly facilitated the arrest, detention and prosecution of
private respondent under the guise of petitioner's authority as employer, taking advantage
of the trust, confidence and faith she reposed upon it. As purportedly found by the Prince
of Makkah, the alleged conviction and imprisonment of private respondent was wrongful.
But these capped the injury or harm allegedly inflicted upon her person and reputation, for
which petitioner could be liable as claimed, to provide compensation or redress for the
wrongs done, once duly proven.
Considering that the complaint in the court a quo is one involving torts, the "connecting
factor" or "point of contact" could be the place or places where the tortious conduct or lex
loci actus occurred. And applying the torts principle in a conflicts case, we find that the
Philippines could be said as a situs of the tort (the place where the alleged tortious conduct
took place). This is because it is in the Philippines where petitioner allegedly deceived
private respondent, a Filipina residing and working here. According to her, she had
honestly believed that petitioner would, in the exercise of its rights and in the performance
of its duties, "act with justice, give her due and observe honesty and good faith." Instead,
petitioner failed to protect her, she claimed. That certain acts or parts of the injury
allegedly occurred in another country is of no moment. For in our view what is important
here is the place where the over-all harm or the totality of the alleged injury to the person,
reputation, social standing and human rights of complainant, had lodged, according to the
plaintiff below (herein private respondent). All told, it is not without basis to identify the
Philippines as the situs of the alleged tort.
Moreover, with the widespread criticism of the traditional rule of lex loci delicti commissi,
modern theories and rules on tort liability 61 have been advanced to offer fresh judicial
approaches to arrive at just results. In keeping abreast with the modern theories on tort
liability, we find here an occasion to apply the "State of the most significant relationship" WHEREFORE, the instant petition for certiorari is hereby DISMISSED. Civil Case No. Q-93-
rule, which in our view should be appropriate to apply now, given the factual context of this 18394 entitled "Milagros P. Morada vs. Saudi Arabia Airlines" is hereby REMANDED to
case. Regional Trial Court of Quezon City, Branch 89 for further proceedings.

In applying said principle to determine the State which has the most significant SO ORDERED.
relationship, the following contacts are to be taken into account and evaluated according to
their relative importance with respect to the particular issue: (a) the place where the
injury occurred; (b) the place where the conduct causing the injury occurred; (c) the
domicile, residence, nationality, place of incorporation and place of business of the parties,
and (d) the place where the relationship, if any, between the parties is centered. 62

As already discussed, there is basis for the claim that over-all injury occurred and lodged in
the Philippines. There is likewise no question that private respondent is a resident Filipina
national, working with petitioner, a resident foreign corporation engaged here in the
business of international air carriage. Thus, the "relationship" between the parties was
centered here, although it should be stressed that this suit is not based on mere labor law
violations. From the record, the claim that the Philippines has the most significant contact
with the matter in this dispute, 63 raised by private respondent as plaintiff below against
defendant (herein petitioner), in our view, has been properly established.

Prescinding from this premise that the Philippines is the situs of the tort complained of
and the place "having the most interest in the problem", we find, by way of recapitulation,
that the Philippine law on tort liability should have paramount application to and control
in the resolution of the legal issues arising out of this case. Further, we hold that the
respondent Regional Trial Court has jurisdiction over the parties and the subject matter of
the complaint; the appropriate venue is in Quezon City, which could properly apply
Philippine law. Moreover, we find untenable petitioner's insistence that "[s]ince private
respondent instituted this suit, she has the burden of pleading and proving the applicable
Saudi law on the matter." 64As aptly said by private respondent, she has "no obligation to
plead and prove the law of the Kingdom of Saudi Arabia since her cause of action is based
on Articles 19 and 21" of the Civil Code of the Philippines. In her Amended Complaint and
subsequent pleadings, she never alleged that Saudi law should govern this case. 65 And as
correctly held by the respondent appellate court, "considering that it was the petitioner
who was invoking the applicability of the law of Saudi Arabia, then the burden was on it
[petitioner] to plead and to establish what the law of Saudi Arabia is". 66

Lastly, no error could be imputed to the respondent appellate court in upholding the trial
court's denial of defendant's (herein petitioner's) motion to dismiss the case. Not only was
jurisdiction in order and venue properly laid, but appeal after trial was obviously available,
and expeditious trial itself indicated by the nature of the case at hand. Indubitably, the
Philippines is the state intimately concerned with the ultimate outcome of the case below,
not just for the benefit of all the litigants, but also for the vindication of the country's
system of law and justice in a transnational setting. With these guidelines in mind, the trial
court must proceed to try and adjudge the case in the light of relevant Philippine law, with
due consideration of the foreign element or elements involved. Nothing said herein, of
course, should be construed as prejudging the results of the case in any manner
whatsoever.

7 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS

 Governor and the Civil Commission admiralty jurisdiction over all crimes committed on
board vessels flying the flag of the United States has been vested in the Courts of First
Instance of the city of Manila. Among other laws and orders he cited the order of August
14, 1898, and Acts Nos. 76 and 186 of the United States Civil Commission. He argued that
the President of the United States had unquestionable authority to authorize the
commanding general and the Civil Commission to establish a judicial system with authority
to take cognizance of maritime and admiralty causes, citing a decision of the Supreme
Court of the United States in support of this doctrine, which was applicable to this
Archipelago, which is now analogous to the status of some of the States of the Union during
the Mexican was and the war of secession.

The judge, however, by an order of the 14th of September, 1901, held that the court was
without jurisdiction to try the accused for the theft alleged to have been committed on the
high seas, sustained the demurrer, and ordered the discharge of the defendants, with the
costs to the Government. Against this order the prosecuting attorney appealed, and the
case was brought before this court.
[G.R. No. 496. December 31, 1902. ]
This case deals with a theft committed on board a transport while navigating the high seas.
THE UNITED STATES, Complainant-Appellant, v. WILLIAM FOWLER ET Act No. 136 of the organic law, as well as Act No. 186 passed by the Civil Commission, and
AL., Defendants-Appellees. which repealed the former law, Act No. 76, do not expressly confer jurisdiction or authority
upon this court to take cognizance of all crimes committed on board vessels on the high
Assistant Attorney-General Constantino, for Appellant. seas. While the provisions of the law are clear and precise with respect to civil admiralty or
maritime cases, this is not true with respect to criminal cases. If any doubt could arise
William Lane O’Neill, for Appellees. concerning the true meaning of the law applicable to the case, Act. No. 400 effectively
dissipates such doubts.
SYLLABUS
1. CRIMINAL LAW; JURISDICTION; CRIMES ON HIGH SEAS. — Courts of First Instance of This law, which is an addition to Act No. 136, by which the courts of justice of the
the Philippines have no jurisdiction to take cognizance of crimes committed on the high Philippine Islands were organized, in article 1 adds to article 56, consisting of seven
seas on board of a transport or other vessel not registered or licensed in the Philippines. paragraphs, another paragraph numbered 8, which reads as follows: "Of all crimes and
offenses committed on the high seas or beyond the jurisdiction of any country, or within
DECISION any of the navigable waters of the Philippine Archipelago, on bard a ship or water craft of
TORRES, J. : any kind registered or licensed in the Philippine Islands in accordance with the laws
thereof." The purpose of this law was to define the jurisdiction of the Courts of First
The two defendants have been accused of the theft of sixteen bottles of champagne of the Instance in criminal cases for crimes committed on board vessels registered or licensed in
value of $20, on the 12th August, 1901, while on board the transport Lawton, then the Philippine Islands. The transport Lawton not being a vessel of this class, our courts are
navigating the high seas, which said bottles of champagne formed part of the cargo of the without jurisdiction to take cognizance of a crime committed on board the same.
said vessel and were the property of Julian Lindsay, and which were taken lucri causa, and
with the intent to appropriate the same, without violence or intimidation, and without the Upon these grounds we consider that the order appealed should be affirmed, with the
consent of the owner, against the statute in the case made and provided. costs de oficio. So ordered.

The accused having been brought before the court, the prosecuting attorney being present Arellano, C.J., Cooper, Smith, Willard, Mapa and Ladd, JJ., concur.
on behalf of the Government, counsel for the defendants presented a demurrer, alleging
that the Court of First Instance was without jurisdiction to try the crime charged, inasmuch
as it appeared from the information that the crime was committed on the high seas, and
not in the city of Manila, or within the territory comprising the Bay of Manila, or upon the
seas within the 3-mile limit to which the jurisdiction of the court extends, and asked, upon
these grounds, that the case be dismissed.

This contention was opposed by the prosecuting attorney, who alleged that the court has
original jurisdiction in all criminal cases in which the penalty exceeds six month’s
imprisonment, or a fine of over $100; that, in accordance with the orders of the Military

8 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS


G.R. No. L-18924 October 19, 1922
THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellant,
vs.
WONG CHENG (alias WONG CHUN), defendant-appellee.
Attorney-General Villa-Real for appellant.
Eduardo Gutierrez Repide for appellee.
ROMUALDEZ, J.:
In this appeal the Attorney-General urges the revocation of the order of the Court of First
Instance of Manila, sustaining the demurrer presented by the defendant to the information
that initiated this case and in which the appellee is accused of having illegally smoked
opium, aboard the merchant vessel Changsa of English nationality while said vessel was
anchored in Manila Bay two and a half miles from the shores of the city.
The demurrer alleged lack of jurisdiction on the part of the lower court, which so held and
dismissed the case.
The question that presents itself for our consideration is whether such ruling is erroneous
or not; and it will or will not be erroneous according as said court has or has no
jurisdiction over said offense.
The point at issue is whether the courts of the Philippines have jurisdiction over crime, like
the one herein involved, committed aboard merchant vessels anchored in our jurisdiction
waters. 1awph!l.net
There are two fundamental rules on this particular matter in connection with International
Law; to wit, the French rule, according to which crimes committed aboard a foreign
merchant vessels should not be prosecuted in the courts of the country within whose
territorial jurisdiction they were committed, unless their commission affects the peace and
security of the territory; and the English rule, based on the territorial principle and
followed in the United States, according to which, crimes perpetrated under such
circumstances are in general triable in the courts of the country within territory they were
committed. Of this two rules, it is the last one that obtains in this jurisdiction, because at
present the theories and jurisprudence prevailing in the United States on this matter are
authority in the Philippines which is now a territory of the United States.
In the cases of The Schooner Exchange vs. M'Faddon and Others (7 Cranch [U. S.], 116), Chief
Justice Marshall said:
. . . When merchant vessels enter for the purposes of trade, it would be obviously
inconvenient and dangerous to society, and would subject the laws to continual
infraction, and the government to degradation, if such individuals or merchants
did not owe temporary and local allegiance, and were not amenable to the
jurisdiction of the country. . . .
In United States vs. Bull (15 Phil., 7), this court held:
. . . No court of the Philippine Islands had jurisdiction over an offense or crime
committed on the high seas or within the territorial waters of any other country,
but when she came within three miles of a line drawn from the headlands, which
embrace the entrance to Manila Bay, she was within territorial waters, and a new
set of principles became applicable. (Wheaton, International Law [Dana ed.], p.
255, note 105; Bonfils, Le Droit Int., secs. 490 et seq.; Latour, La Mer Ter., ch. 1.)
The ship and her crew were then subject to the jurisdiction of the territorial
sovereign subject to such limitations as have been conceded by that sovereignty
through the proper political agency. . . .
9 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
It is true that in certain cases the comity of nations is observed, as in Mali and Wildenhus
vs. Keeper of the Common Jail (120 U.., 1), wherein it was said that:
. . . The principle which governs the whole matter is this: Disorder which disturb
only the peace of the ship or those on board are to be dealt with exclusively by the
sovereignty of the home of the ship, but those which disturb the public peace may
be suppressed, and, if need be, the offenders punished by the proper authorities
of the local jurisdiction. It may not be easy at all times to determine which of the
two jurisdictions a particular act of disorder belongs. Much will undoubtedly
depend on the attending circumstances of the particular case, but all must
concede that felonious homicide is a subject for the local jurisdiction, and that if
the proper authorities are proceeding with the case in the regular way the consul
has no right to interfere to prevent it.
Hence in United States vs. Look Chaw (18 Phil., 573), this court held that:
Although the mere possession of an article of prohibited use in the Philippine
Islands, aboard a foreign vessel in transit in any local port, does not, as a general
rule, constitute a crime triable by the courts of the Islands, such vessels being
considered as an extension of its own nationality, the same rule does not apply
when the article, the use of which is prohibited in the Islands, is landed from the
vessels upon Philippine soil; in such a case an open violation of the laws of the
land is committed with respect to which, as it is a violation of the penal law in
force at the place of the commission of the crime, no court other than that
established in the said place has jurisdiction of the offense, in the absence of an
agreement under an international treaty.
As to whether the United States has ever consented by treaty or otherwise to renouncing
such jurisdiction or a part thereof, we find nothing to this effect so far as England is
concerned, to which nation the ship where the crime in question was committed belongs.
Besides, in his work "Treaties, Conventions, etc.," volume 1, page 625, Malloy says the
following:
There shall be between the territories of the United States of America, and all the
territories of His Britanic Majesty in Europe, a reciprocal liberty of commerce.
The inhabitants of the two countries, respectively, shall have liberty freely and
securely to come with their ships and cargoes to all such places, ports and rivers,
in the territories aforesaid, to which other foreigners are permitted to come, to
enter into the same, and to remain and reside in any parts of the said territories,
respectively; also to hire and occupy houses and warehouses for the purposes of
their commerce; and, generally, the merchants and traders of each nation
respectively shall enjoy the most complete protection and security for their
commerce, but subject always to the laws and statutes of the two countries,
respectively. (Art. 1, Commerce and Navigation Convention.)
We have seen that the mere possession of opium aboard a foreign vessel in transit was held
by this court not triable by or courts, because it being the primary object of our Opium Law
to protect the inhabitants of the Philippines against the disastrous effects entailed by the
use of this drug, its mere possession in such a ship, without being used in our territory,
does not being about in the said territory those effects that our statute contemplates
avoiding. Hence such a mere possession is not considered a disturbance of the public order.
But to smoke opium within our territorial limits, even though aboard a foreign merchant
ship, is certainly a breach of the public order here established, because it causes such drug
to produce its pernicious effects within our territory. It seriously contravenes the purpose
that our Legislature has in mind in enacting the aforesaid repressive statute. Moreover, as
the Attorney-General aptly observes:
 . . . The idea of a person smoking opium securely on board a foreign vessel at
anchor in the port of Manila in open defiance of the local authorities, who are
impotent to lay hands on him, is simply subversive of public order. It requires no
unusual stretch of the imagination to conceive that a foreign ship may come into
the port of Manila and allow or solicit Chinese residents to smoke opium on
board.
The order appealed from is revoked and the cause ordered remanded to the court of origin
for further proceedings in accordance with law, without special findings as to costs. So
ordered.

G.R. No. L-28882 May 31, 1971

TIME, INC., petitioner,

vs.
HON. ANDRES REYES, as Judge of the Court of First Instance of Rizal, ELISEO S. ZARI,
as Deputy Clerk of Court, Branch VI, Court of First Instance of Rizal, ANTONIO J.
VILLEGAS and JUAN PONCE ENRILE, respondents.

REYES, J.B.L., J.:

Petition for certiorari and prohibition, with preliminary injunction, to annul certain orders
of the respondent Court of First Instance of Rizal, issued in its Civil Case No. 10403,
entitled "Antonio J. Villegas and Juan Ponce Enrile vs. Time, Inc., and Time-Life
International, Publisher of 'Time' Magazine (Asia Edition)", and to prohibit the said court
from further proceeding with the said civil case.

Upon petitioner's posting a bond of P1,000.00, this Court, as prayed for, ordered, on 15
April 1968, the issuance of a writ of preliminary injunction.

10 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS

The petition alleges that petitioner Time, Inc., 1 is an American corporation with principal
offices at Rocketfeller Center, New York City, N. Y., and is the publisher of "Time", a weekly
news magazine; the petition, however, does not allege the petitioner's legal capacity to sue
in the courts of the Philippine.2
In the aforesaid Civil Case No. 10403, therein plaintiffs (herein respondents) Antonio J.
Villegas and Juan Ponce Enrile seek to recover from the herein petitioner damages upon an
alleged libel arising from a publication of Time (Asia Edition) magazine, in its issue of 18
August 1967, of an essay, entitled "Corruption in Asia", which, in part, reads, as follows:
The problem of Manila's mayor, ANTONIO VILLEGAS, is a case in point.
When it was discovered last year that the mayor's coffers contained far
more pesos than seemed reasonable in the light of his income, an
investigation was launched. Witnesses who had helped him out under
curious circumstance were asked to explain in court. One government
official admitted lending Villegas P30,000 pesos ($7,700) without
interest because he was the mayor's compadre. An assistant declared he
had given Villegas loans without collateral because he regarded the boss
as my own son. A wealthy Manila businessman testified that he had lent
Villegas' wife 15,000 pesos because the mayor was like a brother to me.
With that, Villegas denounced the investigation as an invasion of his
family's privacy. The case was dismissed on a technicality, and Villegas is
still mayor.3
More specifically, the plaintiffs' complaint alleges, inter alia that:
(4) Defendants, conspiring and confederating, published a libelous
article, publicly, falsely and maliciously imputing to Plaintiffs the
commission of the crimes of graft, corruption and nepotism; that said
publication particularly referred to Plaintiff Mayor Antonio J. Villegas as
a case in point in connection with graft, corruption and nepotism in
Asia; that said publication without any doubt referred to co-plaintiff
Juan Ponce Enrile as the high government official who helped under
curious circumstances Plaintiff Mayor Antonio J. Villegas in lending the
latter approximately P30,000.00 ($7,700.00) without interest because
he was the Mayor's compadre; that the purpose of said Publications is to
cause the dishonor, discredit and put in public contempt the Plaintiffs,
particularly Plaintiff Mayor Antonio J. Villegas.
On motion of the respondents-plaintiffs, the respondent judge, on 25 November 1967,
granted them leave to take the depositions "of Mr. Anthony Gonzales, Time-Life
international", and "Mr. Cesar B. Enriquez, Muller & Phipps (Manila) Ltd.", in connection
with the activities and operations in the Philippines of the petitioner, and, on 27 November
1967, issued a writ of attachment on the real and personal estate of Time, Inc.
Petitioner received the summons and a copy of the complaint at its offices in New York on
13 December 1967 and, on 27 December 1967, it filed a motion to dismiss the complaint
for lack of jurisdiction and improper venue, relying upon the provisions of Republic Act
4363. Private respondents opposed the motion.
11 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
In an order dated 26 February 1968, respondent court deferred the determination of the
motion to dismiss until after trial of the case on the merits, the court having considered
that the grounds relied upon in the motion do not appear to be indubitable.
Petitioner moved for reconsideration of the deferment private respondents again opposed.
On 30 March 1968, respondent judge issued an order re-affirming the previous order of
deferment for the reason that "the rule laid down under Republic Act. No. 4363, amending
Article 360 of the Revised Penal Code, is not applicable to actions against non-resident
defendants, and because questions involving harassment and inconvenience, as well as
disruption of public service do not appear indubitable. ..."
Failing in its efforts to discontinue the taking of the depositions, previously adverted to,
and to have action taken, before trial, on its motion to dismiss, petitioner filed the instant
petition for certiorari and prohibition.
The orders for the taking of the said depositions, for deferring determination of the motion
to dismiss, and for reaffirming the deferment, and the writ of attachment are sought to be
annulled in the petition..
There is no dispute that at the time of the publication of the allegedly offending essay,
private respondents Antonio Villegas and Juan Ponce Enrile were the Mayor Of the City of
Manila and Undersecretary of Finance and concurrently Acting Commissioner of Customs,
respectively, with offices in the City of Manila. The issues in this case are:
1. Whether or not, under the provisions of Republic Act No. 4363 the respondent Court of
First Instance of Rizal has jurisdiction to take cognizance of the civil suit for damages
arising from an allegedly libelous publication, considering that the action was instituted by
public officers whose offices were in the City of Manila at the time of the publication; if it
has no jurisdiction, whether or not its erroneous assumption of jurisdiction may be
challenged by a foreign corporation by writ of certiorari or prohibition; and
2. Whether or not Republic Act 4363 is applicable to action against a foreign corporation or
non-resident defendant.
Provisions of Republic Act No. 4363, which are relevant to the resolution of the foregoing
issues, read, as follows:
Section 1. Article three hundred sixty of the Revised Penal Code, as
amended by Republic Act Numbered Twelve hundred and eighty-nine, is
further amended to read as follows:
'ART. 360. Persons responsible. — Any person who
shall publish, exhibit, or cause the publication or
exhibition of any defamation in writing or by similar
means, shall be responsible for the same.
 The author or editor of a book or pamphlet, or the editor or business
manager of a daily newspaper, magazine or serial publication, shall be
responsible for the defamations contained therein to the extent as if he
were the author thereof.
The criminal and civil action for damages in cases of written
defamations as provided for in this chapter, shall be filed simultaneously
or separately with the court of first instance of the province or city
where the libelous article is printed and first published or where any of
the offended parties actually resides at the time of the commission of
the offense; Provided, however, That where one of the offended parties is
a public officer whose office is in the City of Manila at the time of the
commission of the offense, the action shall be filed in the Court of First
Instance of the City of Manila or of the city or province where the
libelous article is printed and first published, and in case such public
officer does not hold office in the City of Manila, the action shall be filed
in the Court of First Instance of the province or city where he held office
at the time of the commission of the offense or where the libelous
article is printed and first published and in case one of the offended
parties is a private individual, the action shall be filed in the Court of
First Instance of the province or city where he actually resides at the
time of the commission of the offense or where the libelous matter is
printed and first published; Provided,further, That the civil action shall
be filed in the same court where the criminal action is filed and vice
versa; Provided, furthermore, That the court where the criminal action
or civil action for damages is first filed, shall acquire jurisdiction to the
exclusion of other courts; And provided finally, That this amendment
shall not apply to cases of written defamations, the civil and/or criminal
actions which have been filed in court at the time of the effectivity of the
law
xxx xxx xxx
xxx xxx xxx
Sec. 3. This Act shall take effect only if and when, within thirty days from
its approval, the newspapermen in the Philippines shall organize, and
elect the members of, a Philippine Press Council, a private agency of the
said newspapermen, whose function shall be to promulgate a Code of
Ethics for them and the Philippine press investigate violations thereof,
and censure any newspaperman or newspaper guilty of any violation of
the said Code, and the fact that such Philippine Press Council has been
organized and its members have been duly elected in accordance
herewith shall be ascertained and proclaimed by the President of the
Philippines.
Under the first proviso in section 1, the venue of a civil action for damages in cases of
written defamations is localized upon the basis of, first, whether the offended party or
plaintiff is a public officer or a private individual; and second, if he is a public officer,
whether his office is in Manila or not in Manila, at the time of the commission of the
12 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
offense. If the offended party is a public officer in the office in the City of Manila, the
proviso limits him to two (2) choices of venue, namely, in the Court of First instance of the
City of Manila or in the city or province where the libelous article is printed and first
published ..."
The complaint lodged in the court of Rizal by respondents does not allege that the libelous
article was printed and first published in the province of Rizal and, since the respondents-
plaintiffs are public officers with offices in Manila at the time of the commission of the
alleged offense, it is clear that the only place left for them wherein to file their action, is the
Court of First Instance of Manila.
The limitation of the choices of venue, as introduced into the Penal Code through its
amendments by Republic Act 4363, was intended "to minimize or limit the filing of out-of-
town libel suits" to protect an alleged offender from "hardships, inconveniences and
harassments" and, furthermore, to protect "the interest of the public service" where one of
the offended parties is a public officer." 4 The intent, of the law is clear: a libeled public
official might sue in the court of the locality where he holds office, in order that the
prosecution of the action should interfere as little as possible with the discharge of his
official duties and labors. The only alternative allowed him by law is to prosecute those
responsible for the libel in the place where the offending article was printed and first
published. Here, the law tolerates the interference with the libeled officer's duties only for
the sake of avoiding unnecessary harassment of the accused. Since the offending
publication was not printed in the Philippines, the alternative venue was not open to
respondent Mayor Villegas of Manila and Undersecretary of Finance Enrile, who were the
offended parties.
But respondents-plaintiffs argue that Republic Act No. 4363 is not applicable where the
action is against non-existent defendant, as petitioner Time, Inc., for several reasons. They
urge that, in enacting Republic Act No. 4363, Congress did not intend to protect non-
resident defendants as shown by Section 3, which provides for the effectivity of the statute
only if and when the "newspapermen in the Philippines" have organized a "Philippine
Press Council" whose function shall be to promulgate a Code of Ethics for "them" and "the
Philippine press"; and since a non-resident defendant is not in a position to comply with
the conditions imposed for the effectivity of the statute, such defendant may not invoke its
provisions; that a foreign corporation is not inconvenienced by an out-of-town libel suit;
that it would be absurd and incongruous, in the absence of an extradition treaty, for the law
to give to public officers with office in Manila the second option of filing a criminal case in
the court of the place where the libelous article is printed and first published if the
defendant is a foreign corporation and that, under the "single publication" rule which
originated in the United States and imported into the Philippines, the rule was understood
to mean that publications in another state are not covered by venue statutes of the forum.
The implication of respondents' argument is that the law would not take effect as to non-
resident defendants or accused. We see nothing in the text of the law that would sustain
such unequal protection to some of those who may be charged with libel. The official
proclamation that a Philippine Press Council has been organized is made a pre-condition to
the effectivity of the entire Republic Act No. 4363, and no terms are employed therein to
indicate that the law can or will be effective only as to some, but not all, of those that may
be charged with libeling our public officers.
The assertion that a foreign corporation or a non-resident defendant is not inconvenienced
by an out-of-town suit is irrelevant and untenable, for venue and jurisdiction are not
dependent upon convenience or inconvenience to a party; and moreover, venue was fixed
under Republic Act No. 4363, pursuant to the basic policy of the law that is, as previously
stated, to protect the interest of the public service when the offended party is a public
officer, by minimizing as much as possible any interference with the discharge of his duties.
That respondents-plaintiffs could not file a criminal case for libel against a non-resident
defendant does not make Republic Act No. 4363 incongruous of absurd, for such inability
to file a criminal case against a non-resident natural person equally exists in crimes other
than libel. It is a fundamental rule of international jurisdiction that no state can by its laws,
and no court which is only a creature of the state, can by its judgments or decrees, directly
bind or affect property or persons beyond the limits of the state. 5 Not only this, but if the
accused is a corporation, no criminal action can lie against it, 6 whether such corporation or
resident or non-resident. At any rate, the case filed by respondents-plaintiffs is case for
damages.
50 Am. Jur. 2d 659 differentiates the "multiple publication" and "single publication" rules
(invoked by private respondents) to be as follows:
The common law as to causes of action for tort arising out of a single
publication was to the effect that each communication of written or
printed matter was a distinct and separate publication of a libel
contained therein, giving rise to a separate cause of action. This rule
('multiple publication' rule) is still followed in several American
jurisdictions, and seems to be favored by the American Law Institute.
Other jurisdictions have adopted the 'single publication' rule which
originated in New York, under which any single integrated publication,
such as one edition of a newspaper, book, or magazine, or one
broadcast, is treated as a unit, giving rise to only one cause of action,
regardless of the number of times it is exposed to different people. ...
These rules are not pertinent in the present scheme because the number of causes of
action that may be available to the respondents-plaintiffs is not here in issue. We are here
confronted by a specific venue statute, conferring jurisdiction in cases of libel against
Public officials to specified courts, and no other. The rule is that where a statute creates a
right and provides a remedy for its enforcement, the remedy is exclusive; and where it
confers jurisdiction upon a particular court, that jurisdiction is likewise exclusive, unless
otherwise provided. Hence, the venue provisions of Republic Act No. 4363 should be
deemed mandatory for the party bringing the action, unless the question of venue should
be waived by the defendant, which was not the case here. Only thus can the policy of the
Act be upheld and maintained. Nor is there any reason why the inapplicability of one
alternative venue should result in rendering the other alternative, also inapplicable.
The dismissal of the present petition is asked on the ground that the petitioner foreign
corporation failed to allege its capacity to sue in the courts of the Philippines. Respondents
rely on section 69 of the Corporation law, which provides:
13 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
SEC. 69. No foreign corporation or corporations formed, organized, or
existing under any laws other than those of the Philippines shall be
permitted to ... maintain by itself or assignee any suit for the recovery of
any debt, claim, or demand whatever, unless it shall have the license
prescribed in the section immediately preceding. ..." ...;
They also invoke the ruling in Marshall-Wells Co. vs. Elser & Co., Inc.7 that no foreign
corporation may be permitted to maintain any suit in the local courts unless it shall have
the license required by the law, and the ruling in Atlantic Mutual Ins. Co., Inc. vs. Cebu
Stevedoring Co., Inc.8 that "where ... the law denies to a foreign corporation the right to
maintain suit unless it has previously complied with a certain requirement, then such
compliance or the fact that the suing corporation is exempt therefrom, becomes a
necessary averment in the complaint." We fail to see how these doctrines can be a propos
in the case at bar, since the petitioner is not "maintaining any suit" but is merely defending
one against itself; it did not file any complaint but only a corollary defensive petition to
prohibit the lower court from further proceeding with a suit that it had no jurisdiction to
entertain.
Petitioner's failure to aver its legal capacity to institute the present petition is not fatal,
for ...
A foreign corporation may, by writ of prohibition, seek relief against the
wrongful assumption of jurisdiction. And a foreign corporation seeking
a writ of prohibition against further maintenance of a suit, on the
ground of want of jurisdiction in which jurisdiction is not bound by the
ruling of the court in which the suit was brought, on a motion to quash
service of summons, that it has jurisdiction. 9
It is also advanced that the present petition is premature, since respondent court has not
definitely ruled on the motion to dismiss, nor held that it has jurisdiction, but only
argument is untenable. The motion to dismiss was predicated on the respondent court's
lack of jurisdiction to entertain the action; and the rulings of this Court are that writs of
certiorari or prohibition, or both, may issue in case of a denial or deferment of action on
such a motion to dismiss for lack of jurisdiction.
If the question of jurisdiction were not the main ground for this petition
for review by certiorari, it would be premature because it seeks to have
a review of an interlocutory order. But as it would be useless and futile
to go ahead with the proceedings if the court below had no jurisdiction
this petition was given due course.' (San Beda vs. CIR, 51 O.G. 5636,
5638).
'While it is true that action on a motion to dismiss may be deferred until
the trial and an order to that effect is interlocutory, still where it clearly
appears that the trial judge or court is proceeding in excess or outside of
its jurisdiction, the remedy of prohibition would lie since it would be
useless and a waste of time to go ahead with the proceedings.
(Philippine International Fair, Inc., et al. vs. Ibanñ ez, et al., 50 Off. Gaz.
1036; Enrique v. Macadaeg, et al., 47 Off. Gaz. 1207; see also San Beda
 College vs. CIR, 51 Off. Gaz. 5636.)' (University of Sto. Tomas v.
Villanueva, L-13748, 30 October 1959.).
Similarly, in Edward J. Nell Co. vs. Cubacub, L-20843, 23 June 1965, 14 SCRA 419, this Court
held:
'.......................................................... It is a settledrule that the jurisdiction of a
court over the subject-matter is determined by the allegations in the
complaint; and when a motion to dismiss is filed for lack of jurisdiction
those allegations are deemed admitted for purposes of such motion, so
that it may be resolved without waiting for the trial. Thus it has been
held that the consideration thereof may not be postponed in the hope
that the evidence may yield other qualifying or concurring data which
would bring the case under the court's jurisdiction.'
To the same effect are the rulings in: Ruperto vs. Fernando, 83 Phil. 943; Administrator of
Hacienda Luisita Estate vs. Alberto, L-12133, 21 October 1958.
Summing up, We hold:
(1) The under Article 360 of the Revised Penal Code, as amended by Republic Act No. 4363,
actions for damages by public officials for libelous publications against them can only be
filed in the courts of first instance ofthe city or province where the offended functionary
held office at the time ofthe commission of the offense, in case the libelous article was first
printed or published outside the Philippines.
(2) That the action of a court in refusing to rule, or deferring its ruling, on a motion to
dismiss for lack of jurisdiction over the subject matter, or for improper venue, is in excess
of jurisdiction and correctable by writ of prohibition or certiorari sued out in the appellate
Court, even before trial on the merits is had.
WHEREFORE, the writs applied for are granted: the respondent Court of First Instance of
Rizal is declared without jurisdiction to take cognizance of its Civil Case No. 10403; and its
orders issued in connection therewith are hereby annulled and set aside,. Respondent
court is further commanded to desist from further proceedings in Civil case No. 10403
aforesaid. Costs against private respondents, Antonio J. Villegas and Juan Ponce Enrile.
The writ of preliminary injunction heretofore issued by this Supreme Court is made
permanent.
14 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
G.R. No. L-27897 December 2, 1927
WESTERN EQUIPMENT AND SUPPLY COMPANY, WESTERN ELECTRIC COMPANY, INC.,
W. Z. SMITH and FELIX C. REYES, plaintiffs-appellees,
vs.
FIDEL A. REYES, as Director of the Bureau of Commerce and Industry, HENRY
HERMAN, PETER O'BRIEN, MANUEL B. DIAZ, FELIPE MAPOY and ARTEMIO
ZAMORA, defendants-appellants.
STATEMENT
October 23, 1926, in the Court of First Instance of Manila, plaintiffs filed the following
complaint against the defendants:
Now come the plaintiffs in the above entitled case, by the undersigned their
attorneys, and to this Honorable Court respectfully show:
I. That the Western Equipment and Supply Company is a foreign corporation
organized under the laws of the State of Nevada, United States of America; that
the Western Electric Company, Inc., is likewise a foreign corporation organized
under the laws of the State of New York, United States of America; and that the
plaintiffs W. Z. Smith and Felix C. Reyes are both of lawful age and residents of the
City of Manila, Philippine Islands.
II. That the defendant Fidel A. Reyes is the duly appointed and qualified Director
of the Bureau of Commerce and Industry and as such Director is charged with the
duty of issuing and denying the issuance of certificates of incorporation to
persons filing articles of incorporation with the Bureau of Commerce and
Industry.
III. That the defendants Henry Herman, Peter O' Brien, Manuel B. Diaz, Felipe
Mapoy and Artemio Zamora are all of lawful age and are residents of the City of
Manila, Philippines Islands.
IV. That on or about May 4, 1925, the plaintiff the Western Equipment and Supply
Company applied to the defendant Director of the Bureau of Commerce and
Industry for the issuance of a license to engage in business in the Philippine
Islands and, accordingly, on May 20, 1926, a provisional license was by said
defendant issued in its favor, which license was made permanent on August 23,
1926.
V. That from and since the issuance of said provisional license of May 20,. 1926,
said plaintiff Western Equipment and Supply Company has been and still is
engaged in importing and selling in the Philippine Islands the electrical and
telephone apparatus and supplies manufactured by the plaintiff Western Electric
Company, Inc., its offices in the City of Manila being at No. 600 Rizal Avenue, in
the charge and management of the plaintiff Felix C. Reyes, its resident agent in the
Philippine Islands.
VI. That the electric and telephone apparatus and supplies manufactured by the
plaintiff Western Electric Company, Inc., have been sold in foreign and interstate
commerce and have become well and thoroughly known to the trade in all
 countries of the world for the past fifty years; that at present time the greater
part of all telephone equipment used in Manila and elsewhere in the Philippine
Islands was manufactured by the said Western Electric Company, Inc., and sold by
it in commerce between the United States and the Philippine Islands; that about
three fourths of such equipment in use throughout the world are of the
manufacture of said "Western Electric Company, Inc.," and bear its corporate
name; and that these facts are well known to the defendant Henry Herman who
for many years up to May 20, 1926, has himself been buying said products from
the plaintiff Western Electric Company, Inc., and selling them in the Philippine
Islands.
VII. That the name `Western Electric Company, Inc., has been registered as a
trade-mark under the provisions of the Act of Congress of February 20, 1905, in
the office of the Commissioner of Patents, at Washington, District of Columbia,
and said trade-mark remains in force to this date.
VIII. That on or about . . ., the defendants Henry Herman, Peter O' Brien, Manuel B.
Diaz, Felipe Mapoy and Artemio Zamora filed articles of incorporation with the
defendant Director of the Bureau of Commerce and Industry with the intention of
organizing a domestic corporation to be known as the "Western Electric
Company, Inc.," for the purpose principally of manufacturing, buying, selling and
generally dealing in electrical and telephone apparatus and supplies.
IX. That the purpose of said defendant in attempting to incorporate under the
corporate name of plaintiff Western Electric Company, Inc., is to profit and trade
upon the plaintiff's business and reputation, by misleading and deceiving the
public into purchasing the goods manufactured or sold by them as those of
plaintiff Western Electric Company, Inc., in violation of the provisions of Act No.
666 of the Philippine Commission, particularly section 4 thereof.
X. That on October 20, 1926, plaintiff W. Z. Smith was authorized by the Board of
Directors of the Western Electric Company, Inc., to take all necessary steps for the
issuance of a license to said company to engage in business in the Philippine
Islands and to accept service of summons and process in all legal proceedings
against said company, and on October 21, 1926, said plaintiff W. Z. Smith filed a
written application for the issuance of such license with the defendant Director of
Bureau of Commerce and Industry, which application, however, has not yet been
acted upon by said defendant.
XI. That on October 18, 1926, the plaintiff W. Z. Smith formally lodged with the
defendant Director of the Bureau of Commerce and Industry his protest, and
opposed said attempted incorporation, by the defendants Henry Herman, Peter
O'Brien, Manuel B. Diaz, Felipe Mapoy and Artemio Zamora, of the `Western
Electric Company, Inc.,' as a domestic corporation, upon the ground among
others, that the corporate name by which said defendants desire to be known,
being identical with that of the plaintiff Western Equipment and Supply Company,
will deceive and mislead the public purchasing electrical and telephone
apparatus and supplies. A copy of said protest is hereunto annexed, and hereby
made a part hereof, marked Exhibit A.
XII. That the defendant Fidel A. Reyes, Director of the Bureau of Commerce and
Industry has announced to these plaintiffs his intention to overrule the protest of
plaintiffs, and to issue to the other defendants a certificate of incorporation
constituting said defendants a body politic and corporate under the name
"Western Electric Company, Inc.," unless restrained by this Honorable Court.
XIII. That the issuance of a certificate of incorporation in favor of said defendants
under said name of "Western Electric Company, Inc.," would, under the
15 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
circumstances hereinbefore stated, constitute a gross abuse of the discretionary
powers conferred by law upon the defendant Director of the Bureau of Commerce
and Industry.
XIV. That the issuance of said certificate of incorporation would, if carried out, be
in violation of plaintiff's rights and would cause them irreparable injury which
could not be compensated in damages, and from which petitioner would have no
appeal or any plain, speedy and adequate remedy at law, other than that herein
prayed for.
They prayed for a temporary injunction, pending the final decision of the court when it
should be made permanent, restraining the issuance of the certificate of incorporation in
favor of the defendants under the name of Western Electric Company, Inc., or the use of
that name for any purpose in the exploitation and sale of electric apparatus and supplies.
The preliminary writ was issued.
For answer the defendant Fidel A. Reyes, as Director of the Bureau of Commerce and
Industry, admits the allegations of paragraphs 1, 2, 3 and 4 of the complaint, and as to
paragraphs 5, 6 and 7, he alleges that he has no information upon which to form a belief,
and therefore denies them. He admits the allegations of paragraph 8, and denies paragraph
9. He denies the first part of paragraph 10, but admits that an application for a license to do
business was filed by the Western Electric Company, Inc., as alleged. He admits paragraphs
11 and 12, and denies paragraphs 13 and 14, and further alleges that the present action is
prematurely brought, in that it is an attempt to coerce his discretion, and that the mere
registration of the articles of incorporation of the locally organized Western Electric
Company, Inc., cannot in any way injure the plaintiffs, and prays that the complaint be
dismissed.
For answer the defendants Herman, O' Brien, Diaz, Mapoy and Zamora admit the
allegations of paragraphs 1, 2, 3, 4 and 5 of the complaint, and deny paragraph 7, but allege
that on October 15, 1926, the articles of incorporation in question were presented to the
Director of the Bureau of Commerce and Industry for registration. They deny paragraphs 9
and 10, except as to the filing of the application. They admit the allegations made in
paragraph 11, but alleged that W. Z. Smith was without any right or authority. Admit the
allegations of paragraph 12, but deny the allegations of paragraphs 13 and 14, and allege
that the Western Electric Company, Inc., has never transacted business in the Philippine
Islands; that its foreign business has been turned over to the International Standard
Electric Corporation; that the action is prematurely brought; and that the registration of
the articles of incorporation in question cannot in any way injure plaintiffs.
Wherefore, such defendants pray that the preliminary injunction be dissolved, and
plaintiffs' cause of action be dismissed, with costs.
The case was tried and submitted upon the following stipulated facts:
Now come the parties plaintiff and defendants in the above entitled cause, by
their respective undersigned attorneys, and for the purpose of this action, agree
that the following facts are true:
I. That the Western Equipment and Supply Company is a foreign corporation,
organized under the laws of the State of Nevada, United States of America; that
the Western Electric Company, Inc., is likewise a foreign corporation organized
under the laws of the State of New York, United States of America; and that the
plaintiff W. Z. Smith and Felix C. Reyes, are both of lawful age and residents of the
City of Manila, Philippine Islands.
II. That the defendant Fidel A. Reyes is the duly appointed and qualified Director
of the Bureau of Commerce and Industry and as such Director is charge with the
duty of issuing and/or denying the issuance of certificates of incorporation to
 persons filing articles of incorporation with the Bureau of Commerce and
Industry.
III. That the defendants, Henry Herman, Peter O' Brien, Manuel B. Diaz, Felipe
Mapoy and Artemio Zamora are all of lawful age and all residents of the City of
Manila, Philippine Islands.
IV. That on or about May 4, 1925, the plaintiff, the Western Equipment and Supply
Company, through its duly authorized agent, the plaintiff, Felix C. Reyes, applied
to the defendant Director of the Bureau of Commerce and Industry for the
issuance of a license to engage in business in the Philippine Islands and on May
20, 1926, said defendant issued in favor of said plaintiff a provisional license for
that purpose which was permanent on August 23, 1926.
V. That the plaintiff, Western Electric Company, Inc., has ever been licensed to
engage in business in the Philippine Islands, and has never engaged in business
therein.
VI. That from and since the issuance of said provisional license of May 20, 1926,
to the plaintiff, Western Equipment and Supply Company, said plaintiff has been
and still is engaged in importing and selling in the Philippine Islands electrical
and telephone apparatus and supplies manufactured by the plaintiff Western
Electric Company, Inc. (as well as those manufactured by other factories), said
Western Equipment and Supply Company's offices in the City of Manila being at
No. 600 Rizal Avenue, and at the time of the filing of the complaint herein was
under the charge and management of the plaintiff, Felix C. Reyes, its then resident
agent in the Philippine Islands.
VII. That the electrical and telephone apparatus and supplies manufactured by
the plaintiff, Western Electric Company, Inc., have been sold in foreign and
interstate commerce for the past fifty years, and have acquired high trade
reputation throughout the world; that at the present time the greater part of all
telephone equipment used in Manila, and elsewhere in the Philippine Islands,
was manufactured by the said plaintiff, Western Electric Company, Inc., and sold
by it for exportation to the Philippine Islands; that such equipment,
manufactured by the said Western Electric Company, Inc., and bearing its trade-
mark "Western Electric" or its corporate name is generally sold and used
throughout the world; that a Philippine Corporation known as the `Electric
Supply Company, Inc.,' has been importing the manufactures of the plaintiff,
Western Electric Company, Inc., into the Philippine Islands for the purpose of
selling the same therein, and that the defendant Henry Herman, is the President
and General Manager of said corporation.
VIII. That the words `Western Electric' have been registered by the plaintiff,
Electric Company, Inc., as a trade-mark under the provisions of the Act of
Congress of February 20, 1905, in the office of the Commissioner of the Patents at
Washington, District of Columbia, and said trade-mark remains in force as the
property of said plaintiff to this date.
IX. That the plaintiff, Western Electric Company, Inc., is advertising its
manufacturers in its own name by means of advertising its manufactures in its
own name by means of advertisements inserted in periodicals which circulate
generally throughout the English and Spanish speaking portions of the world, and
has never abandoned its corporate name or trade-mark, but, on the contrary, all
of its output bears said corporate name and trade-mark, either directly upon the
manufactured article or upon its container, including that sold and used in the
Philippine Islands.
16 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
X. That on October 15, 1926, the defendants Henry Herman, Peter O'Brien,
Manuel B. Diaz, Felipe Mapoy and Artemio Zamora signed and filed articles of
incorporation with the defendant, Fidel A. Reyes, as Director of the Bureau of
Commerce and Industry, with the intention of organizing a domestic corporation
under the Philippine Corporation Law to be known as the "Western Electric
Company, Inc.," for the purpose, among other things or manufacturing, buying,
selling and dealing generally in electrical and telephone apparatus and supplies;
that said defendants Peter O'Brien, Felipe Mapoy and Artemio Zamora are
employees of the said Electrical Supply Company, of which said defendant, Henry
Herman, is and has been, during the period covered by this stipulation, the
president and principal stockholder; and that they, together with the said
defendant Herman, signed said articles of incorporation for the incorporation of a
domestic company to be known and the "Western Electric Company, Inc.," with
full knowledge of the existence of the plaintiff Western Electric Company, Inc., of
its corporate name, of its trade-mark, "Western Electric," and of the fact that the
manufactures of said plaintiff bearing its trade-mark or corporate name are in
general use in the Philippine Islands and in the United States.
XI. That on October 20, 1926, the plaintiff, W. Z. Smith, was authorized by the
Board of Directors of the plaintiff, Western Electric Company, Inc., to take all
necessary steps for the issuance of a license to said company to engage in
business in the Philippine Islands, and to accept service of summons and process
in all legal proceedings against said company, and on October 21, 1926, said
plaintiff, W. Z. Smith, filed a written application for the issuance of such license
with the defendant Director of the Bureau of Commerce and Industry, which
application, however, has not yet been acted upon by said defendant.
XII. That on October 18, 1926, the Philippine Telephone and Telegraph Co., by its
general manager, the plaintiff W. Z. Smith. lodged with the defendant Director of
the registration of the proposed corporation by the defendants Henry Herman,
Peter O'Brien, Manuel B. Diaz, Felipe Mapoy and Artemio Zamora, to be known as
the Western Electric Company, Inc., as a domestic corporation under the
Philippine Corporation Law. A copy of said protest, marked Exhibit A, hereunto
attached and is hereby made a part of this stipulation.
XIII. That the defendant, Fidel A. Reyes, Director of the Bureau of Commerce and
Industry, announced his intention of overrule said protest and will, unless
judicially restrained therefrom, issue to the other defendants herein a certificate
of incorporation, constituting said defendants a Philippine body politic and
corporate under the name of "Western Electric Company, Inc."
XIV. That the defendant, Henry Herman, acting in behalf of said corporation,
Electrical Supply Company, Inc., has written letters to Messrs. Fisher, DeWitt,
Perkins & Brady, acting as attorneys for plaintiff, Western Electric Company, Inc.,
copies of which are hereunto annexed and hereby made a part hereof, marked
Exhibits B, C and D.
XV. That the defendants, while admitting the facts set out in paragraph VII and IX
regarding the business done, merchandise sold and advertisements made
throughout the world by the plaintiff Western Electric Company, Inc., insist and
maintain that said allegations of fact are immaterial and irrelevant to the issues in
the present case, contending that such issued should be determined upon the
facts as they exist in the Philippine Islands alone.
To which were attached Exhibits A, B, C and D.
The lower court rendered judgment for the plaintiffs as prayed for in their complaint, and
made the temporary injunction permanent, from which the defendants appeal and assign
the following errors:
The lower court erred:
(1) When it granted the writ of preliminary injunction (pages 9 and 10, record;
12 to 14, B. of E.).
(2) When it held that the Western Electric Co., Inc., a foreign corporation, had a
right to bring the present suit in courts of the Philippine Islands, wherein it is
unregistered and unlicensed, as was done in the decision upon the petition for a
preliminary injunction (pages 97 to 115 record), and in repeating such holding in
the final decision herein (pages 51 and 52, B. of E.), as well as in basing such
holding upon the decision of this Honorable Supreme Court in Marshall-Wells
Co. vs. Henry W. Elser & Co. (46 Phil., 70.)
(3) When it found that the plaintiff, the Western Electric Co., Inc., has any such
standing in the Philippine Islands or before the courts thereof as to authorize it to
maintain an action therein under the present case.
(4) When it found that the other plaintiffs herein have any rights in the present
controversy or any legal standing therein.lawphi1.net
(5) In ordering the issuance of a permanent injunction restraining the defendant
Fidel A. Reyes, as Director of the Bureau of Commerce and Industry, from issuing
a certificate of incorporation in favor of the other defendants under the name of
"Western Electric Co., Inc.," or any similar name, and restraining the other
defendants from using the name "Western Electric Co., Inc.," or any like name, in
the manufacture of sale of electrical and telephone apparatus and supplies or as a
business name or style in the Philippine Islands.
(6) In finding that the purpose of the defendants, other than the defendant Fidel
A. Reyes, in seeking to secure the registration of a local corporation under the
name of "Western Electric Co., Inc.," was "certainly not an innocent one," thereby
imputing to said defendants a fraudulent and wrongful intent.
(7) In failing to dismiss plaintiffs' complaint with costs against the plaintiffs.
(8) In overruling and denying defendants' motion for a new trial.
JOHNS, J.:
The appellants say that the two questions presented are:
Has a foreign corporation, which has never done business in the Philippine
Islands, and which is unlicensed and unregistered therein, any right to maintain
an action to restrain residents and inhabitants of the Philippine Islands from
organizing a corporation therein bearing the same name as such foreign
corporation?
Has such foreign corporation a legal right to restrain an officer of the Government
of the Philippine Islands, i. e., the Director of the Bureau of Commerce and
Industry from exercising his discretion, and from registering a corporation so
organized by residents and inhabitants of the Philippine Islands?
As to the first question, the appellees say that it should be revised, so as to read as follows:
Has a foreign corporation which has never done business in the Philippine
Islands, and which is unlicensed and unregistered therein, any right to maintain
an action to restrain residents and inhabitants of the Philippine Islands from
organizing a corporation therein bearing the same name as such foreign
corporation, when said residents and inhabitants have knowledge of the
existence of such foreign corporation, having dealt with it, and sold its
manufactures, and when said foreign corporation is widely and favorably known
17 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
in the Philippine Islands through the use therein of its products bearing its
corporate and trade name, and when the purpose of the proposed domestic
corporation is to deal in precisely the same goods as those of the foreign
corporation?
As to the second, the appellees say that the question as propounded by the appellants is
not fully and fairly stated, in that it overlooks and disregards paragraphs 12 and 13 of the
stipulation of facts, and that the second question should be revised to read as follows:
Has an unregistered corporation which has not transacted business in the
Philippine Islands, but which has acquired a valuable goodwill and high
reputation therein, through the sale, by importers, and the extensive use within
the Islands of products bearing either its corporate name, or trade-mark
consisting of its corporate name, a legal right to restrain an officer of the
Commerce and Industry, with knowledge of those facts, from issuing a certificate
of incorporation to residents of the Philippine Islands who attempt to organize a
corporation for the purpose of pirating the corporate name of such foreign
corporation, of engaging in the same business as such foreign corporation, and of
defrauding the public into thinking that its goods are those of such foreign
corporation, and of defrauding such foreign corporation and its local dealers of
their legitimate trade?
We agree with the revisions of both questions as made by the appellees, for the reason that
they are more in accord with the stipulated facts. First, it is stipulated that the Western
Electric Company, Inc., "has never engaged in business in the Philippine Islands."
In the case of Marshall-Wells Co. vs. Henry W. Elser & Co. (46 Phil., 70, 76), this court held:
The noncompliance of a foreign corporation with the statute may be pleaded as
an affirmative defense. Thereafter, it must appear from the evidence, first, that
the plaintiff is a foreign corporation, second, that it is doing business in the
Philippines, and third, that it has not obtained the proper license as provided by
the statute.
If it had been stipulated that the plaintiff, Western Electric Company, Inc., had been doing
business in the Philippine Islands without first obtaining a license, another and a very
different question would be presented. That company is not here seeking to enforce any
legal or contract rights arising from, or growing out of, any business which it has
transacted in the Philippine Islands. The sole purpose of the action:
"Is to protect its reputation, its corporate name, its goodwill, whenever that reputation,
corporate name or goodwill have, through the natural development of its trade, established
themselves." And it contends that its rights to the use of its corporate and trade name:
Is a property right, a right in rem, which may assert and protect against all the world, in any
of the courts of the world — even in jurisdictions where it does not transact business —
just the same as it may protect its tangible property, real or personal, against trespass, or
conversion. Citing sec. 10, Nims on Unfair Competition and Trade-Marks and cases cited;
secs. 21-22, Hopkins on Trade-Marks, Trade Names and Unfair Competition and cases
cited." That point is sustained by the authorities, and is well stated in Hanover Star Milling
Co. vs. Allen and Wheeler Co. (208 Fed., 513), in which they syllabus says:
Since it is the trade and not the mark that is to be protect, a trade-mark
acknowledges no territorial boundaries of municipalities or states or nations, but
extends to every market where the trader's goods have become known and
identified by the use of the mark.
In Walter E. Olsen & Co. vs. Lambert (42 Phil., 633, 640), this court said:
In order that competition in business should be unfair in the sense necessary to
justify the granting of an injunction to restrain such competition it must appear
that there has been, or is likely to be, a diversion of trade from the business of the
 complainant to that of the wrongdoer, or methods generally recognized as
unfair; . . . In most, if not all, of the cases in which relief has hitherto been granted
against unfair competition the means and methods adopted by the wrongdoer in
order to divert the coveted trade from his rival have been such as were calculated
to deceive and mislead the public into thinking that the goods or business of the
wrongdoer are the goods or business of the rival. Diversion of trade is really the
fundamental thing here, and if diversion of trade be accomplished by any means
which according to accepted legal canons are unfair, the aggrieved party is
entitled to relief.
In Shaver vs. Heller & Merz Co. (48 C.C. A., 48; 108 Fed., 821; 65 L. R. A., 878,. 881), it is
said:
The contention of counsel for the appellants here is a confusion of the bases of
two classes of suits, — those for infringements of trade-marks, and those for
unfair competition in trade. . . . In the former, title to the trade-marks is
indispensable to a good cause of action; in the latter, no proprietary interest in
the words, names, or means by which the fraud is perpetrated is requisite to
maintain a suit to enjoin it. It is sufficient that the complainant is entitled to the
custom — the goodwill — of a business, and that this goodwill is injured, or is
about to be injured, by the palming off of the goods of another as his.
The remaining question as to the jurisdiction of the courts over the defendant Reyes, as
Director of the Bureau of Commerce and Industry, has been adversely decided to his
contention in the case of Asuncion vs. De Yriarte (28 Phil., 67), in which, among other
things, it is said:
If, therefore, the defendant erred in determining the question presented when the
articles were offered for registration, then that error will be corrected by this
court in this action and he will be compelled to register the articles as offered. If,
however, he did not commit an error, but decided that question correctly, then, of
course, his action will be affirmed to the extent that we will deny the relief prayed
for.
It is very apparent that the purpose and intent of Herman and his associates in seeking to
incorporate under the name of Western Electric Company, Inc., was to unfairly and unjustly
compete in the Philippine Islands with the Western Electric Company, Inc., in articles
which are manufactured by, and bear the name of, that company, all of which is prohibited
by Act No. 666, and was made known to the defendant Reyes by the letter known in the
record to the defendant Reyes by the letter known in the record as Exhibit A.
As appellees say:
These defendant, Herman and his associates, are actually asking the Government
of the Philippine Island to permit them to pirate the name of the Western Electric
Company, Inc., by incorporating thereunder, so that they may deceive the people
of the Philippine Islands into thinking that the goods they propose to sell are
goods of the manufacture of the real Western Electric Company. It would be a
gross prostitution of the powers of government to utilize those powers in such a
way as to authorize such a fraud upon the people governed. It would be the
grossest abuse of discretion to permit these defendants to usurp the corporate
mane of the plaintiff, and to trade thereupon in these Islands, in fraud of the
Philippine public and of the true owners of the name and the goodwill incidental
thereto.
The plaintiff, Western Electric Company, Inc., has been in existence as a corporation for
over fifty years, during which time it has established a reputation all over the world
including the Philippine Islands, for the kind and quality of its manufactured articles, and it
is very apparent that the whole purpose and intent of Herman and his associates in seeking
18 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
to incorporate another corporation under the identical name of Western Electric Company,
Inc., and for the same identical purpose as that of the plaintiff, is to trespass upon and
profit by its good name and business reputation. The very fact that Herman and his
associates have sought the use of that particular name for that identical purpose is
conclusive evidence of the fraudulent intent with which it is done.
The judgment of the lower court is affirmed, with costs. So ordered.
G.R. No. L-19906 April 30, 1969
STERLING PRODUCTS INTERNATIONAL, INCORPORATED, plaintiff-appellant,
vs.
FARBENFABRIKEN BAYER AKTIENGESELLSCHAFT, and ALLIED MANUFACTURING
AND TRADING CO., INC., defendant-appellants.
SANCHEZ, J.:
In this, a case for trademark infringement and unfair competition, each of the principal
suitors, namely, plaintiff Sterling Products International, Inc., 1 and defendant
Farbenfabriken Bayer Aktiengesellschaft,2 seeks to exclude the other from use in the
Philippines of the trademarks BAYER and BAYER CROSS IN CIRCLE. SPI asks this Court to
strike down FBA's registration of BAYER CROSS IN CIRCLE covering industrial and
agricultural products — insecticides and other chemicals, not medicines — from the
supplemental register. FBA, for its part, prays for the cancellation from the principal
register of SPI's certificates of registration of the trademarks aforesaid for medicines.
Contending parties are doing business in the Philippines. SPI markets Bayer Aspirin,
Aspirin for Children and Cafiaspirina. The BAYER and BAYER CROSS IN CIRCLE are being
used by SPI in the Philippines only for said products — Bayer Aspirin, Cafiaspirina and
Bayer Aspirin for Children. On the containers (bottles or printed celophane strips, which,
in turn, are placed in cardboard boxes) of Bayer Aspirin, Aspirin for Children and
Cafiaspirina, SPI features the trademarks BAYER and BAYER CROSS IN CIRCLE. FBA thru
Allied Manufacturing & Trading Co., Inc.3 distributes "Folidol" and other industrial and
agricultural chemicals. FBA's "Folidol" (in steel or fiber drums or aluminum containers)
displays a replica of SPI's trademark BAYER CROSS IN CIRCLE; on the tin cap and label of
the container.
The conflict apparent, suit followed.
The trial court declared itself "in favor of the solution that favors division of the market
rather than monopoly." But to avoid confusion, it directed defendants "to add a distinctive
word, or words in their mark to indicate that their products come from Germany." The
judgment below reads:
IN VIEW WHEREOF, both complaint and counterclaim are dismissed without costs; the
Court sustains plaintiff's right to use the Bayer trademark for its medicines, and
defendants' right to use it for chemicals, insecticides, and other products not medicines,
but the Court orders defendants to add a distinctive word or words in their mark to
indicate that their products come from Germany. 4
Both parties appealed: Plaintiff, insofar as the judgment "dismisses plaintiff's complaint
and sustains defendants' right to use the BAYER trademark for their chemicals,
insecticides, and other products not medicines"; 5 and defendants, from the portions of the
aforementioned decision particularly those which dismiss the counterclaim of the
defendants for the cancellation of the registrations by the plaintiff of the trademarks Bayer
and Bayer Cross and which allow the plaintiff "to continue using the Bayer trademarks for
medicines."6
And now to the facts.
The word BAYER was the surname of Friedrich Bayer, a German, who, on August 1, 1868,
organized a drug company bearing his name — Friedr Bayer et comp. — at Barmen,
Germany. The company was at first engaged in the manufacture and sale of chemicals. At
about the year 1888 it started to manufacture pharmaceutical preparations also. A change
of name from Friedr Bayer to Farbenfabriken vorm. Friedr. Bayer & Co. (FFB, for short)
effective July 1, 1881 was followed in 1912 by a change of principal place of business from
Elberfeld to Luverkusen, Germany.7 Its products came to be known outside Germany. With
the discovery in 1899 of the Bayer Aspirin, the mark BAYER acquired prestige. The time
was ripe to register the trademarks. The record, however, does not clearly show when the
word BAYER was registered as a trademark in Germany. The BAYER CROSS IN CIRCLE
trademark was registered in Germany on January 6, 1904 — No. 65777. 8 It was intended to
be used on "medicines for human beings and animals, disinfectants preservatives, tar
dyestuffs and chemical preparations for dyes and for photographic purposes." 9 This
registered trademark consists of the BAYER CROSS encircled by the company's name
Farbenfabriken vorm. Friedr. Bayer & Co. Elberfeld.
When the company was merged with other German companies in 1925 to form the I.G.
Farbenindustrie, the name of the former company was deleted from the trademark and
what remained was the present BAYER CROSS IN CIRCLE. A new registration was effected
on June 17, 1929 in Germany and for which it was issued a certificate with serial no.
404341. The trademark BAYER CROSS IN CIRCLE was registered by FFB and its
subsidiaries in other parts of the world, viz, in Norway, England, Denmark, and Argentina
in 1904; in Japan and the United States in 1908; in Spain in 1911; in Peru in 1913.
Sometime in 1895, FFB established a subsidiary in New York, United States. It was named
Farbenfabriken of Elberfeld Co. Its purpose was to sell FFB's products in the United States
and Canada. It was this subsidiary that registered the trademarks BAYER and BAYER
CROSS IN CIRCLE in the United States between the years 1907-1908.
Sometime in 1913, FFB organized another subsidiary — The Bayer Co., Inc. of New York.
This new subsidiary was authorized by FFB to negotiate for and acquire the trademarks,
goodwill, assets and property of Farbenfabriken of Elberfeld Co. By an agreement dated
June 12, 1913 (Exh. 106) Bayer of New York purchased for the sum of US $750,000.00
Farbenfabriken of Elberfeld Co.'s "right for the sale in the United States and Canada of the
drugs, chemicals, pharmaceuticals and any and all other products and articles
manufactured and (or) controlled by Leverkusen" (FFB) and its "trademarks, good will and
other assets and property."
On April 6, 1917,10 the United States declared war on Germany. Pursuant to the provisions
of the Trading with the Enemy Act, the Alien Property Custodian classified The Bayer Co.,
Inc. of New York as an enemy-controlled corporation. Hence, the Alien Property Custodian
seized its assets about the early part of 1918. Between December 1918 and January 1919,
all the assets of The Bayer Co., Inc. of New York were sold by the Alien Property Custodian
to Sterling Drug, Inc. for the sum of US $5,310,000.00. The Bayer Co., Inc. of New York then
became a subsidiary of Sterling Drug, Inc. Winthrop Chemical Co., Inc. was later organized
as a new subsidiary of Sterling Drug, Inc. to manufacture and sell the physicians' drugs
which had been acquired" by the purchase of the Bayer Co., Inc. Winthrop's operation was
evidently hampered because 'the Germans had kept manufacturing processes secret, so
that the manufacture of physicians' drugs on a commercial scale became an almost
insoluble problem.11
19 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
Sterling Drug, Inc. secured registrations of the BAYER trademarks in different countries of
the world.12
It would appear that the trademark BAYER for medicines was known in the Philippines
about the close of the 19th century. This appears on page 88 of the Revista Farmaceutica
de Filipinos Anñ o I, Numero 7, 3 de Julio de 1893. Before World War I, BAYER products
entering the Philippines came from Germany.
In 1922, a worldwide conflict of interests occurred between Farbenfabriken vorm.
Friedrich Bayer & Co. and The Bayer Co., Inc. of New York, in reference to the trademarks
BAYER and BAYER CROSS IN CIRCLE as they were applied to various products.
Two agreements resolved this conflict, both executed on April 9, 1923 in London, England:
one, between FFB and Winthrop Chemical Co., Inc. (Exh. 66), and the other between FFB
and Bayer New York (Exh. WWW). Under the terms of the agreement with Winthrop
Chemical Co., Inc., FFB stipulated, amongst others: (1) not to contest anymore Winthrop's
right over the trademarks BAYER and BAYER CROSS IN CIRCLE; (2) to discontinue the use
of said trademarks in the United States which was understood to include the Philippines
under par. 16 of said agreement; and (3) to disclose all secrets of other processes relating
to the manufacture of pharmaceuticals.
Paragraph 26 of the FFB — Bayer New York agreement reads —
26. NEW YORK (The Bayer Company, Inc. of New York) agree that they will not sell or offer
for sale any goods other than hereunder or those they may market for Winthrop as
hereinbefore provided and other than Aspirin and compounds of Aspirin which New York
shall continue to market for their own account in the United States of America, Puerto Rico,
the Philippines and Hawaiian Islands and the Panama Zone.13
In 1925, Farbenfabriken vorm. Friedrich Bayer & Co. became I.G. Farbenindustrie, AG. This
necessitated a new agreement incorporating Exh. 66 with modifications. Said new
agreement was signed on November 15, 1926 between I.G. Farbenindustrie and Winthrop.
On September 5, 1941, in the anti-trust suits against Sterling Drug, Inc., Winthrop
Chemicals Co. and The Bayer Co., of New York, two consent decrees [Exh. 68 (No. 15-363)
and Exh. 69: (No. 15-364)] were promulgated by the U.S. District Court for Southern New
York. Said consent decrees declared the April 9 1923, cartel agreements violative of the U.S.
anti-trust laws. One reason given is that the German company, FFB (later I.G.
Farbenindustrie) — FBA's predecessors — was excluded from the U.S. pharmaceutical
market. The sentence, however, contains a saving clause, thus —
The Bayer contract of 1923, the Bayer contract of 1926, and any and all amendments or
supplements thereto are declared and adjudged to be unlawful under the Anti-Trust Laws
of the United States, and the defendants Bayer and Sterling, and their respective successors
an subsidiaries, or any of them, be and they are hereby enjoined and restrained from
carrying out or enforcing any of the aforesaid contracts, or any supplements, amendments
or modifications thereof, or from paying to I.G. Farben, its subsidiaries, successors, or
assigns, any royalties or share of profits pursuant to said contracts with respect to sales
following the effective date of this decree.
Provided, however, that nothing herein contained in this Sec. III shall:lawphi1.nêt
xxx xxx xxx
Affect in any way the rights or title of the defendant Bayer, its successors, subsidiaries or
assigns, in or to the name "Bayer" and the "Bayer Cross" mark or registrations thereof, or
Affect or diminish any right, title or interest of said defendants, their successor
subsidiaries or assigns, in or to or under any heretofore acquired and presently existing
patents, patent applications, patent licenses, trade-marks, trade-names (such as the name
"Bayer" and the "Bayer Cross" mark and registrations thereof), processes or formulae
relating to the manufacturing, processing, use or sale of aspirin, aspirin compounds,
pharmaceutical or other drug or chemical products, or impair any rights or remedies of
said defendants, their successors, subsidiaries or assigns, provided by statute or
convention, and by suits for damages, injunction or other remedy with respect to any such
patents, patent applications, patent licenses or trademarks.... 14
Meanwhile, in 1935, plaintiff Sterling Products International, Inc. (SPI) a Delaware
corporation, a subsidiary of Sterling Drug, Inc. of New York, was issued a license to do
business in the Philippines.15 The trademarks BAYER and BAYER CROSS IN CIRCLE were
then registered in the Philippines under the old Trademark Law (Act 666) by The Bayer
Co., Inc.; the BAYER CROSS IN CIRCLE trademark on April 18, 1939 for which it was issued
Certificate of Registration No. 13081; the BAYER trademark on April 22, 1939 for which it
was issued Registration Certificate No. 13089. These trademark rights were assigned to SPI
on December 30, 1942 and the assignment was recorded in the Philippines Patent Office
on March 5, 1947. With the passage of Republic Act 166 repealing the old Trademark Law
(Act 666), SPI was issued by the Philippines Patent Office on June 18, 1948 two new
certificates of registration: No. 1260-S for BAYER CROSS IN CIRCLE; No. 1262-S for BAYER.
The registration of these trademarks was only for "Medicines".
Came World War II. I.G. Farbenindustrie AG. was seized by the allied powers. In 1945, after
World War II, I.G. Farbenindustrie AG. was decartelized by the Allied High Commission. The
unit known as Farbenfabriken Bayer was transferred in 1953 to Farbenfabriken Bayer
Aktiengesellschaft (FBA), one of the defendants in this case, which was organized in 1951.
Sometime in 1958, defendant Allied Manufacturing & Trading Co., Inc. (AMATCO) started
selling FBA's products especially "Folidol" a chemical insecticide which bears the BAYER
CROSS IN CIRCLE trademark.16
On November 18, 1959, FBA applied for the registration of the BAYER CROSS IN CIRCLE
trademark with the Philippines Patent Office for animal and plant destroying agents. The
examiner's report dated December 17, 1959 stated that the subject mark appears to be
similar to SPI's registered BAYER trademarks as covered by Certificates of Registration
Nos. 1260-S and 1262-S. He concluded that "[r]egistration of applicant's mark is
proscribed by Section 4-d of the Statute because it would cause confusion or mistake or
[to] deceive purchasers."17 This action of the Philippines Patent Office drew a reply from
FBA. In its letter dated February 1, 1960 applicant FBA, thru counsel, said that it "offers no
question or objection to the assertion of the Examiner that the registrant's mark and that
of the applicant are similar to each other. It emphasized the fact that it was seeking
registration in the Supplemental Register. Its concluding statement runs thus:.
Being aware of the duties and obligations of a trademark user in the Philippines and the
penalties provided for in the pertinent law on tradermarks and being aware also that
Supplemental Registration is not a prima facie evidence of ownership of mark but merely a
recordation of the use as in fact the mark is actually being used by the applicant in the
Philippines, it is respectfully urged that this [application] be given due course. 18
On February 25, 1960, FBA was issued a certificate of registration in the Supplemental
Register, SR-304.
We now grapple with the problems raised in the separate appeals.
1. A rule widely accepted and firmly entrenched because it has come down through the
years is that actual use in commerce or business is a prerequisite to the acquisition of the
right of ownership over a trademark. This rule is spelled out in our. Trademark Law thus:
SEC. 2-A. Ownership of trade-marks, trademark names and service-mark; how acquired. —
Anyone who lawfully produces or deals in merchandise of any kind or who engages in any
lawful business, or who renders any lawful service in commerce, by actual use thereof in
manufacture or trade, in business, and in the service rendered, may appropriate to his,
exclusive use a trademark, a trade-name, or a service-mark not so appropriated by another,
to distinguish his merchandise, business, or service from the merchandise, business or
service of others. The ownership or possession of a trademark, trade-name, service mark,
20 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
heretofore or hereafter appropriated, as in this section provided, shall be recognized and
protected in the same manner and to the same extent as are other property rights known
to the law. (As inserted by Section 1 of Republic Act 638)
It would seem quite clear that adoption alone of a trademark would not give exclusive right
thereto. Such right grows out of their actual use." 19 Adoption is not use. One may make
advertisements, issue circulars, give out price lists on certain goods; but these alone would
not give exclusive right of use. For trademark is a creation of use. The underlying reason for
all these is that Purchasers have come to understand the mark as indicating the origin of
the wares.20 Flowing from this is the trader's right to protection in the trade he has built up
and the goodwill he has accumulated from use of the trademark. Registration of a
trademark, of course, has value: it is an administrative act declaratory of a pre-existing
right. Registration does not, however, perfect a trademark right.
The BAYER trademarks registered in the Philippines to which plaintiff SPI may lay claim, as
correctly stated in the decision below, are those which cover medicines only. For, it was on
said goods that the BAYER trademarks were actually used by it in the Philippines.
Therefore, the certificates of registration for medicines issued by the Director of Patents
upon which the protection is enjoyed are only for medicines. Nothing in those certificates
recited would include chemical or insecticides.
But plaintiff insists that the statement of the applicant (The Bayer Co., Inc.) in its
registrations of the BAYER marks states that "the merchandise for which the trademark is
appropriated is d. — Chemicals, Medicines and Pharmaceutical Preparations." Plaintiff's
position is that such statement determines the goods for which said marks had been
registered. Validity does not attach to this proposition. First, the statement itself admits
that "the particular description of the articles comprised in said class (d) on which the
trademark is used is Medicines."21 It is not used for chemicals.
Then, Section 11 of the Trademark Law requires that the certificate of registration state
"the particular goods . . . for which it is registered." This is controlling. Under Section 11
aforesaid, likewise to be entered in the certificate of registration is "the date of the first
use in commerce or business. SPI may not claim "first use" of the trademarks prior to the
registrations thereof on any product other than medicines.
Besides, Section 7 of the same Trademark Act directs that upon the filing of the application
and the payment of the required fee, the "Director [of Patents] shall cause an examination
of the application" — for registration of the trademark — "to be made, and, if on such
examination it shall appear that the applicant is entitled to registration, the Director . . .
shall cause the mark . . . to be published in the Official Gazette." This examination, it would
seem to us, is necessary in order that the Director of Patents may be satisfied that the
application conforms to the requirement of actual use in commerce of the trademark in
Section 2 and 2-A of the Trademark Law; and that the statement in said application — as to
the "first use" thereof and "the goods . . . in connection with which the mark . . . is used"
(Section 5) — is true.
Really, if the certificate of registration were to be deemed as including goods not specified
therein, then a situation may arise whereby an applicant may be tempted to register a
trademark on any and all goods which his mind may conceive even if he had never
intended to use the trademark for the said goods. We believe that such omnibus
registration is not contemplated by our Trademark Law.
Because of this and of the fact that the Bayer trademarks were never used in the
Philippines by plaintiff except for medicines — Aspirin, Aspirin for Children and
Cafiaspirina — we find ourselves unwilling to draw a hard and fast rule which would
absolutely and under all circumstances give unqualified protection to plaintiff against the
use of said trademarks by all others on goods other than medicines.
2. Neither will the 1927 registration in the United States of the BAYER trademark for
insecticides serve plaintiff any. The United States is not the Philippines. Registration in the
United States is not registration in the Philippines. At the time of the United States
registration in 1927, we had our own Trademark Law, Act No. 666 aforesaid of the
Philippine Commission, which provided for registration here of trademarks owned by
persons domiciled in the United States.
What is to be secured from unfair competition in a given territory is the trade which one
has in that particular territory. There is where his business is carried on; where the
goodwill symbolized by the trademark has immediate value; where the infringer may
profit by infringement.
There is nothing new in what we now say. Plaintiff itself concedes 22 that the principle of
territoriality of the Trademark Law has been recognized in the Philippines, citing Ingenohl
vs. Walter E. Olsen, 71 L. ed. 762. As Callmann puts it, the law of trademarks "rests upon
the doctrine of nationality or territoriality." 23
Accordingly, the 1927 registration in the United States of the BAYER trademark would not
of itself afford plaintiff protection for the use by defendants in the Philippines of the same
trademark for the same or different products.
3. A question basic in the field of trademarks and unfair competition is the extent to which
a registrant of a trademark covering one product may invoke the right to protection against
the use by other(s) of the same trademark to identify merchandise different from those for
which the trademark has been appropriated.
Plaintiff's trenchant claim is that it should not be turned away because its case comes
within the protection of the confusion of origin rule. Callmann notes two types of confusion.
The first is the confusion of goods "in which event the ordinarily prudent purchaser would
be induced to purchase one product in the belief that he was purchasing the other." In
which case, "defendant's goods are then bought as the plaintiff's, and the poorer quality of
the former reflects adversely on the plaintiff's reputation." The other is the confusion of
business: "Here though the goods of the parties are different, the defendant's product is
such as might reasonably be assumed to originate with the plaintiff, and the public would
then be deceived either into that belief or into the belief that there is some connection
between the plaintiff and defendant which, in fact, does not exist." 24
A judicial test giving the scope of the rule of confusion of origin is Ang vs.
Teodoro (December 14, 1942), 74 Phil. 50. Briefly, the facts of the just cited case are as
follows: Toribio Teodoro, at first in partnership with Juan Katindig and later as sole
proprietor, had continuously used "Ang Tibay" both as trademark and as tradename in the
manufacture and sale of slippers, shoes and indoor baseballs since 1910. He formally
registered it as a trademark on September 29, 1915 and as a tradename on January 3,
1933. Ana L. Ang registered the same trademark "Ang Tibay" for pants and shirts on April
11, 1932 and established a factory for the manufacture of said articles in 1937. Suit was
lodged by Teodoro against Ang to cancel the latter's registration of the trademark "Ang
Tibay" and to perpetually enjoin her from using the said trademark on goods
manufactured and sold by her. The judgment of the trial court absolved defendant (Ana L.
Ang) from the complaint with costs against the plaintiff. The Court of Appeals reversed. On
appeal by certiorari, we affirmed the judgment of the Court of Appeals. We there said:
"In the present state of development of the law on Trade-Marks, Unfair Competition, and
Unfair Trading, the test employed by the courts to determine whether noncompeting goods
are or are not of the same class is confusion as to the origin of the goods of the second
user. Although two noncompeting articles may be classified under two different classes by
the Patent Office because they are deemed not to possess the same descriptive properties,
they would, nevertheless, be held by the courts to belong to the same class if the
simultaneous use on them of identical or closely similar trademarks would be likely to
21 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
cause confusion as to the origin, or personal source, of the second user's goods. They
would be considered as not falling under the same class only if they are so dissimilar or so
foreign to each other as to make it unlikely that the purchaser would think the first user
made the second user's goods.
Such construction of the law is induced by cogent reasons of equity and fair dealing. The
courts have come to realize that there can be unfair competition or unfair trading even if
the goods are noncompeting, and that such unfair trading can cause injury or damage to
the first user of a given trademark, first, by prevention of the natural expansion of his
business and, second, by having his business reputation confused with and put at the
mercy of the second user. When noncompetitive products are sold under the mark, the
gradual whittling away or dispersion of the identity and hold upon the public mind of the
mark created by its first user, inevitably results. The original owner is entitled to the
preservation of the vauable link between him and the public that has been created by his
ingenuity and the merit of his wares or services. Experience has demonstrated that when a
well-known trademark is adopted by another even for a totally different class of goods, it is
done to get the benefit of the reputation and advertisements of the originator of said mark,
to convey to the public a false impression of some supposed connection between the
manufacturer of the article sold under the original mark and the new articles being
tendered to the public under the same or similar mark. As trade has developed and
commercial changes have come about, the law of unfair competition has expanded to keep
pace with the times and the element of strict competition in itself has ceased to be the
determining factor. The owner of a trademark or trade-name has a property right in which
he is entitled to protection, since there is damage to him from confusion of reputation or
goodwill in the mind of the public as well as from confusion of goods. The modern trend is
to give emphasis to the unfairness of the acts and to classify and treat the issue as a fraud. 25
The thoughts expressed in Ang Tibay command respect Conduct of business should
conform to ethical business standards. Unfairness is proscribed. The invocation of equity is
bottomed upon the injunction that no one should "reap where he has not sown." 26
Nonetheless, "[i]t has been emphasized that each case presents a unique problem which
must be answered by weighing the conflicting interests of the litigants." 27 With this in
mind, we are convinced that the case before us is not to be analogized with Ang Tibay. The
factual setting is different. His Honor, Judge Magno S. Gatmaitan (now Associate Justice of
the Court of Appeals), the trial judge, so found. He reached a conclusion likewise different.
And the reasons, so well stated by His Honor, are these:
1st). — It was not plaintiff's predecessor but defendant's namely Farbenfabriken
or Bayer Germany that first introduced the medical products into the Philippine
market and household with the Bayer mark half a century ago; this is what the
Court gathers from the testimony of Frederick Umbreit and this is the implication
even of Exhs. 48, 49, 66 and as already shown a few pages back; 28
2nd). — There is thus reason plausible enough for defendant' plea that as Sterling
was not the "originator" of the Bayer mark, the rule in Ang vs. Teodoro, supra, is
not applicable; and this is correct notwithstanding Exhs. 106 and 63 and even
giving unto these documents full force and virtue, because purchase of the assets
of Elberfeld, defendants' previous affiliate in New York, by Bayer of New York,
even if that were to be held to include purchase of the Bayer mark, did not make
the purchaser Bayer of New York the originator of the mark; especially since
Bayer of New York was only another subsidiary of Bayer Germany or
Farbenfabriken which was the real originator;
3rd). — The Court is also impelled to believe that the evidence establishes that
among the common people of the Philippines the "Bayer" medicines come from
Germany; this the Court deduces from the testimony of witness Florisa Pestano
 who only reproduced the belief of her grandmother; the Court might as well say
that plaintiff itself has not discouraged that belief because the drug and its
literature that came from the plaintiff and its affiliate would show that it
represented its medicines to have come from defendant 29 and were manufactured
in Germany with that Bayer mark; thus Exh. 70 30 which is the price list of 1928 of
Botica de Sta. Cruz on page 6 indicates that Winthrop Chemical Company of New
York, — plaintiff's subsidiary — was a distributor of I.G. Farbenindustrie, A.G.
Leverkusen Germany; Exh. 8031 which is a medical diary published by Winthrop
for 1934 on page 148 manifested that the journal, "Practical Therapeutics" was
published by I.G. Farbenindustrie Aktiengesellachaft for Winthrop Chemical
Company, Inc.; "with particular reference to the pharmacological products, sera
and vaccines originated and prepared in the laboratories of the I.G.
Farbenindustrie A.G."; and Exh. 79 a, b, c, d and e which are prospectuses for the
medicines, Mitigal, Afridol, Aspirins, Novalgina and My-Salvarsan 32 showed that
these products were manufactured for Winthrop by I.G. Farbenindustrie; and
then Exh. 81 the Revista Boie of 1928 would show that Winthrop represented
itself as the distributor of the products of Bayer of Germany otherwise known as
I.G. Farbenindustrie, "segun la alta calidad de la marca original"; 33 the Court being
also impelled to add in this connection that it has to take judicial notice of a belief
of long standing common among the people in the Philippines that German
products are of very high quality and it is only natural for a distributor or a
retailer to take advantage of that, and as it is not debated that "Bayer" is a
German surname, (see plaintiff's rebuttal Exh. QQQQ, see also p. 7 plaintiff's reply
memorandum wherein it is said that this surname is a "pretty common one
among members of the Germany race") it is all so very easy to associate the Bayer
trademark with products that come from Germany and to believe that they are of
high quality;
4th). — The rationale of the doctrine in Ang vs. Teodoro, supra being that:
The Courts have come to realize that there can be unfair competition or unfair trading even
if the goods are non-competing, and that such unfair trading can cause injury or damage to
the first user of a given trade mark, first, by prevention of the natural expansion of his
business, and second, by having his business reputation confused with and put at the
mercy of the second user. 74 Phil. 55-56;
and the Court having found out that the 'first user' was Bayer Germany and it was this that
had built up the Bayer mark and plaintiff apparently having itself encouraged that belief
even after it had acquired the Bayer mark in America, thru forced sale, of defendant's
subsidiary there in 1918, Exhs. 79, 80, 81, to apply the Ang Tibay rule in the manner
advocated by Sterling would, the Court fears, produce the reverse result and the
consequence would be not equity but injustice. 34
It would seem to us that the fact that plaintiff rode on the German reputation in the Bayer
trademark has diluted the rationally of its exclusionary claim. Not that the free ride in the
name of defendant's German predecessor was sporadic. It is continuing. Proof of this is the
label on the box used by plaintiff (Exhibit U) in the distribution of Bayer Aspirin. This box
bears prominently on the front part the legend "Genuine" in red color and two arrows: the
first pointing to BAYER CROSS IN CIRCLE, and the second, to BAYER Aspirin. At the back
thereof in big letters are the words "BAYER ASPIRIN", followed in small letters "Used since
1900" and down below the small words "Mfd. in the Phil. by Winthrop Stearns, Inc. for
STERLING PRODUCTS INTERNATIONAL, INCORPORATED." In plaintiff's prospectus
(Exhibit 1) found in the box of Bayer Aspirin tablets, children's size, there is the significant
statement: "GENUINE BAYER — Each Children's Size Bayer Aspirin tablet is stamped with
the Bayer Cross, the trademark of the genuine Bayer product. This means that your child is
22 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
getting the same gentle-to-the-system Bayer Aspirin that has been used for over 50 years
by millions of normal people without ill effect."
With the background of prior use in the Philippines of the word BAYER by FBA's German
predecessor and the prior representations that plaintiff's medicines sold in the Philippines
were manufactured in Germany, the facts just recited hammer on the mind of the public
that the Aspirin. Cafiaspirina and Aspirin for Children being marketed for plaintiff in the
Philippines come from the same source — the German source — and in use since 1900.
That this view is far from far-fetched, is illustrated by the testimony of plaintiff's own
witness, Dr. Antonio Vasquez, viz:
Q. Have you ever heard of a pharmaceutical company of Bayer of Germany, or a
company in Germany named Bayer?
A. Yes, sir.
Q. Since when have you heard of this pharmaceutical company in Germany with
the name Bayer, since when have you heard of that?
A. I have always taken the name Bayer as associated with Winthrop & Stearns.
Q. But, you said a while ago....
Witness.
.... Yes .....
xxx xxx xxx
Q. ... that you have heard of a pharmaceutical company with the name of Bayer in
Germany?
A. Yes, sir.
Q. Do you know if this Winthrop & Stearns you mentioned has ever been
connected with Bayer Company of Germany?
A. I have always understood that they were distributing drugs of Bayer &
Company.35
4. The Ang Tibay doctrine, we believe, is not to be read as shunting aside the time-honored
teaching that he who comes into equity must do so with clean hands. 36 Plaintiff cannot now
say that the present worth of its BAYER trademarks it owes solely to its own efforts; it is
not insulated from the charge that as it marketed its medicines it did so with an eye to the
goodwill as to quality that defendants' predecessor had established.
There is no whittling away of the identity of plaintiff's trademarks. Plaintiff is not the first
user thereof in the Philippines. The trademarks do not necessarily link plaintiff with the
public. Plaintiff must show injury; it has not. On the contrary, representations as to the
place of manufacture of plaintiff's medicines were untrue, misleading. Plaintiff could still
be tagged with the same deception "which (it) complains of in the
defendant(s)."37 Appropriate it is to recall here our observation in the Ang Tibay opinion,
viz: "On our part may we add, without meaning to be harsh, that a self-respecting person
does not remain in the shelter of another but builds one of his own." 38
Plaintiff, the owner in this country of the trademarks BAYER for medicines, has thus
forfeited its right to protection from the use of the same trademarks by defendants for
products different therefrom — insecticides and other chemicals.
5. But defendants ask us to delist plaintiff's BAYER trademarks for medicines from the
Principal Register, claiming right thereto for said use. Said trademarks had been registered
since 1939 by plaintiff's predecessor. The Bayer Co., Inc.
Defendants' claim is stale; it suffers from the defect of non-use. 39 While it is conceded that
FBA's predecessors first introduced medical products with the BAYER trademarks in the
Philippine market, it is equally true that, after World War I, no definite evidence there is
that defendants or their professors traded in the Philippines in medicines with the BAYER
trademarks thereafter. FBA did not seasonably voice its objection. Lack of protest thereto
connoted acquiescence. And this; notwithstanding the fact that the 1923 and 1926
agreements were set aside in the anti-trust suits. Defendants did use the marks; but it was
much later, i.e., in 1958 — and on chemicals and insecticides — not on medicines. FBA only
bestirred itself and challenged plaintiff's right to the trademarks on medicines when this
suit was filed. Vigilantibus non dormientibus equitas subvenit. 40
The net result is that, as the trial court aptly observed, plaintiff may hold on to its BAYER
trademarks for medicines. And defendants may continue using the same trademarks for
insecticides and other chemicals, not medicines.
6. Defendants balk at the ruling below which directs them "to add a distinctive word or
words in their mark to indicate that their products come from Germany." 41
We are left under no doubt as to the reasonableness of the formula thus fashioned. It
avoids the mischief of confusion of origin — defendant FBA's product would not be
mistaken for those of plaintiff. It reduces friction. We perceive of no prejudice to
defendants. The order does not visit defendant FBA with reprobation or condemnation.
Rather, said defendant would be enhancing the value of and would be sponsoring its own
products. Anyway, a statement that its products come from Germany is but a statement of
fact.
FOR THE REASONS GIVEN, the judgment under review is hereby affirmed. No costs. So G.R. No. L-63796-97 May 2, 1984
ordered.
LA CHEMISE LACOSTE, S. A., petitioner,
vs.
HON. OSCAR C. FERNANDEZ, Presiding Judge of Branch XLIX, Regional Trial Court,
National Capital Judicial Region, Manila and GOBINDRAM HEMANDAS, respondents.

G.R. No. L-65659 May 2l, 1984

GOBINDRAM HEMANDAS SUJANANI, petitioner,

vs.
HON. ROBERTO V. ONGPIN, in his capacity as Minister of Trade and Industry, and
HON. CESAR SAN DIEGO, in his capacity as Director of Patents, respondents.

GUTIERREZ, JR., J.:

It is among this Court's concerns that the Philippines should not acquire an unbecoming
reputation among the manufacturing and trading centers of the world as a haven for
intellectual pirates imitating and illegally profiting from trademarks and tradenames which
have established themselves in international or foreign trade.

Before this Court is a petition for certiorari with preliminary injunction filed by La Chemise
Lacoste, S.A., a well known European manufacturer of clothings and sporting apparels sold
in the international market and bearing the trademarks "LACOSTE" "CHEMISE LACOSTE",
"CROCODILE DEVICE" and a composite mark consisting of the word "LACOSTE" and a
representation of a crocodile/alligator. The petitioner asks us to set aside as null and void,
the order of judge Oscar C. Fernandez, of Branch XLIX, Regional Trial Court, National
Capital Judicial Region, granting the motion to quash the search warrants previously issued
by him and ordering the return of the seized items.

The facts are not seriously disputed. The petitioner is a foreign corporation, organized and
existing under the laws of France and not doing business in the Philippines, It is
undeniable from the records that it is the actual owner of the abovementioned trademarks
23 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
used on clothings and other goods specifically sporting apparels sold in many parts of the
world and which have been marketed in the Philippines since 1964, The main basis of the
private respondent's case is its claim of alleged prior registration.
In 1975, Hemandas & Co., a duly licensed domestic firm applied for and was issued Reg.
No. SR-2225 (SR stands for Supplemental Register) for the trademark "CHEMISE LACOSTE
& CROCODILE DEVICE" by the Philippine Patent Office for use on T-shirts, sportswear and
other garment products of the company. Two years later, it applied for the registration of
the same trademark under the Principal Register. The Patent Office eventually issued an
order dated March 3, 1977 which states that:
xxx xxx xxx
... Considering that the mark was already registered in the Supplemental
Register in favor of herein applicant, the Office has no other recourse
but to allow the application, however, Reg. No. SR-2225 is now being
contested in a Petition for Cancellation docketed as IPC No. 1046, still
registrant is presumed to be the owner of the mark until after the
registration is declared cancelled.
Thereafter, Hemandas & Co. assigned to respondent Gobindram Hemandas all rights, title,
and interest in the trademark "CHEMISE LACOSTE & DEVICE".
On November 21, 1980, the petitioner filed its application for registration of the trademark
"Crocodile Device" (Application Serial No. 43242) and "Lacoste" (Application Serial No.
43241).The former was approved for publication while the latter was opposed by Games
and Garments in Inter Partes Case No. 1658. In 1982, the petitioner filed a Petition for the
Cancellation of Reg. No. SR-2225 docketed as Inter Partes Case No. 1689. Both cases have
now been considered by this Court in Hemandas v. Hon. Roberto Ongpin (G.R. No. 65659).
On March 21, 1983, the petitioner filed with the National Bureau of Investigation (NBI) a
letter-complaint alleging therein the acts of unfair competition being committed by
Hemandas and requesting their assistance in his apprehension and prosecution. The NBI
conducted an investigation and subsequently filed with the respondent court two
applications for the issuance of search warrants which would authorize the search of the
premises used and occupied by the Lacoste Sports Center and Games and Garments both
owned and operated by Hemandas.
The respondent court issued Search Warrant Nos. 83-128 and 83-129 for violation of
Article 189 of the Revised Penal Code, "it appearing to the satisfaction of the judge after
examining under oath applicant and his witnesses that there are good and sufficient
reasons to believe that Gobindram Hemandas ... has in his control and possession in his
premises the ... properties subject of the offense," (Rollo, pp. 67 and 69) The NBI agents
executed the two search warrants and as a result of the search found and seized various
goods and articles described in the warrants.
Hemandas filed a motion to quash the search warrants alleging that the trademark used by
him was different from petitioner's trademark and that pending the resolution of IPC No.
24 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
1658 before the Patent Office, any criminal or civil action on the same subject matter and
between the same parties would be premature.
The petitioner filed its opposition to the motion arguing that the motion to quash was
fatally defective as it cited no valid ground for the quashal of the search warrants and that
the grounds alleged in the motion were absolutely without merit. The State Prosecutor
likewise filed his opposition on the grounds that the goods seized were instrument of a
crime and necessary for the resolution of the case on preliminary investigation and that
the release of the said goods would be fatal to the case of the People should prosecution
follow in court.
The respondent court was, however, convinced that there was no probable cause to justify
the issuance of the search warrants. Thus, in its order dated March 22, 1983, the search
warrants were recalled and set aside and the NBI agents or officers in custody of the seized
items were ordered to return the same to Hemandas. (Rollo, p. 25)
The petitioner anchors the present petition on the following issues:
Did respondent judge act with grave abuse of discretion amounting to
lack of jurisdiction,
(i) in reversing the finding of probable cause which he himself had made
in issuing the search warrants, upon allegations which are matters of
defense and as such can be raised and resolved only upon trial on the
merits; and
(ii) in finding that the issuance of the search warrants is premature in
the face of the fact that (a) Lacoste's registration of the subject
trademarks is still pending with the Patent Office with opposition from
Hemandas; and (b) the subject trademarks had been earlier registered
by Hemandas in his name in the Supplemental Register of the Philippine
Patent Office?
Respondent, on the other hand, centers his arguments on the following issues:
I
THE PETITIONER HAS NO CAPACITY TO SUE BEFORE PHILIPPINE COURTS.
II
THE RESPONDENT JUDGE DID NOT COMMIT A GRAVE ABUSE OF DISCRETION
TANTAMOUNT TO LACK OF JURISDICTION IN ISSUING THE ORDER DATED APRIL 22,
1983.
Hemandas argues in his comment on the petition for certiorari that the petitioner being a
foreign corporation failed to allege essential facts bearing upon its capacity to sue before
Philippine courts. He states that not only is the petitioner not doing business in the
Philippines but it also is not licensed to do business in the Philippines. He also cites the
case of Leviton Industries v. Salvador (114 SCRA 420) to support his contention
The Leviton case, however, involved a complaint for unfair competition under Section 21-A
of Republic Act No. 166 which provides:
Sec. 21 — A. Any foreign corporation or juristic person to which a mark
or tradename has been registered or assigned under this Act may bring
an action hereunder for infringement, for unfair competition, or false
designation of origin and false description, whether or not it has been
licensed to do business in the Philippines under Act numbered Fourteen
Hundred and Fifty-Nine, as amended, otherwise known as the
Corporation Law, at the time it brings the complaint; Provided, That the
country of which the said foreign corporation or juristic person is a
citizen, or in which it is domiciled, by treaty, convention or law, grants a
similar privilege to corporate or juristic persons of the Philippines.
We held that it was not enough for Leviton, a foreign corporation organized and existing
under the laws of the State of New York, United States of America, to merely allege that it is
a foreign corporation. It averred in Paragraph 2 of its complaint that its action was being
filed under the provisions of Section 21-A of Republic Act No. 166, as amended. Compliance
with the requirements imposed by the abovecited provision was necessary because
Section 21-A of Republic Act No. 166 having explicitly laid down certain conditions in a
specific proviso, the same must be expressly averred before a successful prosecution may
ensue. It is therefore, necessary for the foreign corporation to comply with these
requirements or aver why it should be exempted from them, if such was the case. The
foreign corporation may have the right to sue before Philippine courts, but our rules on
pleadings require that the qualifying circumstances necessary for the assertion of such
right should first be affirmatively pleaded.
In contradistinction, the present case involves a complaint for violation of Article 189 of
the Revised Penal Code. The Leviton case is not applicable.
Asserting a distinctly different position from the Leviton argument, Hemandas argued in
his brief that the petitioner was doing business in the Philippines but was not licensed to
do so. To support this argument, he states that the applicable ruling is the case
of Mentholatum Co., Inc. v. Mangaliman: (72 Phil. 524) where Mentholatum Co. Inc., a
foreign corporation and Philippine-American Drug Co., the former's exclusive distributing
agent in the Philippines filed a complaint for infringement of trademark and unfair
competition against the Mangalimans.
The argument has no merit. The Mentholatum case is distinct from and inapplicable to the
case at bar. Philippine American Drug Co., Inc., was admittedly selling products of its
principal Mentholatum Co., Inc., in the latter's name or for the latter's account. Thus, this
Court held that "whatever transactions the Philippine-American Drug Co., Inc. had
executed in view of the law, the Mentholatum Co., Inc., did it itself. And, the Mentholatum
Co., Inc., being a foreign doing business in the Philippines without the license required by
Section 68 of the Corporation Law, it may not prosecute this action for violation of
trademark and unfair competition."
25 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
In the present case, however, the petitioner is a foreign corporation not doing business in
the Philippines. The marketing of its products in the Philippines is done through an
exclusive distributor, Rustan Commercial Corporation The latter is an independent entity
which buys and then markets not only products of the petitioner but also many other
products bearing equally well-known and established trademarks and tradenames. in
other words, Rustan is not a mere agent or conduit of the petitioner.
The rules and regulations promulgated by the Board of Investments pursuant to its rule-
making power under Presidential Decree No. 1789, otherwise known as the Omnibus
Investment Code, support a finding that the petitioner is not doing business in the
Philippines. Rule I, Sec. 1 (g) of said rules and regulations defines "doing business" as one"
which includes, inter alia:
(1) ... A foreign firm which does business through middlemen acting on
their own names, such as indentors, commercial brokers or commission
merchants, shall not be deemed doing business in the Philippines. But
such indentors, commercial brokers or commission merchants shall be
the ones deemed to be doing business in the Philippines.
(2) Appointing a representative or distributor who is domiciled in the
Philippines, unless said representative or distributor has an
independent status, i.e., it transacts business in its name and for its
account, and not in the name or for the account of a principal Thus,
where a foreign firm is represented by a person or local company which
does not act in its name but in the name of the foreign firm the latter is
doing business in the Philippines.
xxx xxx xxx
Applying the above provisions to the facts of this case, we find and conclude that the
petitioner is not doing business in the Philippines. Rustan is actually a middleman acting
and transacting business in its own name and or its own account and not in the name or
for the account of the petitioner.
But even assuming the truth of the private respondent's allegation that the petitioner failed
to allege material facts in its petition relative to capacity to sue, the petitioner may still
maintain the present suit against respondent Hemandas. As early as 1927, this Court was,
and it still is, of the view that a foreign corporation not doing business in the Philippines
needs no license to sue before Philippine courts for infringement of trademark and unfair
competition. Thus, in Western Equipment and Supply Co. v. Reyes (51 Phil. 115), this Court
held that a foreign corporation which has never done any business in the Philippines and
which is unlicensed and unregistered to do business here, but is widely and favorably
known in the Philippines through the use therein of its products bearing its corporate and
tradename, has a legal right to maintain an action in the Philippines to restrain the
residents and inhabitants thereof from organizing a corporation therein bearing the same
name as the foreign corporation, when it appears that they have personal knowledge of the
existence of such a foreign corporation, and it is apparent that the purpose of the proposed
domestic corporation is to deal and trade in the same goods as those of the foreign
corporation.
We further held:
xxx xxx xxx
... That company is not here seeking to enforce any legal or control
rights arising from, or growing out of, any business which it has
transacted in the Philippine Islands. The sole purpose of the action:
Is to protect its reputation, its corporate name, its goodwill, whenever
that reputation, corporate name or goodwill have, through the natural
development of its trade, established themselves.' And it contends that
its rights to the use of its corporate and trade name:
Is a property right, a right in rem, which it may assert and protect
against all the world, in any of the courts of the world-even in
jurisdictions where it does not transact business-just the same as it may
protect its tangible property, real or personal, against trespass, or
conversion. Citing sec. 10, Nims on Unfair Competition and TradeMarks
and cases cited; secs. 21-22, Hopkins on TradeMarks, Trade Names and
Unfair Competition and cases cited.' That point is sustained by the
authorities, and is well stated in Hanover Star Mining Co. v. Allen and
Wheeler Co. (208 Fed., 513). in which the syllabus says:
Since it is the trade and not the mark that is to be protected, a trade-
mark acknowledges no territorial boundaries of municipalities or states
or nations, but extends to every market where the trader's goods have
become known and Identified by the use of the mark.
Our recognizing the capacity of the petitioner to sue is not by any means novel or
precedent setting. Our jurisprudence is replete with cases illustrating instances when
foreign corporations not doing business in the Philippines may nonetheless sue in our
courts. In East Board Navigation Ltd, v. Ysmael and Co., Inc. (102 Phil. 1), we recognized a
right of foreign corporation to sue on isolated transactions. In General Garments Corp. v.
Director of Patents (41 SCRA 50), we sustained the right of Puritan Sportswear Corp., a
foreign corporation not licensed to do and not doing business in the Philippines, to file a
petition for cancellation of a trademark before the Patent Office.
More important is the nature of the case which led to this petition. What preceded this
petition for certiorari was a letter complaint filed before the NBI charging Hemandas with
a criminal offense, i.e., violation of Article 189 of the Revised Penal Code. If prosecution
follows after the completion of the preliminary investigation being conducted by the
Special Prosecutor the information shall be in the name of the People of the Philippines
and no longer the petitioner which is only an aggrieved party since a criminal offense is
essentially an act against the State. It is the latter which is principally the injured party
although there is a private right violated. Petitioner's capacity to sue would become,
therefore, of not much significance in the main case. We cannot snow a possible violator of
our criminal statutes to escape prosecution upon a far-fetched contention that the
aggrieved party or victim of a crime has no standing to sue.
26 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
In upholding the right of the petitioner to maintain the present suit before our courts for
unfair competition or infringement of trademarks of a foreign corporation, we are
moreover recognizing our duties and the rights of foreign states under the Paris
Convention for the Protection of Industrial Property to which the Philippines and France
are parties. We are simply interpreting and enforcing a solemn international commitment
of the Philippines embodied in a multilateral treaty to which we are a party and which we
entered into because it is in our national interest to do so.
The Paris Convention provides in part that:
ARTICLE 1
(1) The countries to which the present Convention applies constitute
themselves into a Union for the protection of industrial property.
(2) The protection of industrial property is concerned with patents,
utility models, industrial designs, trademarks service marks, trade
names, and indications of source or appellations of origin, and the
repression of unfair competition.
xxx xxx xxx
ARTICLE 2
(2) Nationals of each of the countries of the Union shall as regards the
protection of industrial property, enjoy in all the other countries of the
Union the advantages that their respective laws now grant, or may
hereafter grant, to nationals, without prejudice to the rights specially
provided by the present Convention. Consequently, they shall have the
same protection as the latter, and the same legal remedy against any
infringement of their rights, provided they observe the conditions and
formalities imposed upon nationals.
xxx xxx xxx
ARTICLE 6
(1) The countries of the Union undertake, either administratively if their
legislation so permits, or at the request of an interested party, to refuse
or to cancel the registration and to prohibit the use of a trademark
which constitutes a reproduction, imitation or translation, liable to
create confusion, of a mark considered by the competent authority of
the country of registration or use to be well-known in that country as
being already the mark of a person entitled to the benefits of the
present Convention and used for Identical or similar goods. These
provisions shall also apply when the essential part of the mark
constitutes a reproduction of any such well-known mark or an imitation
liable to create confusion therewith.
 xxx xxx xxx
ARTICLE 8
A trade name shall be protected in all the countries of the Union without
the obligation of filing or registration, whether or not it forms part of
a trademark.
xxx xxx xxx
ARTICLE 10bis
(1) The countries of the Union are bound to assure to persons entitled
to the benefits of the Union effective protection against unfair
competition.
xxx xxx xxx
ARTICLE 10ter
(1) The countries of the Union undertake to assure to nationals of the
other countries of the Union appropriate legal remedies to repress
effectively all the acts referred to in Articles 9, 10 and l0bis.
(2) They undertake, further, to provide measures to permit syndicates
and associations which represent the industrialists, producers or
traders concerned and the existence of which is not contrary to the laws
of their countries, to take action in the Courts or before the
administrative authorities, with a view to the repression of the acts
referred to in Articles 9, 10 and 10bis, in so far as the law of the country
in which protection is claimed allows such action by the syndicates and
associations of that country.
xxx xxx xxx
ARTICLE 17
Every country party to this Convention undertakes to adopt, in
accordance with its constitution, the measures necessary to ensure the
application of this Convention.
It is understood that at the time an instrument of ratification or
accession is deposited on behalf of a country; such country will be in a
position under its domestic law to give effect to the provisions of this
Convention. (61 O.G. 8010)
xxx xxx xxx
27 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
In Vanity Fair Mills, Inc. v. T Eaton Co. (234 F. 2d 633) the United States Circuit Court of
Appeals had occasion to comment on the extraterritorial application of the Paris
Convention It said that:
[11] The International Convention is essentially a compact between the
various member countries to accord in their own countries to citizens of
the other contracting parties trademark and other rights comparable to
those accorded their own citizens by their domestic law. The underlying
principle is that foreign nationals should be given the same treatment in
each of the member countries as that country makes available to its own
citizens. In addition, the Convention sought to create uniformity in
certain respects by obligating each member nation 'to assure to
nationals of countries of the Union an effective protection against unfair
competition.'
[12] The Convention is not premised upon the Idea that the trade-mark
and related laws of each member nation shall be given extra-territorial
application, but on exactly the converse principle that each nation's law
shall have only territorial application. Thus a foreign national of a
member nation using his trademark in commerce in the United States is
accorded extensive protection here against infringement and other
types of unfair competition by virtue of United States membership in
the Convention. But that protection has its source in, and is subject to
the limitations of, American law, not the law of the foreign national's
own country. ...
By the same token, the petitioner should be given the same treatment in the Philippines as
we make available to our own citizens. We are obligated to assure to nationals of "countries
of the Union" an effective protection against unfair competition in the same way that they
are obligated to similarly protect Filipino citizens and firms.
Pursuant to this obligation, the Ministry of Trade on November 20, 1980 issued a
memorandum addressed to the Director of the Patents Office directing the latter:
xxx xxx xxx
... to reject all pending applications for Philippine registration of
signature and other world famous trademarks by applicants other than
its original owners or users.
The conflicting claims over internationally known trademarks involve
such name brands as Lacoste, Jordache, Gloria Vanderbilt, Sasson, Fila,
Pierre Cardin, Gucci, Christian Dior, Oscar de la Renta, Calvin Klein,
Givenchy, Ralph Lauren, Geoffrey Beene, Lanvin and Ted Lapidus.
It is further directed that, in cases where warranted, Philippine
registrants of such trademarks should be asked to surrender their
certificates of registration, if any, to avoid suits for damages and other
legal action by the trademarks' foreign or local owners or original users.
The memorandum is a clear manifestation of our avowed adherence to a policy of
cooperation and amity with all nations. It is not, as wrongly alleged by the private
respondent, a personal policy of Minister Luis Villafuerte which expires once he leaves the
Ministry of Trade. For a treaty or convention is not a mere moral obligation to be enforced
or not at the whims of an incumbent head of a Ministry. It creates a legally binding
obligation on the parties founded on the generally accepted principle of international law
of pacta sunt servanda which has been adopted as part of the law of our land. (Constitution,
Art. II, Sec. 3). The memorandum reminds the Director of Patents of his legal duty to obey
both law and treaty. It must also be obeyed.
Hemandas further contends that the respondent court did not commit grave abuse of
discretion in issuing the questioned order of April 22, 1983.
A review of the grounds invoked by Hemandas in his motion to quash the search warrants
reveals the fact that they are not appropriate for quashing a warrant. They are matters of
defense which should be ventilated during the trial on the merits of the case. For instance,
on the basis of the facts before the Judge, we fail to understand how he could treat a bare
allegation that the respondent's trademark is different from the petitioner's trademark as a
sufficient basis to grant the motion to quash. We will treat the issue of prejudicial question
later. Granting that respondent Hemandas was only trying to show the absence of probable
cause, we, nonetheless, hold the arguments to be untenable.
As a mandatory requirement for the issuance of a valid search warrant, the Constitution
requires in no uncertain terms the determination of probable cause by the judge after
examination under oath or affirmation of the complainant and the witnesses he may
produce (Constitution, Art. IV, Sec. 3). Probable cause has traditionally meant such facts
and circumstances antecedent to the issuance of the warrant that are in themselves
sufficient to induce a cautious man to rely upon them and act in pursuance thereof (People
v. Sy Juco, 64 Phil. 667).
This concept of probable cause was amplified and modified by our ruling in Stonehill v.
Diokno, (20 SCRA 383) that probable cause "presupposes the introduction of competent
proof that the party against whom it is sought has performed particular acts, or committed
specific omissions, violating a given provision of our criminal laws."
The question of whether or not probable cause exists is one which must be decided in the
light of the conditions obtaining in given situations (Central Bank v. Morfe, 20 SCRA 507).
We agree that there is no general formula or fixed rule for the determination of the
existence of probable cause since, as we have recognized in Luna v. Plaza (26 SCRA 310),
the existence depends to a large degree upon the finding or opinion of the judge
conducting the examination. However, the findings of the judge should not disregard the
facts before him nor run counter to the clear dictates of reason. More so it is plain that our
country's ability to abide by international commitments is at stake.
The records show that the NBI agents at the hearing of the application for the warrants
before respondent court presented three witnesses under oath, sworn statements, and
various exhibits in the form of clothing apparels manufactured by Hemandas but carrying
the trademark Lacoste. The respondent court personally interrogated Ramon Esguerra,
Samuel Fiji, and Mamerto Espatero by means of searching questions. After hearing the
28 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
testimonies and examining the documentary evidence, the respondent court was
convinced that there were good and sufficient reasons for the issuance of the warrant. And
it then issued the warrant.
The respondent court, therefore, complied with the constitutional and statutory
requirements for the issuance of a valid search warrant. At that point in time, it was fully
convinced that there existed probable cause. But after hearing the motion to quash and the
oppositions thereto, the respondent court executed a complete turnabout and declared
that there was no probable cause to justify its earlier issuance of the warrants.
True, the lower court should be given the opportunity to correct its errors, if there be any,
but the rectification must, as earlier stated be based on sound and valid grounds. In this
case, there was no compelling justification for the about face. The allegation that vital facts
were deliberately suppressed or concealed by the petitioner should have been assessed
more carefully because the object of the quashal was the return of items already seized and
easily examined by the court. The items were alleged to be fake and quite obviously would
be needed as evidence in the criminal prosecution. Moreover, an application for a search
warrant is heard ex parte. It is neither a trial nor a part of the trial. Action on these
applications must be expedited for time is of the essence. Great reliance has to be accorded
by the judge to the testimonies under oath of the complainant and the witnesses. The
allegation of Hemandas that the applicant withheld information from the respondent court
was clearly no basis to order the return of the seized items.
Hemandas relied heavily below and before us on the argument that it is the holder of a
certificate of registration of the trademark "CHEMISE LACOSTE & CROCODILE DEVICE".
Significantly, such registration is only in the Supplemental Register.
A certificate of registration in the Supplemental Register is not prima facie evidence of the
validity of registration, of the registrant's exclusive right to use the same in connection
with the goods, business, or services specified in the certificate. Such a certificate of
registration cannot be filed, with effect, with the Bureau of Customs in order to exclude
from the Philippines, foreign goods bearing infringement marks or trade names (Rule 124,
Revised Rules of Practice Before the Phil. Pat. Off. in Trademark Cases; Martin, Philippine
Commercial Laws, 1981, Vol. 2, pp. 513-515).
Section 19-A of Republic Act 166 as amended not only provides for the keeping of the
supplemental register in addition to the principal register but specifically directs that:
xxx xxx xxx
The certificates of registration for marks and trade names registered on
the supplemental register shall be conspicuously different from
certificates issued for marks and trade names on the principal register.
xxx xxx xxx
The reason is explained by a leading commentator on Philippine Commercial Laws:
 The registration of a mark upon the supplemental register is not, as in
the case of the principal register, prima facie evidence of (1) the validity
of registration; (2) registrant's ownership of the mark; and (3)
registrant's exclusive right to use the mark. It is not subject to
opposition, although it may be cancelled after its issuance. Neither may
it be the subject of interference proceedings. Registration on the
supplemental register is not constructive notice of registrant's claim of
ownership. A supplemental register is provided for the registration of
marks which are not registrable on the principal register because of
some defects (conversely, defects which make a mark unregistrable on
the principal register, yet do not bar them from the supplemental
register.) (Agbayani, II Commercial Laws of the Philippines, 1978, p.
514, citing Uy Hong Mo v. Titay & Co., et al., Dec. No. 254 of Director of
Patents, Apr. 30, 1963);
Registration in the Supplemental Register, therefore, serves as notice that the registrant is
using or has appropriated the trademark. By the very fact that the trademark cannot as yet
be entered in the Principal Register, all who deal with it should be on guard that there are
certain defects, some obstacles which the user must Still overcome before he can claim
legal ownership of the mark or ask the courts to vindicate his claims of an exclusive right to
the use of the same. It would be deceptive for a party with nothing more than a registration
in the Supplemental Register to posture before courts of justice as if the registration is in
the Principal Register.
The reliance of the private respondent on the last sentence of the Patent office action on
application Serial No. 30954 that "registrant is presumed to be the owner of the mark until
after the registration is declared cancelled" is, therefore, misplaced and grounded on shaky
foundation, The supposed presumption not only runs counter to the precept embodied in
Rule 124 of the Revised Rules of Practice before the Philippine Patent Office in Trademark
Cases but considering all the facts ventilated before us in the four interrelated petitions
involving the petitioner and the respondent, it is devoid of factual basis. And even in cases
where presumption and precept may factually be reconciled, we have held that the
presumption is rebuttable, not conclusive, (People v. Lim Hoa, G.R. No. L10612, May 30,
1958, Unreported). One may be declared an unfair competitor even if his competing
trademark is registered (Parke, Davis & Co. v. Kiu Foo & Co., et al., 60 Phil. 928; La Yebana
Co. v. Chua Seco & Co., 14 Phil. 534).
By the same token, the argument that the application was premature in view of the
pending case before the Patent Office is likewise without legal basis.
The proceedings pending before the Patent Office involving IPC Co. 1658 do not partake of
the nature of a prejudicial question which must first be definitely resolved.
Section 5 of Rule 111 of the Rules of Court provides that:
A petition for the suspension of the criminal action based upon the
pendency of a pre-judicial question in a civil case, may only be
presented by any party before or during the trial of the criminal action.
29 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
The case which suspends the criminal prosecution must be a civil case which is
determinative of the innocence or, subject to the availability of other defenses, the guilt of
the accused. The pending case before the Patent Office is an administrative proceeding and
not a civil case. The decision of the Patent Office cannot be finally determinative of the
private respondent's innocence of the charges against him.
In Flordelis v. Castillo (58 SCRA 301), we held that:
As clearly delineated in the aforecited provisions of the new Civil Code
and the Rules of Court, and as uniformly applied in numerous decisions
of this Court, (Berbari v. Concepcion, 40 Phil. 837 (1920); Aleria v.
Mendoza, 83 Phil. 427 (1949); People v. Aragon, 94 Phil. 357 (1954);
Brito-Sy v. Malate Taxicab & Garage, Inc., 102 Phil 482 (1957); Mendiola
v. Macadael, 1 SCRA 593; Benitez v. Concepcion, 2 SCRA 178; Zapante v.
Montesa, 4 SCRA 510; Jimenez v. Averia, 22 SCRA 1380.) In
Buenaventura v. Ocampo (55 SCRA 271) the doctrine of prejudicial
question was held inapplicable because no criminal case but merely an
administrative case and a civil suit were involved. The Court, however,
held that, in view of the peculiar circumstances of that case, the
respondents' suit for damages in the lower court was premature as it
was filed during the pendency of an administrative case against the
respondents before the POLCOM. 'The possibility cannot be overlooked,'
said the Court, 'that the POLCOM may hand down a decision adverse to
the respondents, in which case the damage suit will become unfounded
and baseless for wanting in cause of action.') the doctrine of pre-judicial
question comes into play generally in a situation where a civil action
and a criminal action both penned and there exists in the former an
issue which must be preemptively resolved before the criminal action
may proceed, because howsoever the issue raised in the civil action is
resolved would be determinative juris et de jure of the guilt or innocence
of the accused in the criminal case.
In the present case, no civil action pends nor has any been instituted. What was pending
was an administrative case before the Patent Office.
Even assuming that there could be an administrative proceeding with exceptional or
special circumstances which render a criminal prosecution premature pending the
promulgation of the administrative decision, no such peculiar circumstances are present in
this case.
Moreover, we take note of the action taken by the Patents Office and the Minister of Trade
and affirmed by the Intermediate Appellate Court in the case of La Chemise Lacoste S. A.
v. Ram Sadhwani (AC-G.R. No. SP-13356, June 17, 1983).
The same November 20, 1980 memorandum of the Minister of Trade discussed in this
decision was involved in the appellate court's decision. The Minister as the "implementing
authority" under Article 6bis of the Paris Convention for the protection of Industrial
Property instructed the Director of Patents to reject applications for Philippine registration
of signature and other world famous trademarks by applicants other than its original
owners or users. The brand "Lacoste" was specifically cited together with Jordache, Gloria
Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar dela Renta, Calvin Klein,
Givenchy, Ralph Laurence, Geoffrey Beene, Lanvin, and Ted Lapidus. The Director of
Patents was likewise ordered to require Philippine registrants of such trademarks to
surrender their certificates of registration. Compliance by the Director of Patents was
challenged.
The Intermediate Appellate Court, in the La Chemise Lacoste S.A. v. Sadhwani decision
which we cite with approval sustained the power of the Minister of Trade to issue the
implementing memorandum and, after going over the evidence in the records, affirmed the
decision of the Director of Patents declaring La Chemise Lacoste &A. the owner of the
disputed trademark and crocodile or alligator device. The Intermediate Appellate Court
speaking through Mr. Justice Vicente V. Mendoza stated:
In the case at bar, the Minister of Trade, as 'the competent authority of
the country of registration,' has found that among other well-known
trademarks 'Lacoste' is the subject of conflicting claims. For this reason,
applications for its registration must be rejected or refused, pursuant to
the treaty obligation of the Philippines.
Apart from this finding, the annexes to the opposition, which La
Chemise Lacoste S.A. filed in the Patent Office, show that it is the owner
of the trademark 'Lacoste' and the device consisting of a representation
of a crocodile or alligator by the prior adoption and use of such mark
and device on clothing, sports apparel and the like. La Chemise Lacoste
S.A, obtained registration of these mark and device and was in fact
issued renewal certificates by the French National Industry Property
Office.
xxx xxx xxx
Indeed, due process is a rule of reason. In the case at bar the order of
the Patent Office is based not only on the undisputed fact of ownership
of the trademark by the appellee but on a prior determination by the
Minister of Trade, as the competent authority under the Paris
Convention, that the trademark and device sought to be registered by
the appellant are well-known marks which the Philippines, as party to
the Convention, is bound to protect in favor of its owners. it would be to
exalt form over substance to say that under the circumstances, due
process requires that a hearing should be held before the application is
acted upon.
The appellant cites section 9 of Republic Act No. 166, which requires
notice and hearing whenever an opposition to the registration of a
trademark is made. This provision does not apply, however, to situations
covered by the Paris Convention, where the appropriate authorities
have determined that a well-known trademark is already that of
another person. In such cases, the countries signatories to the
Convention are obliged to refuse or to cancel the registration of the
30 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
mark by any other person or authority. In this case, it is not disputed
that the trademark Lacoste is such a well-known mark that a hearing,
such as that provided in Republic Act No. 166, would be superfluous.
The issue of due process was raised and fully discussed in the appellate court's decision.
The court ruled that due process was not violated.
In the light of the foregoing it is quite plain that the prejudicial question argument is
without merit.
We have carefully gone over the records of all the cases filed in this Court and find more
than enough evidence to sustain a finding that the petitioner is the owner of the
trademarks "LACOSTE", "CHEMISE LACOSTE", the crocodile or alligator device, and the
composite mark of LACOSTE and the representation of the crocodile or alligator. Any
pretensions of the private respondent that he is the owner are absolutely without basis.
Any further ventilation of the issue of ownership before the Patent Office will be a
superfluity and a dilatory tactic.
The issue of whether or not the trademark used by the private respondent is different from
the petitioner's trade mark is a matter of defense and will be better resolved in the
criminal proceedings before a court of justice instead of raising it as a preliminary matter
in an administrative proceeding.
The purpose of the law protecting a trademark cannot be overemphasized. They are to
point out distinctly the origin or ownership of the article to which it is affixed, to secure to
him, who has been instrumental in bringing into market a superior article of merchandise,
the fruit of his industry and skill, and to prevent fraud and imposition (Etepha v. Director of
Patents, 16 SCRA 495).
The legislature has enacted laws to regulate the use of trademarks and provide for the
protection thereof. Modern trade and commerce demands that depredations on legitimate
trade marks of non-nationals including those who have not shown prior registration
thereof should not be countenanced. The law against such depredations is not only for the
protection of the owner of the trademark but also, and more importantly, for the protection
of purchasers from confusion, mistake, or deception as to the goods they are buying. (Asari
Yoko Co., Ltd. v. Kee Boc, 1 SCRA 1; General Garments Corporation v. Director of Patents, 41
SCRA 50).
The law on trademarks and tradenames is based on the principle of business integrity and
common justice' This law, both in letter and spirit, is laid upon the premise that, while it
encourages fair trade in every way and aims to foster, and not to hamper, competition, no
one, especially a trader, is justified in damaging or jeopardizing another's business by
fraud, deceipt, trickery or unfair methods of any sort. This necessarily precludes the
trading by one dealer upon the good name and reputation built up by another (Baltimore v.
Moses, 182 Md 229, 34 A (2d) 338).
The records show that the goodwill and reputation of the petitioner's products bearing the
trademark LACOSTE date back even before 1964 when LACOSTE clothing apparels were
first marketed in the Philippines. To allow Hemandas to continue using the trademark
Lacoste for the simple reason that he was the first registrant in the Supplemental Register
of a trademark used in international commerce and not belonging to him is to render
nugatory the very essence of the law on trademarks and tradenames.
We now proceed to the consideration of the petition in Gobindram Hemandas Suianani
u. Hon. Roberto V Ongpin, et al. (G.R. No. 65659).
Actually, three other petitions involving the same trademark and device have been filed
with this Court.
In Hemandas & Co. v. Intermediate Appellate Court, et al. (G.R. No. 63504) the petitioner
asked for the following relief:
IN VIEW OF ALL THE FOREGOING, it is respectfully prayed (a) that the
Resolutions of the respondent Court of January 3, 1983 and February
24, 1983 be nullified; and that the Decision of the same respondent
Court of June 30, 1983 be declared to be the law on the matter; (b) that
the Director of Patents be directed to issue the corresponding
registration certificate in the Principal Register; and (c) granting upon
the petitioner such other legal and equitable remedies as are justified by
the premises.
On December 5, 1983, we issued the following resolution:
Considering the allegations contained, issues raised and the arguments
adduced in the petition for review, the respondent's comment thereon,
and petitioner's reply to said comment, the Court Resolved to DENY the
petition for lack of merit.
The Court further Resolved to CALL the attention of the Philippine
Patent Office to the pendency in this Court of G.R. No. 563796-97
entitled 'La Chemise Lacoste, S.A. v. Hon. Oscar C. Fernandez and
Gobindram Hemandas' which was given due course on June 14, 1983
and to the fact that G.R. No. 63928-29 entitled 'Gobindram Hemandas v.
La Chemise Lacoste, S.A., et al.' filed on May 9, 1983 was dismissed for
lack of merit on September 12, 1983. Both petitions involve the same
dispute over the use of the trademark 'Chemise Lacoste'.
The second case of Gobindram Hemandas vs. La Chemise Lacoste, S.A., et al. (G.R. No. 63928-
29) prayed for the following:
I. On the petition for issuance of writ of preliminary injunction, an order
be issued after due hearing:
l. Enjoining and restraining respondents Company, attorneys-in-fact,
and Estanislao Granados from further proceedings in the unfair
competition charges pending with the Ministry of Justice filed against
petitioner;
31 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
2. Enjoining and restraining respondents Company and its attorneys-in-
fact from causing undue publication in newspapers of general
circulation on their unwarranted claim that petitioner's products are
FAKE pending proceedings hereof; and
3. Enjoining and restraining respondents Company and its attorneys-in-
fact from sending further threatening letters to petitioner's customers
unjustly stating that petitioner's products they are dealing in are FAKE
and threatening them with confiscation and seizure thereof.
II. On the main petition, judgment be rendered:
l. Awarding and granting the issuance of the Writ of Prohibition,
prohibiting, stopping, and restraining respondents from further
committing the acts complained of;
2. Awarding and granting the issuance of the Writ of Mandamus,
ordering and compelling respondents National Bureau of Investigation,
its aforenamed agents, and State Prosecutor Estanislao Granados to
immediately comply with the Order of the Regional Trial Court, National
Capital Judicial Region, Branch XLIX, Manila, dated April 22, 1983, which
directs the immediate return of the seized items under Search Warrants
Nos. 83-128 and 83-129;
3. Making permanent any writ of injunction that may have been
previously issued by this Honorable Court in the petition at bar: and
4. Awarding such other and further relief as may be just and equitable in
the premises.
As earlier stated, this petition was dismissed for lack of merit on September 12, 1983.
Acting on a motion for reconsideration, the Court on November 23, 1983 resolved to deny
the motion for lack of merit and declared the denial to be final.
Hemandas v. Hon. Roberto Ongpin (G.R. No. 65659) is the third petition.
In this last petition, the petitioner prays for the setting aside as null and void and for the
prohibiting of the enforcement of the following memorandum of respondent Minister
Roberto Ongpin:
MEMORANDUM:
FOR: THE DIRECTOR OF PATENTS
Philippine Patent Office
xxx xxx xxx
Pursuant to Executive Order No. 913 dated 7 October 1983 which strengthens the rule-
making and adjudicatory powers of the Minister of Trade and Industry and provides inter
alia, that 'such rule-making and adjudicatory powers should be revitalized in order that the
Minister of Trade and Industry can ...apply more swift and effective solutions and remedies
to old and new problems ... such as the infringement of internationally-known tradenames
and trademarks ...'and in view of the decision of the Intermediate Appellate Court in the
case of LA CHEMISE LACOSTE, S.A., versus RAM SADWHANI [AC-G.R. Sp. No. 13359 (17) June
1983] which affirms the validity of the MEMORANDUM of then Minister Luis R. Villafuerte
dated 20 November 1980 confirming our obligations under the PARIS CONVENTION FOR
THE PROTECTION OF INDUSTRIAL PROPERTY to which the Republic of the Philippines is a
signatory, you are hereby directed to implement measures necessary to effect compliance
with our obligations under said convention in general, and, more specifically, to honor our
commitment under Section 6 bis thereof, as follows:
1. Whether the trademark under consideration is well-known in the
Philippines or is a mark already belonging to a person entitled to the
benefits of the CONVENTION, this should be established, pursuant to
Philippine Patent Office procedures in inter partes and ex parte cases,
according to any of the following criteria or any combination thereof:
(a) a declaration by the Minister of Trade and Industry that' the
trademark being considered is already well-known in the Philippines
such that permission for its use by other than its original owner will
constitute a reproduction, imitation, translation or other infringement;
(b) that the trademark is used in commerce internationally, supported
by proof that goods bearing the trademark are sold on an international
scale, advertisements, the establishment of factories, sales offices,
distributorships, and the like, in different countries, including volume or
other measure of international trade and commerce;
(c) that the trademark is duly registered in the industrial property
office(s) of another country or countries, taking into consideration the
dates of such registration;
(d) that the trademark has been long established and obtained goodwill
and general international consumer recognition as belonging to one
owner or source;
(e) that the trademark actually belongs to a party claiming ownership
and has the right to registration under the provisions of the aforestated
PARIS CONVENTION.
2. The word trademark, as used in this MEMORANDUM, shall include
tradenames, service marks, logos, signs, emblems, insignia or other
similar devices used for Identification and recognition by consumers.
3. The Philippine Patent Office shall refuse all applications for, or cancel
the registration of, trademarks which constitute a reproduction,
32 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
translation or imitation of a trademark owned by a person, natural or
corporate, who is a citizen of a country signatory to the PARIS
CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY.
4. The Philippine Patent Office shall give due course to the Opposition in
cases already or hereafter filed against the registration of trademarks
entitled to protection of Section 6 bis of said PARIS CONVENTION as
outlined above, by remanding applications filed by one not entitled to
such protection for final disallowance by the Examination Division.
5. All pending applications for Philippine registration of signature and
other world famous trademarks filed by applicants other than their
original owners or users shall be rejected forthwith. Where such
applicants have already obtained registration contrary to the
abovementioned PARIS CONVENTION and/or Philippine Law, they shall
be directed to surrender their Certificates of Registration to the
Philippine Patent Office for immediate cancellation proceedings.
6. Consistent with the foregoing, you are hereby directed to expedite the
hearing and to decide without delay the following cases pending before
your Office:
1. INTER PARTES CASE NO. 1689-Petition filed by La Chemise Lacoste,
S.A. for the cancellation of Certificate of Registration No. SR-2225 issued
to Gobindram Hemandas, assignee of Hemandas and Company;
2. INTER PARTES CASE NO. 1658-Opposition filed by Games and
Garments Co. against the registration of the trademark Lacoste sought
by La Chemise Lacoste, S.A.;
3. INTER PARTES CASE NO. 1786-Opposition filed by La Chemise
Lacoste, S.A. against the registration of trademark Crocodile Device and
Skiva sought by one Wilson Chua.
Considering our discussions in G.R. Nos. 63796-97, we find the petition in G.R. No. 65659
to be patently without merit and accordingly deny it due course.
In complying with the order to decide without delay the cases specified in the
memorandum, the Director of Patents shall limit himself to the ascertainment of facts in
issues not resolved by this decision and apply the law as expounded by this Court to those
facts.
One final point. It is essential that we stress our concern at the seeming inability of law
enforcement officials to stem the tide of fake and counterfeit consumer items flooding the
Philippine market or exported abroad from our country. The greater victim is not so much
the manufacturer whose product is being faked but the Filipino consuming public and in
the case of exportations, our image abroad. No less than the President, in issuing Executive
Order No. 913 dated October 7, 1983 to strengthen the powers of the Minister of Trade and
Industry for the protection of consumers, stated that, among other acts, the dumping of
substandard, imitated, hazardous, and cheap goods, the infringement of internationally
known tradenames and trademarks, and the unfair trade practices of business firms has
reached such proportions as to constitute economic sabotage. We buy a kitchen appliance,
a household tool, perfume, face powder, other toilet articles, watches, brandy or whisky,
and items of clothing like jeans, T-shirts, neck, ties, etc. — the list is quite length — and pay
good money relying on the brand name as guarantee of its quality and genuine nature only
to explode in bitter frustration and genuine nature on helpless anger because the
purchased item turns out to be a shoddy imitation, albeit a clever looking counterfeit, of
the quality product. Judges all over the country are well advised to remember that court
processes should not be used as instruments to, unwittingly or otherwise, aid
counterfeiters and intellectual pirates, tie the hands of the law as it seeks to protect the
Filipino consuming public and frustrate executive and administrative implementation of
solemn commitments pursuant to international conventions and treaties.
WHEREFORE, the petition in G.R. NOS. 63797-97 is hereby GRANTED. The order dated
April 22, 1983 of the respondent regional trial court is REVERSED and SET ASIDE. Our
Temporary Restraining Order dated April 29, 1983 is ma(i.e. PERMANENT. The petition in
G.R. NO. 65659 is DENIED due course for lack of merit. Our Temporary Restraining Order
dated December 5, 1983 is LIFTED and SET ASIDE, effective immediately.
G.R. No. L-46720 June 28, 1940
WELLS FARGO BANK & UNION TRUST COMPANY, petitioner-appellant,
vs.
THE COLLECTOR OF INTERNAL REVENUE, respondent-appellee.
MORAN, J.:
An appeal from a declaratory judgment rendered by the Court of First Instance of Manila.
33 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
Birdie Lillian Eye, wife of Clyde Milton Eye, died on September 16, 1932, at Los Angeles,
California, the place of her alleged last residence and domicile. Among the properties she
left her one-half conjugal share in 70,000 shares of stock in the Benguet Consolidated
Mining Company, an anonymous partnership (sociedad anonima), organized and existing
under the laws of the Philippines, with is principal office in the City of Manila. She left a
will which was duly admitted to probate in California where her estate was administered
and settled. Petitioner-appellant, Wells Fargo Bank & Union Trust Company, was duly
appointed trustee of the created by the said will. The Federal and State of California's
inheritance taxes due on said shares have been duly paid. Respondent Collector of Internal
Revenue sought to subject anew the aforesaid shares of stock to the Philippine inheritance
tax, to which petitioner-appellant objected. Wherefore, a petition for a declaratory
judgment was filed in the lower court, with the statement that, "if it should be held by a
final declaratory judgment that the transfer of the aforesaid shares of stock is legally
subject to the Philippine inheritance tax, the petitioner will pay such tax, interest and
penalties (saving error in computation) without protest and will not file to recover the
same; and the petitioner believes and t herefore alleges that it should be held that such
transfer is not subject to said tax, the respondent will not proceed to assess and collect the
same." The Court of First Instance of Manila rendered judgment, holding that the
transmission by will of the said 35,000 shares of stock is subject to Philippine inheritance
tax. Hence, this appeal by the petitioner.
Petitioner concedes (1) that the Philippine inheritance tax is not a tax property, but upon
transmission by inheritance (Lorenzo vs. Posadas, 35 Off. Gaz., 2393, 2395), and (2) that as
to real and tangible personal property of a non-resident decedent, located in the
Philippines, the Philippine inheritance tax may be imposed upon their transmission by
death, for the self-evident reason that, being a property situated in this country, its transfer
is, in some way, defendant, for its effectiveness, upon Philippine laws. It is contended,
however, that, as to intangibles, like the shares of stock in question, their situs is in the
domicile of the owner thereof, and, therefore, their transmission by death necessarily takes
place under his domiciliary laws.
Section 1536 of the Administrative Code, as amended, provides that every transmission by
virtue of inheritance of any share issued by any corporation of sociedad anonima organized
or constituted in the Philippines, is subject to the tax therein provided. This provision has
already been applied to shares of stock in a domestic corporation which were owned by a
British subject residing and domiciled in Great Britain. (Knowles vs. Yatco, G. R. No.
42967. See also Gibbs vs. Government of P. I., G. R. No. 35694.) Petitioner, however, invokes
the rule laid down by the United States Supreme Court in four cases (Farmers Loan & Trust
Company vs. Minnesota, 280 U.S. 204; 74 Law. ed., 371; Baldwin vs. Missouri, 281 U.S., 586;
74 Law. ed., 1056, Beidler vs. South Carolina Tax Commission 282 U. S., 1; 75 Law. ed., 131;
First National Bank of Boston vs. Maine, 284 U. S., 312; 52 S. Ct., 174, 76 Law. ed., 313; 77 A.
L. R., 1401), to the effect that an inheritance tax can be imposed with respect to intangibles
only by the State where the decedent was domiciled at the time of his death, and that,
under the due-process clause, the State in which a corporation has been incorporated has
no power to impose such tax if the shares of stock in such corporation are owned by a non-
resident decedent. It is to be observed, however, that in a later case (Burnet vs. Brooks, 288
U. S., 378; 77 Law. ed., 844), the United States Supreme Court upheld the authority of the
Federal Government to impose an inheritance tax on the transmission, by death of a non-
resident, of stock in a domestic (America) corporation, irrespective of the situs of the
corresponding certificates of stock. But it is contended that the doctrine in the foregoing
case is not applicable, because the due-process clause is directed at the State and not at the
Federal Government, and that the federal or national power of the United States is to be
determined in relation to other countries and their subjects by applying the principles of
jurisdiction recognized in international relations. Be that as it may, the truth is that the
due-process clause is "directed at the protection of the individual and he is entitled to its
immunity as much against the state as against the national government."
(Curry vs. McCanless, 307 U. S., 357, 370; 83 Law. ed., 1339, 1349.) Indeed, the rule laid
down in the four cases relied upon by the appellant was predicated on a proper regard for
the relation of the states of the American Union, which requires that property should be
taxed in only one state and that jurisdiction to tax is restricted accordingly. In other words,
the application to the states of the due-process rule springs from a proper distribution of
their powers and spheres of activity as ordained by the United States Constitution, and
such distribution is enforced and protected by not allowing one state to reach out and tax
property in another. And these considerations do not apply to the Philippines. Our status
rests upon a wholly distinct basis and no analogy, however remote, cam be suggested in the
relation of one state of the Union with another or with the United States. The status of the
Philippines has been aptly defined as one which, though a part of the United States in the
international sense, is, nevertheless, foreign thereto in a domestic sense.
(Downes vs. Bidwell, 182 U. S., 244, 341.)
At any rate, we see nothing of consequence in drawing any distinct between the operation
and effect of the due-process clause as it applies to the individual states and to the national
government of the United States. The question here involved is essentially not one of due-
process, but of the power of the Philippine Government to tax. If that power be conceded,
the guaranty of due process cannot certainly be invoked to frustrate it, unless the law
involved is challenged, which is not, on considerations repugnant to such guaranty of due
process of that of the equal protection of the laws, as, when the law is alleged to be
arbitrary, oppressive or discriminatory.
Originally, the settled law in the United States is that intangibles have only one situs for the
purpose of inheritance tax, and that such situs is in the domicile of the decedent at the time
of his death. But this rule has, of late, been relaxed. The maxim mobilia sequuntur
personam, upon which the rule rests, has been described as a mere "fiction of law having
its origin in consideration of general convenience and public policy, and cannot be applied
to limit or control the right of the state to tax property within its jurisdiction" (State Board
of Assessors vs. Comptoir National D'Escompte, 191 U. S., 388, 403, 404), and must "yield
to established fact of legal ownership, actual presence and control elsewhere, and cannot
be applied if to do so result in inescapable and patent injustice." (Safe Deposit & Trust
Co. vs. Virginia, 280 U. S., 83, 91-92) There is thus a marked shift from artificial postulates
of law, formulated for reasons of convenience, to the actualities of each case.
An examination of the adjudged cases will disclose that the relaxation of the original rule
rests on either of two fundamental considerations: (1) upon the recognition of the inherent
power of each government to tax persons, properties and rights within its jurisdiction and
enjoying, thus, the protection of its laws; and (2) upon the principle that as o intangibles, a
single location in space is hardly possible, considering the multiple, distinct relationships
which may be entered into with respect thereto. It is on the basis of the first consideration
that the case of Burnet vs.Brooks, supra, was decided by the Federal Supreme Court,
sustaining the power of the Government to impose an inheritance tax upon transmission,
by death of a non-resident, of shares of stock in a domestic (America) corporation,
regardless of the situs of their corresponding certificates; and on the basis of the second
consideration, the case of Cury vs. McCanless, supra.
In Burnet vs. Brooks, the court, in disposing of the argument that the imposition of the
federal estate tax is precluded by the due-process clause of the Fifth Amendment, held:
The point, being solely one of jurisdiction to tax, involves none of the other
consideration raised by confiscatory or arbitrary legislation inconsistent with the
fundamental conceptions of justice which are embodied in the due-process clause
34 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
for the protection of life, liberty, and property of all persons — citizens and
friendly aliens alike. Russian Volunteer Fleet vs. United States, 282 U. S., 481, 489;
75 Law ed., 473, 476; 41 S. Ct., 229; Nicholas vs. Coolidge, 274 U. S., 531; 542, 71
Law ed., 1184, 1192; 47 S. Ct., 710; 52 A. L. R., 1081; Heiner vs. Donnon, 285 U.S.,
312, 326; 76 Law ed., 772, 779; 52 S. Ct., 358. If in the instant case the Federal
Government had jurisdiction to impose the tax, there is manifestly no ground for
assailing it. Knowlton vs. Moore, 178 U.S., 41, 109; 44 Law. ed., 969, 996; 20 S. Ct.,
747; MaGray vs. United States, 195 U.S., 27, 61; 49 Law. ed., 78; 97; 24 S. Ct., 769;
1 Ann. Cas., 561; Flint vs. Stone Tracy Co., 220 U.S., 107, 153, 154; 55 Law. ed.,
389, 414, 415; 31 S. Ct., 342; Ann. Cas., 1912B, 1312; Brushaber vs. Union p. R.
Co., 240 U.S., 1, 24; 60 Law. ed., 493, 504; 36 S. Ct., 236; L. R. A., 1917 D; 414, Ann.
Cas, 1917B, 713; United States vs. Doremus, 249 U. S., 86, 93; 63 Law. ed., 439,
496; 39 S. Ct., 214. (Emphasis ours.)
And, in sustaining the power of the Federal Government to tax properties within its
borders, wherever its owner may have been domiciled at the time of his death, the court
ruled:
. . . There does not appear, a priori, to be anything contrary to the principles of
international law, or hurtful to the polity of nations, in a State's taxing property
physically situated within its borders, wherever its owner may have been
domiciled at the time of his death. . . .
As jurisdiction may exist in more than one government, that is, jurisdiction based
on distinct grounds — the citizenship of the owner, his domicile, the source of
income, the situs of the property — efforts have been made to preclude multiple
taxation through the negotiation of appropriate international conventions. These
endeavors, however, have proceeded upon express or implied recognition, and
not in denial, of the sovereign taxing power as exerted by governments in the
exercise of jurisdiction upon any one of these grounds. . . . (See pages 396-397;
399.)
In Curry vs. McCanless, supra, the court, in deciding the question of whether the States of
Alabama and Tennessee may each constitutionally impose death taxes upon the transfer of
an interest in intangibles held in trust by an Alabama trustee but passing under the will of
a beneficiary decedent domiciles in Tennessee, sustained the power of each State to
impose the tax. In arriving at this conclusion, the court made the following observations:
In cases where the owner of intangibles confines his activity to the place of his
domicile it has been found convenient to substitute a rule for a reason, cf. New
York ex rel., Cohn vs. Graves, 300 U.S., 308, 313; 81 Law. ed., 666, 670; 57 S. Ct.,
466; 108 A. L. R., 721; First Bank Stock Corp. vs. Minnesota, 301 U. S., 234, 241; 81
Law. ed., 1061, 1065; 57 S. Ct., 677; 113 A. L. R., 228, by saying that his intangibles
are taxed at their situs and not elsewhere, or perhaps less artificially, by invoking
the maxim mobilia sequuntur personam. Blodgett vs. Silberman, 277 U.S., 1; 72
Law. ed., 749; S. Ct., 410, supra; Baldwin vs. Missouri, 281 U. S., 568; 74 Law. ed.,
1056; 50 S. Ct., 436; 72 A. L. R., 1303, supra, which means only that it is the
identify owner at his domicile which gives jurisdiction to tax. But when the
taxpayer extends his activities with respect to his intangibles, so as to avail
himself of the protection and benefit of the laws of another state, in such a way as
to bring his person or properly within the reach of the tax gatherer there, the
reason for a single place of taxation no longer obtains, and the rule even workable
substitute for the reasons may exist in any particular case to support the
constitutional power of each state concerned to tax. Whether we regard the right
of a state to tax as founded on power over the object taxed, as declared by Chief
Justice Marshall in McCulloch vs. Maryland, 4 Wheat., 316; 4 Law. ed., 579, supra,
 through dominion over tangibles or over persons whose relationships are source
of intangibles rights, or on the benefit and protection conferred by the taxing
sovereignty, or both, it is undeniable that the state of domicile is not deprived, by
the taxpayer's activities elsewhere, of its constitutional jurisdiction to tax, and
consequently that there are many circumstances in which more than one state
may have jurisdiction to impose a tax and measure it by some or all of the
taxpayer's intangibles. Shares or corporate stock be taxed at the domicile of the
shareholder and also at that of the corporation which the taxing state has created
and controls; and income may be taxed both by the state where it is earned and
by the state of the recipient's domicile. protection, benefit, and power over the
subject matter are not confined to either state. . . .(p. 1347-1349.)
. . . We find it impossible to say that taxation of intangibles can be reduced in
every case to the mere mechanical operation of locating at a single place, and
there taxing, every legal interest growing out of all the complex legal
relationships which may be entered into between persons. This is the case
because in point of actuality those interests may be too diverse in their
relationships to various taxing jurisdictions to admit of unitary treatment
without discarding modes of taxation long accepted and applied before the
Fourteen Amendment was adopted, and still recognized by this Court as valid. (P.
1351.)
We need not belabor the doctrines of the foregoing cases. We believe, and so hold, that the
issue here involved is controlled by those doctrines. In the instant case, the actual situs of
the shares of stock is in the Philippines, the corporation being domiciled therein. And
besides, the certificates of stock have remained in this country up to the time when the
deceased died in California, and they were in possession of one Syrena McKee, secretary of
the Benguet Consolidated Mining Company, to whom they have been delivered and
indorsed in blank. This indorsement gave Syrena McKee the right to vote the certificates at
the general meetings of the stockholders, to collect dividends, and dispose of the shares in
the manner she may deem fit, without prejudice to her liability to the owner for violation
of instructions. For all practical purposes, then, Syrena McKee had the legal title to the
certificates of stock held in trust for the true owner thereof. In other words, the owner
residing in California has extended here her activities with respect to her intangibles so as
to avail herself of the protection and benefit of the Philippine laws. Accordingly, the
jurisdiction of the Philippine Government to tax must be upheld.
Judgment is affirmed, with costs against petitioner-appellant.
G.R. No. 91332 July 16, 1993
PHILIP MORRIS, INC., BENSON & HEDGES (CANADA), INC., AND FABRIQUES OF TABAC
REUNIES, S.A., petitioners
vs.
THE COURT OF APPEALS AND FORTUNE TOBACCO CORPORATION, respondents.
MELO, J.:
In the petition before us, petitioners Philip Morris, Inc., Benson and Hedges (Canada), Inc.,
and Fabriques of Tabac Reunies, S.A., are ascribing whimsical exercise of the faculty
conferred upon magistrates by Section 6, Rule 58 of the Revised Rules of Court when
35 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
respondent Court of Appeals lifted the writ of preliminary injunction it earlier had issued
against Fortune Tobacco Corporation, herein private respondent, from manufacturing and
selling "MARK" cigarettes in the local market.
Banking on the thesis that petitioners' respective symbols "MARK VII", "MARK TEN", and
"LARK", also for cigarettes, must be protected against unauthorized appropriation,
petitioners twice solicited the ancillary writ in the course the main suit for infringement
but the court of origin was unpersuaded.
Before we proceed to the generative facts of the case at bar, it must be emphasized that
resolution of the issue on the propriety of lifting the writ of preliminary injunction should
not be construed as a prejudgment of the suit below. Aware of the fact that the discussion
we are about to enter into involves a mere interlocutory order, a discourse on the aspect
infringement must thus be avoided. With these caveat, we shall now shift our attention to
the events which spawned the controversy.
As averred in the initial pleading, Philip Morris, Incorporated is a corporation organized
under the laws of the State of Virginia, United States of America, and does business at 100
Park Avenue, New York, New York, United States of America. The two other plaintiff foreign
corporations, which are wholly-owned subsidiaries of Philip Morris, Inc., are similarly not
doing business in the Philippines but are suing on an isolated transaction. As registered
owners "MARK VII", "MARK TEN", and "LARK" per certificates of registration issued by the
Philippine Patent Office on April 26, 1973, May 28, 1964, and March 25, 1964, plaintiffs-
petitioners asserted that defendant Fortune Tobacco Corporation has no right to
manufacture and sell cigarettes bearing the allegedly identical or confusingly similar
trademark "MARK" in contravention of Section 22 of the Trademark Law, and should,
therefore, be precluded during the pendency of the case from performing the acts
complained of via a preliminary injunction (p. 75, Court of Appeals Rollo in AC-G.R. SP No.
13132).
For its part, Fortune Tobacco Corporation admitted petitioners' certificates of registration
with the Philippine Patent Office subject to the affirmative and special defense on
misjoinder of party plaintiffs. Private respondent alleged further that it has been
authorized by the Bureau of Internal Revenue to manufacture and sell cigarettes bearing
the trademark "MARK", and that "MARK" is a common word which cannot be exclusively
appropriated (p.158, Court of Appeals Rollo in A.C.-G.R. SP No. 13132). On March 28, 1983,
petitioners' prayer for preliminary injunction was denied by the Presiding Judge of Branch
166 of the Regional Trial Court of the National Capital Judicial Region stationed at Pasig,
premised upon the following propositions:
Plaintiffs admit in paragraph 2 of the complaint that ". . . they are
not doing business in the Philippines and are suing on an isolated
transaction . . .". This simply means that they are not engaged in the sale,
manufacture, importation, expor[t]ation and advertisement of their
cigarette products in the Philippines. With this admission, defendant
asks: ". . . how could defendant's "MARK" cigarettes cause the former
"irreparable damage" within the territorial limits of the Philippines?"
Plaintiffs maintain that since their trademarks are entitled to protection
by treaty obligation under Article 2 of the Paris Convention of which the
Philippines is a member and ratified by Resolution No. 69 of the Senate
 of the Philippines and as such, have the force and effect of law under
Section 12, Article XVII of our Constitution and since this is an action for
a violation or infringement of a trademark or trade name by defendant,
such mere allegation is sufficient even in the absence of proof to support
it. To the mind of the Court, precisely, this is the issue in the main case to
determine whether or not there has been an invasion of plaintiffs' right
of property to such trademark or trade name. This claim of plaintiffs is
disputed by defendant in paragraphs 6 and 7 of the Answer; hence, this
cannot be made a basis for the issuance of a writ of preliminary
injunction.
There is no dispute that the First Plaintiff is the registered owner of
trademar[k] "MARK VII" with Certificate of Registration No. 18723,
dated April 26,1973 while the Second Plaintiff is likewise the registered
owner of trademark "MARK TEN" under Certificate of Registration No.
11147, dated May 28, 1963 and the Third Plaintiff is a registrant of
trademark "LARK" as shown by Certificate of Registration No. 10953
dated March 23, 1964, in addition to a pending application for
registration of trademark "MARK VII" filed on November 21, 1980
under Application Serial No. 43243, all in the Philippine Patent Office. In
same the manner, defendant has a pending application for registration
of the trademark "LARK" cigarettes with the Philippine Patent Office
under Application Serial No. 44008. Defendant contends that since
plaintiffs are "not doing business in the Philippines" coupled the fact
that the Director of Patents has not denied their pending application for
registration of its trademark "MARK", the grant of a writ of preliminary
injunction is premature. Plaintiffs contend that this act(s) of defendant
is but a subterfuge to give semblance of good faith intended to deceive
the public and patronizers into buying the products and create the
impression that defendant's goods are identical with or come from the
same source as plaintiffs' products or that the defendant is a licensee of
plaintiffs when in truth and in fact the former is not. But the fact
remains that with its pending application, defendant has embarked in
the manufacturing, selling, distributing and advertising of "MARK"
cigarettes. The question of good faith or bad faith on the part of
defendant are matters which are evidentiary in character which have to
be proven during the hearing on the merits; hence, until and unless the
Director of Patents has denied defendant's application, the Court is of
the opinion and so holds that issuance a writ of preliminary injunction
would not lie.
There is no question that defendant has been authorized by the Bureau
of Internal Revenue to manufacture cigarettes bearing the trademark
"MARK" (Letter of Ruben B. Ancheta, Acting Commissioner addressed to
Fortune Tobacco Corporation dated April 3, 1981, marked as Annex "A",
defendant's "OPPOSITION, etc." dated September 24, 1982). However,
this authority is qualified . . . that the said brands have been accepted
and registered by the Patent Office not later than six (6) months after
you have been manufacturing the cigarettes and placed the same in the
market." However, this grant ". . . does not give you protection against
any person or entity whose rights may be prejudiced by infringement or
36 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
unfair competition in relation to your indicated trademarks/brands". As
aforestated, the registration of defendant's application is still pending in
the Philippine Patent Office.
It has been repeatedly held in this jurisdiction as well as in the United
States that the right or title of the applicant for injunction remedy must
be clear and free from doubt. Because of the disastrous and painful
effects of an injunction, Courts should be extremely careful, cautious
and conscionable in the exercise of its discretion consistent with justice,
equity and fair play.
There is no power the exercise of which is more
delicate which requires greater caution, deliberation,
and sound discretion, or (which is) more dangerous
in a doubtful case than the issuing of an injunction; it
is the strong arm of equity that never ought to be
extended unless to cases of great injury, where courts
of law cannot afford an adequate or commensurate
remedy in damages. The right must be clear, the
injury impending or threatened, so as to be averted
only by the protecting preventive process of
injunction. (Bonaparte v. Camden, etc. N. Co., 3 F. Cas.
No. 1, 617, Baldw. 205, 217.)
Courts of equity constantly decline to lay down any
rule which injunction shall be granted or withheld.
There is wisdom in this course, for it is impossible to
foresee all exigencies of society which may require
their aid to protect rights and restrain wrongs.
(Merced M. Go v. Freemont, 7 Gal. 317, 321; 68 Am.
Dec. 262.)
It is the strong arm of the court; and to render its
operation begin and useful, it must be exercised with
great discretion, and when necessary requires it.
(Attorney-General v. Utica Inc. Co., P. John Ch. (N.Y.)
371.)
Having taken a panoramic view of the position[s] of both parties as
viewed from their pleadings, the picture reduced to its minimum size
would be this: At the crossroads are the two (2) contending parties,
plaintiffs vigorously asserting the rights granted by law, treaty and
jurisprudence to restrain defendant in its activities of manufacturing,
selling, distributing and advertising its "MARK" cigarettes and now
comes defendant who countered and refused to be restrained claiming
that it has been authorized temporarily by the Bureau of Internal
Revenue under certain conditions to do so as aforestated coupled by its
pending application for registration of trademark "MARK" in the
Philippine Patent Office. This circumstance in itself has created a
 dispute between the parties which to the mind of the Court does not
warrant the issuance of a writ of preliminary injunction.
It is well-settled principle that courts of equity will
refuse an application for the injunctive remedy
where the principle of law on which the right to
preliminary injunction rests is disputed and will
admit of doubt, without a decision of the court of law
establishing such principle although satisfied as to
what is a correct conclusion of law upon the facts.
The fact, however, that there is no such dispute or
conflict does not in itself constitute a justifiable
ground for the court to refuse an application for the
injunctive relief. (Hackensack Impr. Commn. v. New
Jersey Midland P. Co., 22 N.J. Eg. 94.)
Hence, the status quo existing between the parties prior to the filing of
this case should be maintained. For after all, an injunction, without
reference to the parties, should be violent, vicious nor even vindictive.
(pp. 338-341, Rollo in G.R. No. 91332.)
In the process of denying petitioners' subsequent motion for reconsideration of the order
denying issuance of the requested writ, the court of origin took cognizance of the
certification executed on January 30, 1984 by the Philippine Patent Office attesting to the
fact that private respondent's application for registration is still pending appropriate
action. Apart from this communication, what prompted the trial court judge to entertain
the idea of prematurity and untimeliness of petitioners' application for a writ of
preliminary injunction was the letter from the Bureau of Internal Revenue date February 2,
1984 which reads:
MRS. TERESITA GANDIONGCO OLEDAN
Legal Counsel
Fortune Tobacco Corporation
Madam:
In connection with your letter dated January 25, 1984, reiterating your
query as to whether your label approval automatically expires or
becomes null and void after six (6) months if the brand is not accepted
and by the patent office, please be informed that no provision in the Tax
Code or revenue regulation that requires an applicant to comply with
the aforementioned condition order that his label approved will remain
valid and existing.
Based on the document you presented, it shows that registration of this
particular label still pending resolution by the Patent Office. These being
so , you may therefore continue with the production said brand of
cigarette until this Office is officially notified that the question of
ownership of "MARK" brand is finally resolved.(p. 348, Rollo.)
37 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
It appears from the testimony of Atty. Enrique Madarang, Chief of the Trademark Division
of the then Philippine Patent Office that Fortune's application for its trademark is still
pending before said office (p. 311, Rollo).
Petitioners thereafter cited supervening events which supposedly transpired since March
28, 1983, when the trial court first declined issuing a writ of preliminary injunction, that
could alter the results of the case in that Fortune's application had been rejected, nay,
barred by the Philippine Patent Office, and that the application had been forfeited by
abandonment, but the trial court nonetheless denied the second motion for issuance of the
injunctive writ on April 22, 1987, thus:
For all the prolixity of their pleadings and testimonial evidence, the
plaintiffs-movants have fallen far short of the legal requisites that would
justify the grant of the writ of preliminary injunction prayed for. For one,
they did not even bother to establish by competent evidence that the
products supposedly affected adversely by defendant's trademark now
subject of an application for registration with the Philippine Patents
Office, are in actual use in the Philippines. For another, they
concentrated their fire on the alleged abandonment and forfeiture by
defendant of said application for registration.
The Court cannot help but take note of the fact that in their complaint
plaintiffs included a prayer for issuance preliminary injunction. The
petition was duly heard, and thereafter matter was assiduously
discussed lengthily and resolved against plaintiffs in a 15-page Order
issued by the undersigned's predecessor on March 28, 1983. Plaintiffs'
motion for reconsideration was denied in another well-argued 8 page
Order issued on April 5, 1984,, and the matter was made to rest.
However, on the strength of supposed changes in the material facts of
this case, plaintiffs came up with the present motion citing therein the
said changes which are: that defendant's application had been rejected
and barred by the Philippine Patents Office, and that said application
has been deemed abandoned and forfeited. But defendant has refiled
the same.
Plaintiffs' arguments in support of the present motion appear to be a
mere rehash of their stand in the first above-mentioned petition which
has already been ruled upon adversely against them. Granting that the
alleged changes in the material facts are sufficient grounds for a motion
seeking a favorable grant of what has already been denied, this motion
just the same cannot prosper.
In the first place there is no proof whatsoever that any of plaintiffs'
products which they seek to protect from any adverse effect of the
trademark applied for by defendant, is in actual use and available for
commercial purposes anywhere in the Philippines. Secondly as shown
by plaintiffs' own evidence furnished by no less than the chief of
Trademarks Division of the Philippine Patent Office, Atty. Enrique
 Madarang, the abandonment of an application is of no moment, for the
same can always be refiled. He said there is no specific provision in the
rules prohibiting such refiling (TSN, November 21, 1986, pp. 60 & 64,
Raviera). In fact, according to Madarang, the refiled application of
defendant is now pending before the Patents Office. Hence, it appears
that the motion has no leg to stand on. (pp. 350-351, Rolloin G. R. No.
91332.)
Confronted with this rebuff, petitioners filed a previous petition for certiorari before the
Court, docketed as G.R. No. 78141, but the petition was referred to the Court of Appeals.
The Court of Appeals initially issued a resolution which set aside the court of origin's order
dated April 22, 1987, and granted the issuance of a writ of preliminary injunction enjoining
Fortune, its agents, employees, and representatives, from manufacturing, selling, and
advertising "MARK" cigarettes. The late Justice Cacdac, speaking for the First Division of
the Court of Appeals in CA-G.R. SP No. 13132, remarked:
There is no dispute that petitioners are the registered owners of the
trademarks for cigarettes "MARK VII", "MARK TEN", and "LARK".
(Annexes B, C and D, petition). As found and reiterated by the Philippine
Patent Office in two (2) official communications dated April 6, 1983 and
January 24, 1984, the trademark "MARK" is "confusingly similar" to the
trademarks of petitioners, hence registration was barred under Sec. 4
(d) of Rep. Act. No. 166, as amended (pp. 106, 139, SCA rollo). In a third
official communication dated April 8, 1986, the trademark application
of private respondent for the "MARK" under Serial No. 44008 filed on
February 13, 1981 which was declared abandoned as of February 16,
1986, is now deemed forfeited, there being no revival made pursuant to
Rule 98 of the Revised Rules of Practitioners in Trademark Cases." (p.
107, CA rollo). The foregoing documents or communications mentioned
by petitioners as "the changes in material facts which occurred after
March 28, 1983", are not also questioned by respondents.
Pitted against the petitioners' documentary evidence, respondents
pointed to (1) the letter dated January 30, 1979 (p. 137, CA rollo) of
Conrado P. Diaz, then Acting Commissioner of Internal Revenue,
temporarily granting the request of private respondent for a permit to
manufacture two (2) new brands of cigarettes one of which is brand
"MARK" filter-type blend, and (2) the certification dated September 26,
1986 of Cesar G. Sandico, Director of Patents (p. 138, CA rollo) issued
upon the written request of private respondents' counsel dated
September 17, 1986 attesting that the records of his office would show
that the "trademark MARK" for cigarettes is now the subject of a
pending application under Serial No. 59872 filed on September 16,
1986.
Private respondent's documentary evidence provides the reasons
neutralizing or weakening their probative values. The penultimate
paragraph of Commissioner Diaz' letter of authority reads:
38 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
Please be informed further that the authority herein
granted does not give you protection against any
person or entity whose rights may be prejudiced by
infringement or unfair competition in relation to
your above-named brands/trademark.
while Director Sandico's certification contained similar conditions as
follows:
This Certification, however, does not give protection
as against any person or entity whose right may be
prejudiced by infringement or unfair competition in
relation to the aforesaid trademark nor the right to
register if contrary to the provisions of the
Trademark Law, Rep. Act No. 166 as amended and
the Revised Rules of Practice in Trademark Cases.
The temporary permit to manufacture under the trademark "MARK" for
cigarettes and the acceptance of the second application filed by private
respondent in the height of their dispute in the main case were
evidently made subject to the outcome of the said main case or Civil
Case No. 47374 of the respondent Court. Thus, the Court has not missed
to note the absence of a mention in the Sandico letter of September 26,
1986 of any reference to the pendency of the instant action filed on
August 18, 1982. We believe and hold that petitioners have shown
a prima facie case for the issuance of the writ of prohibitory injunction
for the purposes stated in their complaint and subsequent motions for
the issuance of the prohibitory writ. (Buayan Cattle Co. vs. Quintillan,
125 SCRA 276)
The requisites for the granting of preliminary injunction are the
existence of the right protected and the facts against which the
injunction is to be directed as violative of said right. (Buayan Cattle Co.
vs. Quintillan, supra; Ortigas & Co. vs. Ruiz, 148 SCRA 326). It is a writ
framed according to the circumstances of the case commanding an act
which the Court regards as essential to justice and restraining an act it
deems contrary to equity and good conscience (Rosauro vs. Cuneta, 151
SCRA 570). If it is not issued, the defendant may, before final judgment,
do or continue the doing of the act which the plaintiff asks the court to
restrain, and thus make ineffectual the final judgment rendered
afterwards granting the relief sought by the plaintiff (Calo vs. Roldan, 76
Phil. 445). Generally, its grant or denial rests upon the sound discretion
of the Court except on a clear case of abuse (Belish Investment &
Finance Co. vs. State House, 151 SCRA 636). Petitioners' right of
exclusivity to their registered trademarks being clear and beyond
question, the respondent court's denial of the prohibitive writ
constituted excess of jurisdiction and grave abuse discretion. If the
lower court does not grant preliminary injunction, the appellate court
may grant the same. (Service Specialists, Inc. vs. Sheriff of Manila, 145
SCRA 139). (pp. 165-167, Rollo in G.R. No. 91332.)
After private respondent Fortune's motion for reconsideration was rejected, a motion to
dissolve the disputed writ of preliminary injunction with offer to post a counterbond was
submitted which was favorably acted upon by the Court of Appeals, premised on the filing
of a sufficient counterbond to answer for whatever perjuicio petitioners may suffer as a
result thereof, to wit:
The private respondent seeks to dissolve the preliminary injunction
previously granted by this Court with an offer to file a counterbond. It
was pointed out in its supplemental motion that lots of workers
employed will be laid off as a consequence of the injunction and that the
government will stand to lose the amount of specific taxes being paid by
the
private respondent. The specific taxes being paid is the sum total of
P120,120, 295.98 from January to July 1989.
The petitioners argued in their comment that the damages caused by
the infringement of their trademark as well as the goodwill it generates
are incapable of pecuniary estimation and monetary evaluation and not
even the counterbond could adequately compensate for the damages it
will incur as a result of the dissolution of the bond. In addition, the
petitioner further argued that doing business in the Philippines is not
relevant as the injunction pertains to an infringement of a trademark
right.
After a thorough re-examination of the issues involved and the
arguments advanced by both parties in the offer to file a counterbond
and the opposition thereto, WE believe that there are sound and cogent
reasons for US to grant the dissolution of the writ of preliminary
injunction by the offer of the private respondent to put up a
counterbond to answer for whatever damages the petitioner may suffer
as a consequence of the dissolution of the preliminary injunction.
The petitioner will not be prejudiced nor stand to suffer irreparably as a
consequence of the lifting of the preliminary injunction considering that
they are not actually engaged in the manufacture of the cigarettes with
the trademark in question and the filing of the counterbond will amply
answer for such damages.
While the rule is that an offer of a counterbond does not operate to
dissolve an injunction previously granted, nevertheless, it is equally true
that an injunction could be dissolved only upon good and valid grounds
subject to the sound discretion of the court. As WE have maintained the
view that there are sound and good reasons to lift the preliminary
injunction, the motion to file a counterbond is granted. (pp. 53-
54, Rollo in G.R. No. 91332.)
Petitioners, in turn, filed their own motion for re-examination geared towards reimposition
of the writ of preliminary injunction but to no avail (p. 55, Rollo in G.R. No. 91332).
39 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
Hence, the instant petition casting three aspersions that respondent court gravely abused
its discretion tantamount to excess of jurisdiction when:
I. . . . it required, contrary to law and jurisprudence, that in order that
petitioners may suffer irreparable injury due to the lifting of the
injunction, petitioners should be using actually their registered
trademarks in commerce in the Philippines;
II. . . . it lifted the injunction in violation of section 6 of Rule 58 of the
Rules of Court; and
III. . . . after having found that the trial court had committed grave abuse
of discretion and exceeded its jurisdiction for having refused to issue
the writ of injunction to restrain private respondent's acts that are
contrary to equity and good conscience, it made a complete about face
for legally insufficient grounds and authorized the private respondent to
continue performing the very same acts that it had considered contrary
to equity and good conscience, thereby ignoring not only the mandates
of the Trademark Law, the international commitments of the
Philippines, the judicial admission of private respondent that it will
have no more right to use the trademark "MARK" after the Director of
Patents shall have rejected the application to register it, and the
admonitions of the Supreme Court. (pp. 24-25, Petition; pp. 25-
26, Rollo.)
To sustain a successful prosecution of their suit for infringement, petitioners, as foreign
corporations not engaged in local commerce, rely on section 21-A of the Trademark Law
reading as follows:
Sec. 21-A. Any foreign corporation or juristic person to which a mark or
trade-name has been registered or assigned under this act may bring an
action hereunder for infringement, for unfair competition, or false
designation of origin and false description, whether or not it has been
licensed to do business in the Philippines under Act Numbered
Fourteen hundred and fifty-nine, as amended, otherwise known as the
Corporation Law, at the time it brings complaint: Provided, That the
country of which the said foreign corporation or juristic person is a
citizen or in which it is domiciled, by treaty, convention or law, grants a
similar privilege to corporate or juristic persons of the Philippines. (As
inserted by Sec. 7 of Republic Act No. 638.)
to drive home the point that they are not precluded from initiating a
cause of action in the Philippines on account of the principal perception
that another entity is pirating their symbol without any lawful authority
to do so. Judging from a perusal of the aforequoted Section 21-A, the
conclusion reached by petitioners is certainly correct for the
proposition in support thereof is embedded in the Philippine legal
jurisprudence.
Indeed, it was stressed in General Garments Corporation vs. Director of Patents (41 SCRA 50
[1971]) by then Justice (later Chief Justice) Makalintal that:
Parenthetically, it may be stated that the ruling in the Mentholatum case
was subsequently derogated when Congress, purposely to "counteract
the effects" of said case, enacted Republic Act No. 638, inserting Section
21-A in the Trademark Law, which allows a foreign corporation or
juristic person to bring an action in Philippine courts for infringement
of a mark or tradename, for unfair competition, or false designation of
origin and false description, "whether or not it has been licensed to do
business in the Philippines under Act Numbered Fourteen hundred and
fifty-nine, as amended, otherwise known as the Corporation Law, at the
time it brings complaint."
Petitioner argues that Section 21-A militates against respondent's
capacity to maintain a suit for cancellation, since it requires, before a
foreign corporation may bring an action, that its trademark or
tradename has been registered under the Trademark Law. The
argument misses the essential point in the said provision, which is that
the foreign corporation is allowed thereunder to sue "whether or not it
has been licensed to do business in the Philippines" pursuant to the
Corporation Law (precisely to counteract the effects of the decision in
the Mentholatum case). (at p. 57.)
However, on May, 21, 1984, Section 21-A, the provision under consideration, was qualified
by this Court in La Chemise Lacoste S.A. vs. Fernandez (129 SCRA 373 [1984]), to the effect
that a foreign corporation not doing business in the Philippines may have the right to sue
before Philippine Courts, but existing adjective axioms require that qualifying
circumstances necessary for the assertion of such right should first be affirmatively
pleaded (2 Agbayani Commercial Laws of the Philippines, 1991 Ed., p. 598; 4 Martin,
Philippine Commercial Laws, Rev. Ed., 1986, p. 381). Indeed, it is not sufficient for a foreign
corporation suing under Section 21-A to simply allege its alien origin. Rather, it must
additionally allege its personality to sue. Relative to this condition precedent, it may be
observed that petitioners were not remiss in averring their personality to lodge a
complaint for infringement (p. 75, Rollo in AC-G.R. SP No. 13132) especially so when they
asserted that the main action for infringement is anchored on an isolated transaction (p.
75, Rollo in AC-G.R. SP No. 13132; Atlantic Mutual Ins. Co. vs. Cebu Stevedoring Co., Inc., 17
SCRA 1037 (1966), 1 Regalado, Remedial Law Compendium, Fifth Rev. Ed., 1988, p. 103).
Another point which petitioners considered to be of significant interest, and which they
desire to impress upon us is the protection they enjoy under the Paris Convention of 1965
to which the Philippines is a signatory. Yet, insofar as this discourse is concerned, there is
no necessity to treat the matter with an extensive response because adherence of the
Philippines to the 1965 international covenant due to pact sunt servanda had been
acknowledged in La Chemise (supra at page 390).
Given these confluence of existing laws amidst the cases involving trademarks, there can be
no disagreement to the guiding principle in commercial law that foreign corporations not
engaged in business in the Philippines may maintain a cause of action for infringement
40 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
primarily because of Section 21-A of the Trademark Law when the legal standing to sue is
alleged, which petitioners have done in the case at hand.
In assailing the justification arrived at by respondent court when it recalled the writ of
preliminary injunction, petitioners are of the impression that actual use of their
trademarks in Philippine commercial dealings is not an indispensable element under
Article 2 of the Paris Convention in that:
(2) . . . . no condition as to the possession of a domicile or establishment
in the country where protection is claimed may be required of persons
entitled to the benefits of the Union for the enjoyment of any industrial
property of any industrial property rights. (p. 28, Petition; p. 29, Rollo in
G.R. No. 91332.)
Yet petitioners' perception along this line is nonetheless resolved by Sections 2 and 2-A of
the Trademark Law which speak loudly, about necessity of actual commercial use of the
trademark in the local forum:
Sec. 2. What are registrable. — Trademarks, tradenames and service
marks owned by persons, corporations, partnerships or associations
domiciled in the Philippines and by persons, corporations, partnerships
or associations domiciled in any foreign country may be registered in
accordance with the provisions of this Act; Provided, That said
trademarks, tradenames, or service marks are actually in use in
commerce and services not less than two months in the
Philippines before the time the applications for registration are filed;
And provided, further, That the country of which the applicant for
registration is a citizen grants by law substantially similar privileges to
citizens of the Philippines, and such fact is officially certified, with a
certified true copy of the foreign law translated into the English
language, by the government of the foreign country to the Government
of the Republic of the Philippines. (As amended by R.A. No. 865).
Sec. 2-A. Ownership of trademarks, tradenames and service marks; how
acquired. — Anyone who lawfully produces or deals in merchandise of
any kind or who engages in any lawful business, or who renders any
lawful service in commerce, by actual use thereof in manufacture or
trade, in business,and in the service rendered, may appropriate to his
exclusive use a trademark, a tradename, or a service mark not so
appropriated by another, to distinguish his merchandise, business or
service from the merchandise, business or service of others. The
ownership or possession of a trademark, tradename, service mark,
heretofore or hereafter appropriated, as in this section provided, shall
be recognized and protected in the same manner and to the same extent
as are other property rights known to the law. (As amended by R.A. No.
638). (Kabushi Kaisha Isetan vs. Intermediate Appellate Court, 203
SCRA 583 [1991], at pp. 589-590; emphasis supplied.)
Following universal acquiescence and comity, our municipal law on trademarks regarding
the requirement of actual use in the Philippines must subordinate an international
agreement inasmuch as the apparent clash is being decided by a municipal tribunal
(Mortensen vs. Peters, Great Britain, High Court of Judiciary of Scotland, 1906, 8 Sessions
93; Paras, International Law and World Organization, 1971 Ed., p. 20). Withal, the fact that
international law has been made part of the law of the land does not by any means imply
the primacy of international law over national law in the municipal sphere. Under the
doctrine of incorporation as applied in most countries, rules of international law are given
a standing equal, not superior, to national legislative enactments (Salonga and Yap, Public
International Law, Fourth ed., 1974, p. 16).
The aforequoted basic provisions of our Trademark Law, according to Justice Gutierrez, Jr.,
in Kabushi Kaisha Isetan vs. Intermediate Appellate Court (203 SCRA 583 [1991]), have been
construed in this manner:
A fundamental principle of Philippine Trademark Law is that actual use
in commerce in the Philippines is a pre-requisite to the acquisition of
ownership over a trademark or a tradename.
xxx xxx xxx
These provisions have been interpreted in Sterling Products
International, Inc. v. Farbenfabriken Bayer Actiengesellschaft (27 SCRA
1214 [1969]) in this way:
A rule widely accepted and firmly entrenched
because it has come down through the years is that
actual use in commerce or business is a prerequisite
to the acquisition of the right of ownership over a
trademark.
xxx xxx xxx
. . . Adoption alone of a trademark would not give
exclusive right thereto. Such right grows out of their
actual use. Adoption is not use. One may make
advertisements, issue circulars, give out price lists on
certain goods; but these alone would not give
exclusive right of use. For trademark is a creation of
use. The underlying reason for all these is that
purchasers have come to understand the mark as
indicating the origin of the wares. Flowing from this
is the trader's right to protection in the trade he has
built up and the goodwill he has accumulated from
use of the trademark. . . .
In fact, a prior registrant cannot claim exclusive use of the trademark
unless it uses it in commerce.
41 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
We rule[d] in Pagasa Industrial Corporation v. Court of Appeals (118
SCRA 526 [1982]):
3. The Trademark law is very clear. It requires actual commercial use of
the mark prior to its registration. There is no dispute that respondent
corporation was the first registrant, yet it failed to fully substantiate its
claim that it used in trade or business in the Philippines the subject
mark; it did not present proof to invest it with exclusive, continuous
adoption of the trademark which should consist among others, of
considerable sales since its first use. The invoices (Exhibits 7, 7-a, and 8-
b) submitted by respondent which were dated way back in 1957 show
that the zippers sent to the Philippines were to be used as "samples"
and "of no commercial value". The evidence for respondent must be
clear, definite and free from inconsistencies. (Sy Ching v. Gaw Lui, 44
SCRA 148-149) "Samples" are not for sale and therefore, the fact of
exporting them to the Philippines cannot be considered to be equivalent
to the "use" contemplated by the law. Respondent did not expect income
from such "samples". There were no receipts to establish sale, and no
proof were presented to show that they were subsequently sold in the
Philippines. (Pagasa Industrial Corp. v. Court of Appeals, 118 SCRA 526
[1982]; Emphasis Supplied)
The records show that the petitioner has never conducted any business
in the Philippines. It has never promoted its tradename or trademark in
the Philippines. It is unknown to Filipino except the very few who may
have noticed it while travelling abroad. It has never paid a single
centavo of tax to the Philippine government. Under the law, it has no
right to the remedy it seeks. (at pp. 589-591.)
In other words, petitioners may have the capacity to sue for infringement irrespective of
lack of business activity in the Philippines on account of Section 21-A of the Trademark
Law but the question whether they have an exclusive right over their symbol as to justify
issuance of the controversial writ will depend on actual use of their trademarks in the
Philippines in line with Sections 2 and 2-A of the same law. It is thus incongruous for
petitioners to claim that when a foreign corporation not licensed to do business in
Philippines files a complaint for infringement, the entity need not be actually using its
trademark in commerce in the Philippines. Such a foreign corporation may have the
personality to file a suit for infringement but it may not necessarily be entitled to
protection due to absence of actual use of the emblem in the local market.
Going back to the first assigned error, we can not help but notice the manner the ascription
was framed which carries with it the implied but unwarranted assumption of the existence
of petitioners' right to relief. It must be emphasized that this aspect of exclusive dominion
to the trademarks, together with the corollary allegation of irreparable injury, has yet to be
established by petitioners by the requisite quantum of evidence in civil cases. It cannot be
denied that our reluctance to issue a writ of preliminary injunction is due to judicial
deference to the lower courts, involved as there is mere interlocutory order (Villarosa vs.
Teodoro, Sr., 100 Phil. 25 [1956]). In point of adjective law, the petition has its roots on a
remedial measure which is but ancillary to the main action for infringement still pending
factual determination before the court of origin. It is virtually needless to stress the
obvious reality that critical facts in an infringement case are not before us more so when
even Justice Feliciano's opinion observes that "the evidence is scanty" and that petitioners
"have yet to submit copies or photographs of their registered marks as used in cigarettes"
while private respondent has not, for its part, "submitted the actual labels or packaging
materials used in selling its "Mark" cigarettes." Petitioners therefore, may not be permitted
to presume a given state of facts on their so called right to the trademarks which could be
subjected to irreparable injury and in the process, suggest the fact of infringement. Such a
ploy would practically place the cart ahead of the horse. To our mind, what appears to be
the insurmountable barrier to petitioners' portrayal of whimsical exercise of discretion by
the Court of Appeals is the well-taken remark of said court that:
The petitioner[s] will not be prejudiced nor stand to suffer irreparably
as a consequence of the lifting of the preliminary injunction considering
that they are not actually engaged in the manufacture of the cigarettes
with the trademark in question and the filing of the counterbond will
amply answer for such damages. (p. 54. Rollo in G.R. No. 91332.)
More telling are the allegations of petitioners in their complaint (p. 319, Rollo G.R. No.
91332) as well as in the very petition filed with this Court (p. 2, Rollo in G.R. No. 91332)
indicating that they are not doing business in the Philippines, for these frank
representations are inconsistent and incongruent with any pretense of a right which can
breached (Article 1431, New Civil Code; Section 4, Rule 129; Section 3, Rule 58, Revised
Rules of Court). Indeed, to be entitled to an injunctive writ, petitioner must show that there
exists a right to be protected and that the facts against which injunction is directed are
violative of said right (Searth Commodities Corporation vs. Court of Appeals, 207 SCRA
622 [1992]). It may be added in this connection that albeit petitioners are holders of
certificate of registration in the Philippines of their symbols as admitted by private
respondent, the fact of exclusive ownership cannot be made to rest solely on these
documents since dominion over trademarks is not acquired by the mere fact of registration
alone and does not perfect a trademark right (Unno Commercial Enterprises, Inc. vs.
General Milling Corporation, 120 SCRA 804 [1983]).
Even if we disregard the candid statements of petitioners anent the absence of business
activity here and rely on the remaining statements of the complaint below, still, when these
averments are juxtaposed with the denials and propositions of the answer submitted by
private respondent, the supposed right of petitioners to the symbol have thereby been
controverted. This is not to say, however, that the manner the complaint was traversed by
the answer is sufficient to tilt the scales of justice in favor of private respondent. Far from
it. What we are simply conveying is another basic tenet in remedial law that before
injunctive relief may properly issue, complainant's right or title must be undisputed and
demonstrated on the strength of one's own title to such a degree as to unquestionably
exclude dark clouds of doubt, rather than on the weakness of the adversary's evidence,
inasmuch as the possibility of irreparable damage, without prior proof of transgression of
an actual existing right, is no ground for injunction being mere damnum absque
injuria (Talisay-Silay Milling Co., Inc. vs. CFI of Negros Occidental, 42 SCRA 577 [1971];
Francisco, Rules of Court, Second ed., 1985, p. 225; 3 Martin, Rules of Court, 1986 ed., p.
82).
On the economic repercussion of this case, we are extremely bothered by the thought of
having to participate in throwing into the streets Filipino workers engaged in the
42 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
manufacture and sale of private respondent's "MARK" cigarettes who might be retrenched
and forced to join the ranks of the many unemployed and unproductive as a result of the
issuance of a simple writ of preliminary injunction and this, during the pendency of the
case before the trial court, not to mention the diminution of tax revenues represented to be
close to a quarter million pesos annually. On the other hand, if the status quo is maintained,
there will be no damage that would be suffered by petitioners inasmuch as they are not
doing business in the Philippines.
With reference to the second and third issues raised by petitioners on the lifting of the writ
of preliminary injunction, it cannot be gainsaid that respondent court acted well within its
prerogatives under Section 6, Rule 58 of the Revised Rules of Court:
Sec. 6. Grounds for objection to, or for motion of dissolution of
injunction. — The injunction may be refused or, if granted ex parte, may
be dissolved, upon the insufficiency of the complaint as shown by the
complaint itself, with or without notice to the adverse party. It may also
be refused or dissolved on other grounds upon affidavits on the part of
the defendants which may be opposed by the plaintiff also by affidavits.
It may further be refused or, if granted, may be dissolved, if it appears
after hearing that although the plaintiff is entitled to the injunction, the
issuance or continuance thereof, as the case may be, would cause great
damage to the defendant while the plaintiff can be fully compensated
for such damages as he may suffer, and the defendant files a bond in an
amount fixed by the judge conditioned that he will pay all damages
which the plaintiff may suffer by the refusal or the dissolution of the
injunction. If it appears that the extent of the preliminary injunction
granted is too great, it must be modified.
Under the foregoing rule, injunction may be refused, or, if granted, may be dissolved, on the
following instances:
(1) If there is insufficiency of the complaint as shown by the allegations
therein. Refusal or dissolution may be granted in this case with or
without notice to the adverse party.
(2) If it appears after hearing that although the plaintiff is entitled to the
injunction, the issuance or continuance thereof would cause great
damage to the defendant, while the plaintiff can be fully compensated
for such damages as he may suffer. The defendant, in this case, must file
a bond in an amount fixed by the judge conditioned that he will pay all
damages which plaintiff may suffer by the refusal or the dissolution of
the injunction.
(3) On the other grounds upon affidavits on the part of the defendant
which may be opposed by the plaintiff also affidavits.
Modification of the injunction may also be ordered by the court if it
appears that the extent of the preliminary injunction granted is too
 great. (3 Martin, Rules of Court, 1986 ed., p. 99; Francisco, supra, at p.
268.)
In view of the explicit representation of petitioners in the complaint that they are not
engaged in business in the Philippines, it inevitably follows that no conceivable damage
can be suffered by them not to mention the foremost consideration heretofore discussed
on the absence of their "right" to be protected. At any rate, and assuming in gratia
argumenti that respondent court erroneously lifted the writ it previously issued, the same
may be cured by appeal and not in the form of a petition for certiorari (Clark vs. Philippine
Ready Mix Concrete Co., 88 Phil. 460 [1951]). Verily, and mindful of the rule that a writ of
preliminary injunction is an interlocutory order which is always under the control of the
court before final judgment, petitioners' criticism must fall flat on the ground, so to speak,
more so when extinction of the previously issued writ can even be made without previous
notice to the adverse party and without a hearing (Caluya vs. Ramos, 79 Phil. 640 [1974]; 3
Moran, Rules of Court, 1970 ed., p. 81).
WHEREFORE, the petition is hereby DISMISSED and the Resolutions of the Court of
Appeals dated September 14, 1989 and November 29, 1989 are hereby AFFIRMED.
G.R. No. 154342 July 14, 2004
MIGHTY CORPORATION and LA CAMPANA FABRICA DE TABACO, INC., petitioner,
vs.
E. & J. GALLO WINERY and THE ANDRESONS GROUP, INC., respondents.
CORONA, J.:
In this petition for review on certiorari under Rule 45, petitioners Mighty Corporation and
La Campana Fabrica de Tabaco, Inc. (La Campana) seek to annul, reverse and set aside: (a)
the November 15, 2001 decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 65175
affirming the November 26, 1998 decision, 2 as modified by the June 24, 1999 order, 3 of the
Regional Trial Court of Makati City, Branch 57 (Makati RTC) in Civil Case No. 93-850, which
held petitioners liable for, and permanently enjoined them from, committing trademark
infringement and unfair competition, and which ordered them to pay damages to
respondents E. & J. Gallo Winery (Gallo Winery) and The Andresons Group, Inc.
(Andresons); (b) the July 11, 2002 CA resolution denying their motion for
reconsideration4and (c) the aforesaid Makati RTC decision itself.
43 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
I.
The Factual Background
Respondent Gallo Winery is a foreign corporation not doing business in the Philippines but
organized and existing under the laws of the State of California, United States of America
(U.S.), where all its wineries are located. Gallo Winery produces different kinds of wines
and brandy products and sells them in many countries under different registered
trademarks, including the GALLO and ERNEST & JULIO GALLO wine trademarks.
Respondent domestic corporation, Andresons, has been Gallo Winery’s exclusive wine
importer and distributor in the Philippines since 1991, selling these products in its own
name and for its own account.5
Gallo Winery’s GALLO wine trademark was registered in the principal register of the
Philippine Patent Office (now Intellectual Property Office) on November 16, 1971 under
Certificate of Registration No. 17021 which was renewed on November 16, 1991 for
another 20 years.6 Gallo Winery also applied for registration of its ERNEST & JULIO GALLO
wine trademark on October 11, 1990 under Application Serial No. 901011-00073599-PN
but the records do not disclose if it was ever approved by the Director of Patents. 7
On the other hand, petitioners Mighty Corporation and La Campana and their sister
company, Tobacco Industries of the Philippines (Tobacco Industries), are engaged in the
cultivation, manufacture, distribution and sale of tobacco products for which they have
been using the GALLO cigarette trademark since 1973. 8
The Bureau of Internal Revenue (BIR) approved Tobacco Industries’ use of GALLO 100’s
cigarette mark on September 14, 1973 and GALLO filter cigarette mark on March 26, 1976,
both for the manufacture and sale of its cigarette products. In 1976, Tobacco Industries
filed its manufacturer’s sworn statement as basis for BIR’s collection of specific tax on
GALLO cigarettes.9
On February 5, 1974, Tobacco Industries applied for, but eventually did not pursue, the
registration of the GALLO cigarette trademark in the principal register of the then
Philippine Patent Office.10
In May 1984, Tobacco Industries assigned the GALLO cigarette trademark to La Campana
which, on July 16, 1985, applied for trademark registration in the Philippine Patent
Office.11 On July 17, 1985, the National Library issued Certificate of Copyright Registration
No. 5834 for La Campana’s lifetime copyright claim over GALLO cigarette labels. 12
Subsequently, La Campana authorized Mighty Corporation to manufacture and sell
cigarettes bearing the GALLO trademark. 13 BIR approved Mighty Corporation’s use of
GALLO 100’s cigarette brand, under licensing agreement with Tobacco Industries, on May
18, 1988, and GALLO SPECIAL MENTHOL 100’s cigarette brand on April 3, 1989. 14
Petitioners claim that GALLO cigarettes have been sold in the Philippines since 1973,
initially by Tobacco Industries, then by La Campana and finally by Mighty Corporation. 15
On the other hand, although the GALLO wine trademark was registered in the Philippines
in 1971, respondents claim that they first introduced and sold the GALLO and ERNEST &
JULIO GALLO wines in the Philippines circa1974 within the then U.S. military facilities only.
By 1979, they had expanded their Philippine market through authorized distributors and
independent outlets.16
Respondents claim that they first learned about the existence of GALLO cigarettes in the
latter part of 1992 when an Andresons employee saw such cigarettes on display with
GALLO wines in a Davao supermarket wine cellar section.17 Forthwith, respondents sent a
demand letter to petitioners asking them to stop using the GALLO trademark, to no avail.
II.
The Legal Dispute
On March 12, 1993, respondents sued petitioners in the Makati RTC for trademark and
tradename infringement and unfair competition, with a prayer for damages and
preliminary injunction.
Respondents charged petitioners with violating Article 6 bis of the Paris Convention for the
Protection of Industrial Property (Paris Convention) 18 and RA 166 (Trademark
Law),19 specifically, Sections 22 and 23 (for trademark infringement), 20 29 and 3021 (for
unfair competition and false designation of origin) and 37 (for tradename
infringement).22 They claimed that petitioners adopted the GALLO trademark to ride on
Gallo Winery’s GALLO and ERNEST & JULIO GALLO trademarks’ established reputation
and popularity, thus causing confusion, deception and mistake on the part of the
purchasing public who had always associated GALLO and ERNEST & JULIO GALLO
trademarks with Gallo Winery’s wines. Respondents prayed for the issuance of a writ of
preliminary injunction and ex parte restraining order, plus P2 million as actual and
compensatory damages, at least P500,000 as exemplary and moral damages, and at
least P500,000 as attorney’s fees and litigation expenses.23
In their answer, petitioners alleged, among other affirmative defenses, that: petitioner’s
GALLO cigarettes and Gallo Winery’s wines were totally unrelated products; Gallo Winery’s
GALLO trademark registration certificate covered wines only, not cigarettes; GALLO
cigarettes and GALLO wines were sold through different channels of trade; GALLO
cigarettes, sold at P4.60 for GALLO filters and P3 for GALLO menthols, were low-cost items
compared to Gallo Winery’s high-priced luxury wines which cost between P98 to P242.50;
the target market of Gallo Winery’s wines was the middle or high-income bracket with at
least P10,000 monthly income while GALLO cigarette buyers were farmers, fishermen,
laborers and other low-income workers; the dominant feature of the GALLO cigarette mark
was the rooster device with the manufacturer’s name clearly indicated as MIGHTY
CORPORATION while, in the case of Gallo Winery’s wines, it was the full names of the
founders-owners ERNEST & JULIO GALLO or just their surname GALLO; by their inaction
and conduct, respondents were guilty of laches and estoppel; and petitioners acted with
honesty, justice and good faith in the exercise of their right to manufacture and sell GALLO
cigarettes.
44 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
In an order dated April 21, 1993, 24 the Makati RTC denied, for lack of merit, respondent’s
prayer for the issuance of a writ of preliminary injunction, 25 holding that respondent’s
GALLO trademark registration certificate covered wines only, that respondents’ wines and
petitioners’ cigarettes were not related goods and respondents failed to prove material
damage or great irreparable injury as required by Section 5, Rule 58 of the Rules of Court. 26
On August 19, 1993, the Makati RTC denied, for lack of merit, respondents’ motion for
reconsideration. The court reiterated that respondents’ wines and petitioners’ cigarettes
were not related goods since the likelihood of deception and confusion on the part of the
consuming public was very remote. The trial court emphasized that it could not rely on
foreign rulings cited by respondents "because the[se] cases were decided by foreign courts
on the basis of unknown facts peculiar to each case or upon factual surroundings which
may exist only within their jurisdiction. Moreover, there [was] no showing that [these cases
had] been tested or found applicable in our jurisdiction." 27
On February 20, 1995, the CA likewise dismissed respondents’ petition for review on
certiorari, docketed as CA-G.R. No. 32626, thereby affirming the Makati RTC’s denial of the
application for issuance of a writ of preliminary injunction against petitioners. 28
After trial on the merits, however, the Makati RTC, on November 26, 1998, held petitioners
liable for, and permanently enjoined them from, committing trademark infringement and
unfair competition with respect to the GALLO trademark:
WHEREFORE, judgment is rendered in favor of the plaintiff (sic) and against the
defendant (sic), to wit:
a. permanently restraining and enjoining defendants, their distributors,
trade outlets, and all persons acting for them or under their
instructions, from (i) using E & J’s registered trademark GALLO or any
other reproduction, counterfeit, copy or colorable imitation of said
trademark, either singly or in conjunction with other words, designs or
emblems and other acts of similar nature, and (ii) committing other acts
of unfair competition against plaintiffs by manufacturing and selling
their cigarettes in the domestic or export markets under the GALLO
trademark.
b. ordering defendants to pay plaintiffs –
(i) actual and compensatory damages for the injury and
prejudice and impairment of plaintiffs’ business and goodwill
as a result of the acts and conduct pleaded as basis for this
suit, in an amount equal to 10% of FOURTEEN MILLION TWO
HUNDRED THIRTY FIVE THOUSAND PESOS
(PHP14,235,000.00) from the filing of the complaint until fully
paid;
(ii) exemplary damages in the amount of PHP100,000.00;
 (iii) attorney’s fees and expenses of litigation in the amount of
PHP1,130,068.91;
(iv) the cost of suit.
SO ORDERED."29
On June 24, 1999, the Makati RTC granted respondent’s motion for partial reconsideration
and increased the award of actual and compensatory damages to 10% of P199,290,000
or P19,929,000.30
On appeal, the CA affirmed the Makati RTC decision and subsequently denied petitioner’s
motion for reconsideration.
III.
The Issues
Petitioners now seek relief from this Court contending that the CA did not follow prevailing
laws and jurisprudence when it held that: [a] RA 8293 (Intellectual Property Code of the
Philippines [IP Code]) was applicable in this case; [b] GALLO cigarettes and GALLO wines
were identical, similar or related goods for the reason alone that they were purportedly
forms of vice; [c] both goods passed through the same channels of trade and [d] petitioners
were liable for trademark infringement, unfair competition and damages. 31
Respondents, on the other hand, assert that this petition which invokes Rule 45 does not
involve pure questions of law, and hence, must be dismissed outright.
IV.
Discussion
THE EXCEPTIONAL CIRCUMSTANCES
IN THIS CASE OBLIGE THE COURT TO REVIEW
THE CA’S FACTUAL FINDINGS
As a general rule, a petition for review on certiorari under Rule 45 must raise only
"questions of law"32 (that is, the doubt pertains to the application and interpretation of law
to a certain set of facts) and not "questions of fact" (where the doubt concerns the truth or
falsehood of alleged facts),33 otherwise, the petition will be denied. We are not a trier of
facts and the Court of Appeals’ factual findings are generally conclusive upon us. 34
This case involves questions of fact which are directly related and intertwined with
questions of law. The resolution of the factual issues concerning the goods’ similarity,
identity, relation, channels of trade, and acts of trademark infringement and unfair
competition is greatly dependent on the interpretation of applicable laws. The controversy
here is not simply the identity or similarity of both parties’ trademarks but whether or not
45 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
infringement or unfair competition was committed, a conclusion based on statutory
interpretation. Furthermore, one or more of the following exceptional circumstances
oblige us to review the evidence on record: 35
(1) the conclusion is grounded entirely on speculation, surmises, and conjectures;
(2) the inference of the Court of Appeals from its findings of fact is manifestly
mistaken, absurd and impossible;
(3) there is grave abuse of discretion;
(4) the judgment is based on a misapprehension of facts;
(5) the appellate court, in making its findings, went beyond the issues of the case,
and the same are contrary to the admissions of both the appellant and the
appellee;
(6) the findings are without citation of specific evidence on which they are based;
(7) the facts set forth in the petition as well as in the petitioner's main and reply
briefs are not disputed by the respondents; and
(8) the findings of fact of the Court of Appeals are premised on the absence of
evidence and are contradicted [by the evidence] on record. 36
In this light, after thoroughly examining the evidence on record, weighing, analyzing and
balancing all factors to determine whether trademark infringement and/or unfair
competition has been committed, we conclude that both the Court of Appeals and the trial
court veered away from the law and well-settled jurisprudence.
Thus, we give due course to the petition.
THE TRADEMARK LAW AND THE PARIS
CONVENTION ARE THE APPLICABLE LAWS,
NOT THE INTELLECTUAL PROPERTY CODE
We note that respondents sued petitioners on March 12, 1993 for trademark infringement
and unfair competition committed during the effectivity of the Paris Convention and the
Trademark Law.
Yet, in the Makati RTC decision of November 26, 1998, petitioners were held liable not only
under the aforesaid governing laws but also under the IP Code which took effect only on
January 1, 1998,37 or about five years after the filing of the complaint:
Defendants’ unauthorized use of the GALLO trademark constitutes trademark
infringement pursuant to Section 22 of Republic Act No. 166, Section 155 of the
IP Code, Article 6bis of the Paris Convention, and Article 16 (1) of the TRIPS
 Agreement as it causes confusion, deception and mistake on the part of the
purchasing public.38 (Emphasis and underscoring supplied)
The CA apparently did not notice the error and affirmed the Makati RTC decision:
In the light of its finding that appellants’ use of the GALLO trademark on its
cigarettes is likely to create confusion with the GALLO trademark on wines
previously registered and used in the Philippines by appellee E & J Gallo Winery,
the trial court thus did not err in holding that appellants’ acts not
only violated the provisions of the our trademark laws (R.A. No. 166 and R.A.
Nos. (sic) 8293) but also Article 6bis of the Paris Convention. 39 (Emphasis and
underscoring supplied)
We therefore hold that the courts a quo erred in retroactively applying the IP Code in this
case.
It is a fundamental principle that the validity and obligatory force of a law proceed from
the fact that it has first been promulgated. A law that is not yet effective cannot be
considered as conclusively known by the populace. To make a law binding even before it
takes effect may lead to the arbitrary exercise of the legislative power. 40 Nova constitutio
futuris formam imponere debet non praeteritis. A new state of the law ought to affect the
future, not the past. Any doubt must generally be resolved against the retroactive operation
of laws, whether these are original enactments, amendments or repeals. 41 There are only a
few instances when laws may be given retroactive effect, 42 none of which is present in this
case.
The IP Code, repealing the Trademark Law, 43 was approved on June 6, 1997. Section 241
thereof expressly decreed that it was to take effect only on January 1, 1998, without any
provision for retroactive application. Thus, the Makati RTC and the CA should have limited
the consideration of the present case within the parameters of the Trademark Law and the
Paris Convention, the laws in force at the time of the filing of the complaint.
DISTINCTIONS BETWEEN
TRADEMARK INFRINGEMENT
AND UNFAIR COMPETITION
Although the laws on trademark infringement and unfair competition have a common
conception at their root, that is, a person shall not be permitted to misrepresent his goods
or his business as the goods or business of another, the law on unfair competition is
broader and more inclusive than the law on trademark infringement. The latter is more
limited but it recognizes a more exclusive right derived from the trademark adoption and
registration by the person whose goods or business is first associated with it. The law on
trademarks is thus a specialized subject distinct from the law on unfair competition,
although the two subjects are entwined with each other and are dealt with together in the
Trademark Law (now, both are covered by the IP Code). Hence, even if one fails to establish
his exclusive property right to a trademark, he may still obtain relief on the ground of his
competitor’s unfairness or fraud. Conduct constitutes unfair competition if the effect is to
pass off on the public the goods of one man as the goods of another. It is not necessary that
any particular means should be used to this end. 44
46 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
In Del Monte Corporation vs. Court of Appeals, 45 we distinguished trademark infringement
from unfair competition:
(1) Infringement of trademark is the unauthorized use of a trademark, whereas
unfair competition is the passing off of one's goods as those of another.
(2) In infringement of trademark fraudulent intent is unnecessary, whereas in
unfair competition fraudulent intent is essential.
(3) In infringement of trademark the prior registration of the trademark is a
prerequisite to the action, whereas in unfair competition registration is not
necessary.
Pertinent Provisions on Trademark
Infringement under the Paris
Convention and the Trademark Law
Article 6bis of the Paris Convention,46 an international agreement binding on the Philippines
and the United States (Gallo Winery’s country of domicile and origin) prohibits "the
[registration] or use of a trademark which constitutes a reproduction, imitation or
translation, liable to create confusion, of a mark considered by the competent authority of
the country of registration or use to be well-known in that country as being already the
mark of a person entitled to the benefits of the [Paris] Convention and used for identical
or similar goods. [This rule also applies] when the essential part of the mark constitutes a
reproduction of any such well-known mark or an imitation liable to
createconfusion therewith." There is no time limit for seeking the prohibition of the use of
marks used in bad faith.47
Thus, under Article 6bis of the Paris Convention, the following are the elements of
trademark infringement:
(a) registration or use by another person of a trademark which is a reproduction,
imitation or translation liable to create confusion,
(b) of a mark considered by the competent authority of the country of
registration or use48 to be well-known in that country and is already the mark of a
person entitled to the benefits of the Paris Convention, and
(c) such trademark is used for identical or similar goods.
On the other hand, Section 22 of the Trademark Law holds a person liable for infringement
when, among others, he "uses without the consent of the registrant, any reproduction,
counterfeit, copy or colorable imitation of any registered mark or tradename in connection
with the sale, offering for sale, or advertising of any goods, business or services or in
connection with which such use is likely to cause confusion or mistake or to deceive
purchasers or others as to the source or origin of such goods or services, or identity of such
business; or reproduce, counterfeit, copy or colorably imitate any such mark or tradename
and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs,
prints, packages, wrappers, receptacles or advertisements intended to be used upon or in
connection with such goods, business or services." 49 Trademark registration and actual use
are material to the complaining party’s cause of action.
Corollary to this, Section 20 of the Trademark Law 50 considers the trademark registration
certificate as prima facieevidence of the validity of the registration, the registrant’s
ownership and exclusive right to use the trademark in connection with the goods, business
or services as classified by the Director of Patents 51 and as specified in the certificate,
subject to the conditions and limitations stated therein. Sections 2 and 2-A 52 of the
Trademark Law emphasize the importance of the trademark’s actual use in commerce in
the Philippines prior to its registration. In the adjudication of trademark rights between
contending parties, equitable principles of laches, estoppel, and acquiescence may be
considered and applied.53
Under Sections 2, 2-A, 9-A, 20 and 22 of the Trademark Law therefore, the following
constitute the elements of trademark infringement:
(a) a trademark actually used in commerce in the Philippines and registered in
the principal register of the Philippine Patent Office
(b) is used by another person in connection with the sale, offering for sale, or
advertising of any goods, business or services or in connection with which such
use is likely to cause confusion or mistake or to deceive purchasers or others as to
the source or origin of such goods or services, or identity of such business; or such
trademark is reproduced, counterfeited, copied or colorably imitated by another
person and such reproduction, counterfeit, copy or colorable imitation is applied
to labels, signs, prints, packages, wrappers, receptacles or advertisements
intended to be used upon or in connection with such goods, business or services
as to likely cause confusion or mistake or to deceive purchasers,
(c) the trademark is used for identical or similar goods, and
(d) such act is done without the consent of the trademark registrant or assignee.
In summary, the Paris Convention protects well-known trademarks only (to be determined
by domestic authorities), while the Trademark Law protects all trademarks, whether well-
known or not, provided that they have been registered and are in actual commercial use in
the Philippines. Following universal acquiescence and comity, in case of domestic legal
disputes on any conflicting provisions between the Paris Convention (which is an
international agreement) and the Trademark law (which is a municipal law) the latter will
prevail.54
Under both the Paris Convention and the Trademark Law, the protection of a registered
trademark is limited only to goods identical or similar to those in respect of which such
trademark is registered and only when there is likelihood of confusion. Under both laws,
the time element in commencing infringement cases is material in ascertaining the
registrant’s express or implied consent to another’s use of its trademark or a colorable
imitation thereof. This is why acquiescence, estoppel or laches may defeat the registrant’s
otherwise valid cause of action.
47 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
Hence, proof of all the elements of trademark infringement is a condition precedent to any
finding of liability.
THE ACTUAL COMMERCIAL USE IN THE
PHILIPPINES OF GALLO CIGARETTE
TRADEMARK PRECEDED THAT OF
GALLO WINE TRADEMARK.
By respondents’ own judicial admission, the GALLO wine trademark was registered in the
Philippines in November 1971 but the wine itself was first marketed and sold in the
country only in 1974 and only within the former U.S. military facilities, and outside thereof,
only in 1979. To prove commercial use of the GALLO wine trademark in the Philippines,
respondents presented sales invoice no. 29991 dated July 9, 1981 addressed to Conrad
Company Inc., Makati, Philippines and sales invoice no. 85926 dated March 22, 1996
addressed to Andresons Global, Inc., Quezon City, Philippines. Both invoices were for the
sale and shipment of GALLO wines to the Philippines during that period. 55 Nothing at all,
however, was presented to evidence the alleged sales of GALLO wines in the Philippines in
1974 or, for that matter, prior to July 9, 1981.
On the other hand, by testimonial evidence supported by the BIR authorization letters,
forms and manufacturer’s sworn statement, it appears that petitioners and its
predecessor-in-interest, Tobacco Industries, have indeed been using and selling GALLO
cigarettes in the Philippines since 1973 or before July 9, 1981. 56
In Emerald Garment Manufacturing Corporation vs. Court of Appeals, 57 we reiterated our
rulings in Pagasa Industrial Corporation vs. Court of Appeals, 58 Converse Rubber Corporation
vs. Universal Rubber Products, Inc.,59 Sterling Products International, Inc. vs. Farbenfabriken
Bayer Aktiengesellschaft,60 Kabushi Kaisha Isetan vs. Intermediate Appellate
Court,61 and Philip Morris vs. Court of Appeals, 62 giving utmost importance to the actual
commercial useof a trademark in the Philippines prior to its registration, notwithstanding
the provisions of the Paris Convention:
xxx xxx xxx
In addition to the foregoing, we are constrained to agree with petitioner's
contention that private respondent failed to prove prior actual commercial
use of its "LEE" trademark in the Philippines before filing its application for
registration with the BPTTT and hence, has not acquired ownership over
said mark.
Actual use in commerce in the Philippines is an essential prerequisite for
the acquisition of ownership over a trademark pursuant to Sec. 2 and 2-A of
the Philippine Trademark Law (R.A. No. 166) x x x
xxx xxx xxx
The provisions of the 1965 Paris Convention for the Protection of Industrial
Property relied upon by private respondent and Sec. 21-A of the Trademark Law
 (R.A. No. 166) were sufficiently expounded upon and qualified in the recent
case of Philip Morris, Inc. v. Court of Appeals (224 SCRA 576 [1993]):
xxx xxx xxx
Following universal acquiescence and comity, our municipal law on
trademarks regarding the requirement of actual use in the
Philippines must subordinate an international agreement
inasmuch as the apparent clash is being decided by a municipal
tribunal (Mortisen vs. Peters, Great Britain, High Court of Judiciary of
Scotland, 1906, 8 Sessions, 93; Paras, International Law and World
Organization, 1971 Ed., p. 20). Withal, the fact that international law has
been made part of the law of the land does not by any means imply the
primacy of international law over national law in the municipal sphere.
Under the doctrine of incorporation as applied in most countries, rules
of international law are given a standing equal, not superior, to national
legislative enactments.
xxx xxx xxx
In other words, (a foreign corporation) may have the capacity to sue
for infringement irrespective of lack of business activity in the
Philippines on account of Section 21-A of the Trademark Law but
the question of whether they have an exclusive right over their
symbol as to justify issuance of the controversial writ will depend
on actual use of their trademarks in the Philippines in line with
Sections 2 and 2-A of the same law. It is thus incongruous for
petitioners to claim that when a foreign corporation not licensed to do
business in the Philippines files a complaint for infringement, the entity
need not be actually using the trademark in commerce in the
Philippines. Such a foreign corporation may have the personality to file
a suit for infringement but it may not necessarily be entitled to
protection due to absence of actual use of the emblem in the local
market.
xxx xxx xxx
Undisputably, private respondent is the senior registrant, having obtained
several registration certificates for its various trademarks "LEE," "LEE RIDERS,"
and "LEESURES" in both the supplemental and principal registers, as early as
1969 to 1973. However, registration alone will not suffice. In Sterling
Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft (27
SCRA 1214 [1969]; Reiterated inKabushi Isetan vs. Intermediate Appellate
Court (203 SCRA 583 [1991]) we declared:
xxx xxx xxx
A rule widely accepted and firmly entrenched because it has come down
through the years is that actual use in commerce or business is a
48 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
prerequisite in the acquisition of the right of ownership over a
trademark.
xxx xxx xxx
The credibility placed on a certificate of registration of one's trademark, or its
weight as evidence of validity, ownership and exclusive use, is qualified. A
registration certificate serves merely as prima facieevidence. It is not
conclusive but can and may be rebutted by controverting evidence.
xxx xxx xxx
In the case at bench, however, we reverse the findings of the Director of Patents
and the Court of Appeals. After a meticulous study of the records, we observe
that the Director of Patents and the Court of Appeals relied mainly on the
registration certificates as proof of use by private respondent of the
trademark "LEE" which, as we have previously discussed are not sufficient.
We cannot give credence to private respondent's claim that its "LEE" mark
first reached the Philippines in the 1960's through local sales by the Post
Exchanges of the U.S. Military Bases in the Philippines (Rollo, p. 177) based
as it was solely on the self-serving statements of Mr. Edward Poste, General
Manager of Lee (Phils.), Inc., a wholly owned subsidiary of the H.D. Lee, Co.,
Inc., U.S.A., herein private respondent. (Original Records, p. 52) Similarly,
we give little weight to the numerous vouchers representing various
advertising expenses in the Philippines for "LEE" products. It is well to note
that these expenses were incurred only in 1981 and 1982 by LEE (Phils.),
Inc. after it entered into a licensing agreement with private respondent on
11 May 1981. (Exhibit E)
On the other hand, petitioner has sufficiently shown that it has been in the
business of selling jeans and other garments adopting its "STYLISTIC MR.
LEE" trademark since 1975 as evidenced by appropriate sales invoices to
various stores and retailers. (Exhibit 1-e to 1-o)
Our rulings in Pagasa Industrial Corp. v. Court of Appeals (118 SCRA 526
[1982]) and Converse Rubber Corp. v. Universal Rubber Products, Inc., (147 SCRA
154 [1987]), respectively, are instructive:
The Trademark Law is very clear. It requires actual commercial use of
the mark prior to its registration. There is no dispute that respondent
corporation was the first registrant, yet it failed to fully
substantiate its claim that it used in trade or business in the
Philippines the subject mark; it did not present proof to invest it
with exclusive, continuous adoption of the trademark which should
consist among others, of considerable sales since its first use. The
invoices submitted by respondent which were dated way back in
1957 show that the zippers sent to the Philippines were to be used
as "samples" and "of no commercial value." The evidence for
respondent must be clear, definite and free from inconsistencies.
 "Samples" are not for sale and therefore, the fact of exporting them to
the Philippines cannot be considered to be equivalent to the "use"
contemplated by law. Respondent did not expect income from such
"samples." There were no receipts to establish sale, and no proof were
presented to show that they were subsequently sold in the Philippines.
xxx xxx xxx
For lack of adequate proof of actual use of its trademark in the Philippines
prior to petitioner's use of its own mark and for failure to establish
confusing similarity between said trademarks, private respondent's action
for infringement must necessarily fail. (Emphasis supplied.)
In view of the foregoing jurisprudence and respondents’ judicial admission that the actual
commercial use of the GALLO wine trademark was subsequent to its registration in 1971
and to Tobacco Industries’ commercial use of the GALLO cigarette trademark in 1973, we
rule that, on this account, respondents never enjoyed the exclusive right to use the GALLO
wine trademark to the prejudice of Tobacco Industries and its successors-in-interest,
herein petitioners, either under the Trademark Law or the Paris Convention.
Respondents’ GALLO trademark
registration is limited to wines only
We also note that the GALLO trademark registration certificates in the Philippines and in
other countries expressly state that they cover wines only, without any evidence or
indication that registrant Gallo Winery expanded or intended to expand its business to
cigarettes.63
Thus, by strict application of Section 20 of the Trademark Law, Gallo Winery’s exclusive
right to use the GALLO trademark should be limited to wines, the only product indicated in
its registration certificates. This strict statutory limitation on the exclusive right to use
trademarks was amply clarified in our ruling in Faberge, Inc. vs. Intermediate Appellate
Court:64
Having thus reviewed the laws applicable to the case before Us, it is not difficult
to discern from the foregoing statutory enactments that private respondent may
be permitted to register the trademark "BRUTE" for briefs produced by it
notwithstanding petitioner's vehement protestations of unfair dealings in
marketing its own set of items which are limited to: after-shave lotion, shaving
cream, deodorant, talcum powder and toilet soap. Inasmuch as petitioner has
not ventured in the production of briefs, an item which is not listed in its
certificate of registration, petitioner cannot and should not be allowed to
feign that private respondent had invaded petitioner's exclusive domain. To
be sure, it is significant that petitioner failed to annex in its Brief the so-called
"eloquent proof that petitioner indeed intended to expand its mark ‘BRUT’ to
other goods" (Page 27, Brief for the Petitioner; page 202, Rollo). Even then, a
mere application by petitioner in this aspect does not suffice and may not vest an
exclusive right in its favor that can ordinarily be protected by the Trademark Law.
In short, paraphrasing Section 20 of the Trademark Law as applied to the
49 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
documentary evidence adduced by petitioner, the certificate of registration
issued by the Director of Patents can confer upon petitioner the exclusive
right to use its own symbol only to those goods specified in the
certificate, subject to any conditions and limitations stated therein. This basic
point is perhaps the unwritten rationale of Justice Escolin in Philippine
Refining Co., Inc. vs. Ng Sam (115 SCRA 472 [1982]), when he stressed the
principle enunciated by the United States Supreme Court in American Foundries
vs. Robertson (269 U.S. 372, 381, 70 L ed 317, 46 Sct. 160) that one who has
adopted and used a trademark on his goods does not prevent the adoption
and use of the same trademark by others for products which are of a
different description. Verily, this Court had the occasion to observe in the 1966
case of George W. Luft Co., Inc. vs. Ngo Guan (18 SCRA 944 [1966]) that no serious
objection was posed by the petitioner therein since the applicant utilized the
emblem "Tango" for no other product than hair pomade in which petitioner does
not deal.
This brings Us back to the incidental issue raised by petitioner which private
respondent sought to belie as regards petitioner's alleged expansion of its
business. It may be recalled that petitioner claimed that it has a pending
application for registration of the emblem "BRUT 33" for briefs (page 25, Brief for
the Petitioner; page 202, Rollo) to impress upon Us the Solomonic wisdom
imparted by Justice JBL Reyes in Sta. Ana vs. Maliwat (24 SCRA 1018 [1968]), to
the effect that dissimilarity of goods will not preclude relief if the junior
user's goods are not remote from any other product which the first user
would be likely to make or sell (vide, at page 1025). Commenting on the former
provision of the Trademark Law now embodied substantially under Section 4(d)
of Republic Act No. 166, as amended, the erudite jurist opined that the law in
point "does not require that the articles of manufacture of the previous user and
late user of the mark should possess the same descriptive properties or should
fall into the same categories as to bar the latter from registering his mark in the
principal register." (supra at page 1026).
Yet, it is equally true that as aforesaid, the protective mantle of the
Trademark Law extends only to the goods used by the first user as specified
in the certificate of registration following the clear message conveyed by
Section 20.
How do We now reconcile the apparent conflict between Section 4(d) which
was relied upon by Justice JBL Reyes in the Sta. Ana case and Section 20? It
would seem that Section 4(d) does not require that the goods manufactured
by the second user be related to the goods produced by the senior user
while Section 20 limits the exclusive right of the senior user only to those
goods specified in the certificate of registration. But the rule has been laid
down that the clause which comes later shall be given paramount significance
over an anterior proviso upon the presumption that it expresses the latest and
dominant purpose. (Graham Paper Co. vs. National Newspapers Asso. (Mo. App.)
193 S.W. 1003; Barnett vs. Merchant's L. Ins. Co., 87 Okl. 42; State ex nel Atty. Gen.
vs. Toledo, 26 N.E., p. 1061; cited by Martin, Statutory Construction Sixth ed., 1980
Reprinted, p. 144). It ineluctably follows that Section 20 is controlling and,
therefore, private respondent can appropriate its symbol for the briefs it
 manufactures because as aptly remarked by Justice Sanchez in Sterling
Products International Inc. vs. Farbenfabriken Bayer(27 SCRA 1214 [1969]):
"Really, if the certificate of registration were to be deemed as
including goods not specified therein, then a situation may arise
whereby an applicant may be tempted to register a trademark on
any and all goods which his mind may conceive even if he had
never intended to use the trademark for the said goods. We believe
that such omnibus registration is not contemplated by our Trademark
Law." (1226).
NO LIKELIHOOD OF CONFUSION, MISTAKE
OR DECEIT AS TO THE IDENTITY OR SOURCE
OF PETITIONERS’ AND RESPONDENTS’
GOODS OR BUSINESS
A crucial issue in any trademark infringement case is the likelihood of confusion, mistake
or deceit as to the identity, source or origin of the goods or identity of the business as a
consequence of using a certain mark. Likelihood of confusion is admittedly a relative term,
to be determined rigidly according to the particular (and sometimes peculiar)
circumstances of each case. Thus, in trademark cases, more than in other kinds of
litigation, precedents must be studied in the light of each particular case. 65
There are two types of confusion in trademark infringement. The first is "confusion of
goods" when an otherwise prudent purchaser is induced to purchase one product in the
belief that he is purchasing another, in which case defendant’s goods are then bought as
the plaintiff’s and its poor quality reflects badly on the plaintiff’s reputation. The other is
"confusion of business" wherein the goods of the parties are different but the defendant’s
product can reasonably (though mistakenly) be assumed to originate from the plaintiff,
thus deceiving the public into believing that there is some connection between the plaintiff
and defendant which, in fact, does not exist. 66
In determining the likelihood of confusion, the Court must consider: [a] the resemblance
between the trademarks; [b] the similarity of the goods to which the trademarks are
attached; [c] the likely effect on the purchaser and [d] the registrant’s express or implied
consent and other fair and equitable considerations.
Petitioners and respondents both use "GALLO" in the labels of their respective cigarette
and wine products. But, as held in the following cases, the use of an identical mark does
not, by itself, lead to a legal conclusion that there is trademark infringement:
(a) in Acoje Mining Co., Inc. vs. Director of Patent, 67 we ordered the approval of
Acoje Mining’s application for registration of the trademark LOTUS for its soy
sauce even though Philippine Refining Company had prior registration and use of
such identical mark for its edible oil which, like soy sauce, also belonged to Class
47;
(b) in Philippine Refining Co., Inc. vs. Ng Sam and Director of Patents, 68 we upheld
the Patent Director’s registration of the same trademark CAMIA for Ng Sam’s ham
50 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
under Class 47, despite Philippine Refining Company’s prior trademark
registration and actual use of such mark on its lard, butter, cooking oil (all of
which belonged to Class 47), abrasive detergents, polishing materials and soaps;
(c) in Hickok Manufacturing Co., Inc. vs. Court of Appeals and Santos Lim Bun
Liong,69 we dismissed Hickok’s petition to cancel private respondent’s HICKOK
trademark registration for its Marikina shoes as against petitioner’s earlier
registration of the same trademark for handkerchiefs, briefs, belts and wallets;
(d) in Shell Company of the Philippines vs. Court of Appeals, 70 in a minute
resolution, we dismissed the petition for review for lack of merit and affirmed the
Patent Office’s registration of the trademark SHELL used in the cigarettes
manufactured by respondent Fortune Tobacco Corporation, notwithstanding
Shell Company’s opposition as the prior registrant of the same trademark for its
gasoline and other petroleum products;
(e) in Esso Standard Eastern, Inc. vs. Court of Appeals,71 we dismissed ESSO’s
complaint for trademark infringement against United Cigarette Corporation and
allowed the latter to use the trademark ESSO for its cigarettes, the same
trademark used by ESSO for its petroleum products, and
(f) in Canon Kabushiki Kaisha vs. Court of Appeals and NSR Rubber
Corporation,72 we affirmed the rulings of the Patent Office and the CA that NSR
Rubber Corporation could use the trademark CANON for its sandals (Class 25)
despite Canon Kabushiki Kaisha’s prior registration and use of the same
trademark for its paints, chemical products, toner and dyestuff (Class 2).
Whether a trademark causes confusion and is likely to deceive the public hinges on
"colorable imitation"73 which has been defined as "such similarity in form, content, words,
sound, meaning, special arrangement or general appearance of the trademark or
tradename in their overall presentation or in their essential and substantive and distinctive
parts as would likely mislead or confuse persons in the ordinary course of purchasing the
genuine article."74
Jurisprudence has developed two tests in determining similarity and likelihood of
confusion in trademark resemblance:75
(a) the Dominancy Test applied in Asia Brewery, Inc. vs. Court of Appeals 76 and
other cases,77 and
(b) the Holistic or Totality Test used in Del Monte Corporation vs. Court of
Appeals78 and its preceding cases.79
The Dominancy Test focuses on the similarity of the prevalent features of the competing
trademarks which might cause confusion or deception, and thus infringement. If the
competing trademark contains the main, essential or dominant features of another, and
confusion or deception is likely to result, infringement takes place. Duplication or imitation
is not necessary; nor is it necessary that the infringing label should suggest an effort to
imitate. The question is whether the use of the marks involved is likely to cause confusion
or mistake in the mind of the public or deceive purchasers. 80
On the other hand, the Holistic Test requires that the entirety of the marks in question be
considered in resolving confusing similarity. Comparison of words is not the only
determining factor. The trademarks in their entirety as they appear in their respective
labels or hang tags must also be considered in relation to the goods to which they are
attached. The discerning eye of the observer must focus not only on the predominant
words but also on the other features appearing in both labels in order that he may draw his
conclusion whether one is confusingly similar to the other. 81
In comparing the resemblance or colorable imitation of marks, various factors have been
considered, such as the dominant color, style, size, form, meaning of letters, words, designs
and emblems used, the likelihood of deception of the mark or name's tendency to
confuse82 and the commercial impression likely to be conveyed by the trademarks if used in
conjunction with the respective goods of the parties. 83
Applying the Dominancy and Holistic Tests, we find that the dominant feature of the
GALLO cigarette trademark is the device of a large rooster facing left, outlined in black
against a gold background. The rooster’s color is either green or red – green for GALLO
menthols and red for GALLO filters. Directly below the large rooster device is the word
GALLO. The rooster device is given prominence in the GALLO cigarette packs in terms of
size and location on the labels.84
The GALLO mark appears to be a fanciful and arbitrary mark for the cigarettes as it has no
relation at all to the product but was chosen merely as a trademark due to the fondness for
fighting cocks of the son of petitioners’ president. Furthermore, petitioners adopted
GALLO, the Spanish word for rooster, as a cigarette trademark to appeal to one of their
target markets, the sabungeros (cockfight aficionados).85
Also, as admitted by respondents themselves, 86 on the side of the GALLO cigarette packs are
the words "MADE BY MIGHTY CORPORATION," thus clearly informing the public as to the
identity of the manufacturer of the cigarettes.
On the other hand, GALLO Winery’s wine and brandy labels are diverse. In many of them,
the labels are embellished with sketches of buildings and trees, vineyards or a bunch of
grapes while in a few, one or two small roosters facing right or facing each other (atop the
EJG crest, surrounded by leaves or ribbons), with additional designs in green, red and
yellow colors, appear as minor features thereof. 87 Directly below or above these sketches is
the entire printed name of the founder-owners, "ERNEST & JULIO GALLO" or just their
surname "GALLO,"88which appears in different fonts, sizes, styles and labels, unlike
petitioners’ uniform casque-font bold-lettered GALLO mark.
Moreover, on the labels of Gallo Winery’s wines are printed the words "VINTED AND
BOTTLED BY ERNEST & JULIO GALLO, MODESTO, CALIFORNIA." 89
The many different features like color schemes, art works and other markings of both
products drown out the similarity between them – the use of the word “GALLO” ― a family
51 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
surname for the Gallo Winery’s wines and a Spanish word for rooster for petitioners’
cigarettes.
WINES AND CIGARETTES ARE NOT
IDENTICAL, SIMILAR, COMPETING OR
RELATED GOODS
Confusion of goods is evident where the litigants are actually in competition; but confusion
of business may arise between non-competing interests as well. 90
Thus, apart from the strict application of Section 20 of the Trademark Law and Article
6bis of the Paris Convention which proscribe trademark infringement not only of goods
specified in the certificate of registration but also of identical or similar goods, we have
also uniformly recognized and applied the modern concept of "related goods." 91Simply
stated, when goods are so related that the public may be, or is actually, deceived and misled
that they come from the same maker or manufacturer, trademark infringement occurs. 92
Non-competing goods may be those which, though they are not in actual competition, are
so related to each other that it can reasonably be assumed that they originate from one
manufacturer, in which case, confusion of business can arise out of the use of similar
marks.93 They may also be those which, being entirely unrelated, cannot be assumed to
have a common source; hence, there is no confusion of business, even though similar
marks are used.94 Thus, there is no trademark infringement if the public does not expect
the plaintiff to make or sell the same class of goods as those made or sold by the
defendant.95
In resolving whether goods are related,96 several factors come into play:
(a) the business (and its location) to which the goods belong
(b) the class of product to which the goods belong
(c) the product's quality, quantity, or size, including the nature of the package, wrapper or
container 97
(d) the nature and cost of the articles98
(e) the descriptive properties, physical attributes or essential characteristics with
reference to their form, composition, texture or quality
(f) the purpose of the goods99
(g) whether the article is bought for immediate consumption, 100 that is, day-to-day
household items101
(h) the fields of manufacture102
(i) the conditions under which the article is usually purchased 103 and
(j) the channels of trade through which the goods flow, 104 how they are distributed,
marketed, displayed and sold.105
The wisdom of this approach is its recognition that each trademark infringement case
presents its own unique set of facts. No single factor is preeminent, nor can the presence or
absence of one determine, without analysis of the others, the outcome of an infringement
suit. Rather, the court is required to sift the evidence relevant to each of the criteria. This
requires that the entire panoply of elements constituting the relevant factual landscape be
comprehensively examined.106 It is a weighing and balancing process. With reference to this
ultimate question, and from a balancing of the determinations reached on all of the factors,
a conclusion is reached whether the parties have a right to the relief sought. 107
A very important circumstance though is whether there exists a likelihood that an
appreciable number of ordinarily prudent purchasers will be misled, or simply confused,
as to the source of the goods in question. 108 The "purchaser" is not the "completely unwary
consumer" but is the "ordinarily intelligent buyer" considering the type of product
involved.109 He is "accustomed to buy, and therefore to some extent familiar with, the goods
in question. The test of fraudulent simulation is to be found in the likelihood of the
deception of some persons in some measure acquainted with an established design and
desirous of purchasing the commodity with which that design has been associated. The
test is not found in the deception, or the possibility of deception, of the person who knows
nothing about the design which has been counterfeited, and who must be indifferent
between that and the other. The simulation, in order to be objectionable, must be such as
appears likely to mislead the ordinary intelligent buyer who has a need to supply and is
familiar with the article that he seeks to purchase." 110
Hence, in the adjudication of trademark infringement, we give due regard to the goods’
usual purchaser’s character, attitude, habits, age, training and education. 111
Applying these legal precepts to the present case, petitioner’s use of the GALLO cigarette
trademark is not likely to cause confusion or mistake, or to deceive the "ordinarily
intelligent buyer" of either wines or cigarettes or both as to the identity of the goods, their
source and origin, or identity of the business of petitioners and respondents.
Obviously, wines and cigarettes are not identical or competing products. Neither do they
belong to the same class of goods. Respondents’ GALLO wines belong to Class 33 under
Rule 84[a] Chapter III, Part II of the Rules of Practice in Trademark Cases while petitioners’
GALLO cigarettes fall under Class 34.
We are mindful that product classification alone cannot serve as the decisive factor in the
resolution of whether or not wines and cigarettes are related goods. Emphasis should be
on the similarity of the products involved and not on the arbitrary classification or general
description of their properties or characteristics. But the mere fact that one person has
adopted and used a particular trademark for his goods does not prevent the adoption and
use of the same trademark by others on articles of a different description. 112
52 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
Both the Makati RTC and the CA held that wines and cigarettes are related products
because: (1) "they are related forms of vice, harmful when taken in excess, and used for
pleasure and relaxation" and (2) "they are grouped or classified in the same section of
supermarkets and groceries."
We find these premises patently insufficient and too arbitrary to support the legal
conclusion that wines and cigarettes are related products within the contemplation of the
Trademark Law and the Paris Convention.
First, anything –- not only wines and cigarettes ― can be used for pleasure and relaxation
and can be harmful when taken in excess. Indeed, it would be a grave abuse of discretion to
treat wines and cigarettes as similar or related products likely to cause confusion just
because they are pleasure-giving, relaxing or potentially harmful. Such reasoning makes no
sense.
Second, it is common knowledge that supermarkets sell an infinite variety of wholly
unrelated products and the goods here involved, wines and cigarettes, have nothing
whatsoever in common with respect to their essential characteristics, quality, quantity,
size, including the nature of their packages, wrappers or containers. 113
Accordingly, the U.S. patent office and courts have consistently held that the mere fact that
goods are sold in one store under the same roof does not automatically mean that buyers
are likely to be confused as to the goods’ respective sources, connections or sponsorships.
The fact that different products are available in the same store is an insufficient standard,
in and of itself, to warrant a finding of likelihood of confusion. 114
In this regard, we adopted the Director of Patents’ finding in Philippine Refining Co., Inc. vs.
Ng Sam and the Director of Patents:115
In his decision, the Director of Patents enumerated the factors that set
respondent’s products apart from the goods of petitioner. He opined and we
quote:
"I have taken into account such factors as probable purchaser attitude
and habits, marketing activities, retail outlets, and commercial
impression likely to be conveyed by the trademarks if used in
conjunction with the respective goods of the parties, I believe that ham
on one hand, and lard, butter, oil, and soap on the other are
products that would not move in the same manner through the
same channels of trade. They pertain to unrelated fields of
manufacture, might be distributed and marketed under dissimilar
conditions, and are displayed separately even though they
frequently may be sold through the same retail food
establishments. Opposer’s products are ordinary day-to-day
household items whereas ham is not necessarily so. Thus, the goods of
the parties are not of a character which purchasers would likely
attribute to a common origin.
 The observations and conclusion of the Director of Patents are correct. The
particular goods of the parties are so unrelated that consumers, would not, in any
probability mistake one as the source of origin of the product of the other.
(Emphasis supplied).
The same is true in the present case. Wines and cigarettes are non-competing and are
totally unrelated products not likely to cause confusion vis-à-vis the goods or the business
of the petitioners and respondents.
Wines are bottled and consumed by drinking while cigarettes are packed in cartons or
packages and smoked. There is a whale of a difference between their descriptive
properties, physical attributes or essential characteristics like form, composition, texture
and quality.
GALLO cigarettes are inexpensive items while GALLO wines are not. GALLO wines are
patronized by middle-to-high-income earners while GALLO cigarettes appeal only to
simple folks like farmers, fishermen, laborers and other low-income workers. 116 Indeed, the
big price difference of these two products is an important factor in proving that they are in
fact unrelated and that they travel in different channels of trade. There is a distinct price
segmentation based on vastly different social classes of purchasers. 117
GALLO cigarettes and GALLO wines are not sold through the same channels of trade.
GALLO cigarettes are Philippine-made and petitioners neither claim nor pass off their
goods as imported or emanating from Gallo Winery. GALLO cigarettes are distributed,
marketed and sold through ambulant and sidewalk vendors, small local sari-saristores and
grocery stores in Philippine rural areas, mainly in Misamis Oriental, Pangasinan, Bohol, and
Cebu.118 On the other hand, GALLO wines are imported, distributed and sold in the
Philippines through Gallo Winery’s exclusive contracts with a domestic entity, which is
currently Andresons. By respondents’ own testimonial evidence, GALLO wines are sold in
hotels, expensive bars and restaurants, and high-end grocery stores and supermarkets, not
through sari-sari stores or ambulant vendors.119
Furthermore, the Makati RTC and the CA erred in relying on Carling Brewing Company vs.
Philip Morris, Inc.120 to support its finding that GALLO wines and GALLO cigarettes are
related goods. The courts a quo should have taken into consideration the subsequent case
of IDV North America, Inc. and R & A Bailey Co. Limited vs. S & M Brands, Inc.: 121
IDV correctly acknowledges, however, that there is no per se rule that the use of
the same mark on alcohol and tobacco products always will result in a likelihood
of confusion. Nonetheless, IDV relies heavily on the decision in John Walker &
Sons, Ltd. vs. Tampa Cigar Co., 124 F. Supp. 254, 256 (S.D. Fla. 1954), aff’d, 222 F.
2d 460 (5th Cir. 1955), wherein the court enjoined the use of the mark "JOHNNIE
WALKER" on cigars because the fame of the plaintiff’s mark for scotch whiskey
and because the plaintiff advertised its scotch whiskey on, or in connection with
tobacco products. The court, in John Walker & Sons, placed great significance
on the finding that the infringers use was a deliberate attempt to capitalize
on the senior marks’ fame. Id. At 256. IDV also relies on Carling Brewing Co.
v. Philip Morris, Inc., 297 F. Supp. 1330, 1338 (N.D. Ga. 1968), in which the
court enjoined the defendant’s use of the mark "BLACK LABEL" for
53 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
cigarettes because it was likely to cause confusion with the plaintiff’s well-
known mark "BLACK LABEL" for beer.
xxx xxx xxx
Those decisions, however, must be considered in perspective of the
principle that tobacco products and alcohol products should be considered
related only in cases involving special circumstances.Schenley Distillers, Inc.
v. General Cigar Co., 57C.C.P.A. 1213, 427 F. 2d 783, 785 (1970). The
presence of special circumstances has been found to exist where there is a
finding of unfair competition or where a ‘famous’ or ‘well-known mark’ is
involved and there is a demonstrated intent to capitalize on that mark. For
example, in John Walker & Sons, the court was persuaded to find a relationship
between products, and hence a likelihood of confusion, because of the plaintiff’s
long use and extensive advertising of its mark and placed great emphasis on the
fact that the defendant used the trademark ‘Johnnie Walker with full knowledge
of its fame and reputation and with the intention of taking advantage
thereof.’ John Walker & Sons, 124 F. Supp. At 256; see Mckesson & Robbins, Inc. v. P.
Lorillard Co., 1959 WL 5894, 120 U.S.P.Q. 306, 307 (1959) (holding that the
decision in John Walker & Sons was ‘merely the law on the particular case based
upon its own peculiar facts’); see also Alfred Dunhill, 350 F. Supp. At 1363
(defendant’s adoption of ‘Dunhill’ mark was not innocent). However,
in Schenley, the court noted that the relation between tobacco and whiskey
products is significant where a widely known arbitrary mark has long been used
for diversified products emanating from a single source and a newcomer seeks to
use the same mark on unrelated goods. Schenley, 427 F.2d. at 785. Significantly,
in Schenley, the court looked at the industry practice and the facts of the case in
order to determine the nature and extent of the relationship between the mark
on the tobacco product and the mark on the alcohol product.
The record here establishes conclusively that IDV has never advertised BAILEYS
liqueurs in conjunction with tobacco or tobacco accessory products and that IDV
has no intent to do so. And, unlike the defendant in Dunhill, S & M Brands does
not market bar accessories, or liqueur related products, with its cigarettes. The
advertising and promotional materials presented a trial in this action
demonstrate a complete lack of affiliation between the tobacco and liqueur
products bearing the marks here at issue.
xxx xxx xxx
Of equal significance, it is undisputed that S & M Brands had no intent, by
adopting the family name ‘Bailey’s’ as the mark for its cigarettes, to capitalize
upon the fame of the ‘BAILEYS’ mark for liqueurs. See Schenley, 427 F. 2d at
785. Moreover, as will be discussed below, and as found in Mckesson &
Robbins, the survey evidence refutes the contention that cigarettes and
alcoholic beverages are so intimately associated in the public mind that
they cannot under any circumstances be sold under the same mark without
causing confusion. See Mckesson & Robbins, 120 U.S.P.Q. at 308.
 Taken as a whole, the evidence here demonstrates the absence of the ‘special
circumstances’ in which courts have found a relationship between tobacco and
alcohol products sufficient to tip the similarity of goods analysis in favor of the
protected mark and against the allegedly infringing mark. It is true that BAILEYS
liqueur, the world’s best selling liqueur and the second best selling in the
United States, is a well-known product. That fact alone, however, is
insufficient to invoke the special circumstances connection here where so
much other evidence and so many other factors disprove a likelihood of
confusion. The similarity of products analysis, therefore, augers against
finding that there is a likelihood of confusion. (Emphasis supplied).
In short, tobacco and alcohol products may be considered related only in cases
involving special circumstanceswhich exist only if a famous mark is involved and there is a
demonstrated intent to capitalize on it. Both of these are absent in the present case.
THE GALLO WINE TRADEMARK IS NOT A Transportation,’ it does not necessarily follow that ‘Rapid’
WELL-KNOWN MARK IN THE CONTEXT
OF THE PARIS CONVENTION IN THIS CASE
SINCE WINES AND CIGARETTES ARE NOT
IDENTICAL OR SIMILAR GOODS
First, the records bear out that most of the trademark registrations took place in the late
1980s and the 1990s, that is, after Tobacco Industries’ use of the GALLO cigarette
trademark in 1973 and petitioners’ use of the same mark in 1984.
GALLO wines and GALLO cigarettes are neither the same, identical, similar nor related
goods, a requisite elementunder both the Trademark Law and the Paris Convention.
Second, the GALLO trademark cannot be considered a strong and distinct mark in the
Philippines. Respondents do not dispute the documentary evidence that aside from Gallo
Winery’s GALLO trademark registration, the Bureau of Patents, Trademarks and
Technology Transfer also issued on September 4, 1992 Certificate of Registration No.
53356 under the Principal Register approving Productos Alimenticios Gallo, S.A’s April 19,
1990 application for GALLO trademark registration and use for its "noodles, prepared food
or canned noodles, ready or canned sauces for noodles, semolina, wheat flour and bread
crumbs, pastry, confectionery, ice cream, honey, molasses syrup, yeast, baking powder, salt,
mustard, vinegar, species and ice." 122
Third and most important, pursuant to our ruling in Canon Kabushiki Kaisha vs. Court of
Appeals and NSR Rubber Corporation,123 "GALLO" cannot be considered a "well-known" mark
within the contemplation and protection of the Paris Convention in this case since wines and
cigarettes are not identical or similar goods:
We agree with public respondents that the controlling doctrine with respect to
the applicability of Article 8 of the Paris Convention is that established in Kabushi
Kaisha Isetan vs. Intermediate Appellate Court (203 SCRA 59 [1991]). As pointed
out by the BPTTT:
54 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
"Regarding the applicability of Article 8 of the Paris Convention,
this Office believes that there is no automatic protection afforded
an entity whose tradename is alleged to have been infringed
through the use of that name as a trademark by a local entity.
In Kabushiki Kaisha Isetan vs. The Intermediate Appellate Court, et. al.,
G.R. No. 75420, 15 November 1991, the Honorable Supreme Court held
that:
‘The Paris Convention for the Protection of Industrial
Property does not automatically exclude all countries of
the world which have signed it from using a tradename
which happens to be used in one country. To illustrate — if
a taxicab or bus company in a town in the United Kingdom
or India happens to use the tradename ‘Rapid
can no longer be registered in Uganda, Fiji, or the
Philippines.
This office is not unmindful that in (sic) the Treaty of Paris for the
Protection of Intellectual Property regarding well-known marks and
possible application thereof in this case. Petitioner, as this office sees it,
is trying to seek refuge under its protective mantle, claiming that the
subject mark is well known in this country at the time the then
application of NSR Rubber was filed.
However, the then Minister of Trade and Industry, the Hon. Roberto V.
Ongpin, issued a memorandum dated 25 October 1983 to the Director
of Patents, a set of guidelines in the implementation of Article 6 bis of
the Treaty of Paris. These conditions are:
a) the mark must be internationally known;
b) the subject of the right must be a trademark, not a patent or
copyright or anything else;
c) the mark must be for use in the same or similar kinds of
goods; and
d) the person claiming must be the owner of the mark (The
Parties Convention Commentary on the Paris Convention. Article
by Dr. Bogsch, Director General of the World Intellectual
Property Organization, Geneva, Switzerland, 1985)’
From the set of facts found in the records, it is ruled that the Petitioner
failed to comply with the third requirement of the said
memorandum that is the mark must be for use in the same or
similar kinds of goods. The Petitioner is using the mark "CANON"
 for products belonging to class 2 (paints, chemical products) while
the Respondent is using the same mark for sandals (class 25).
Hence, Petitioner's contention that its mark is well-known at the
time the Respondent filed its application for the same mark should
fail." (Emphasis supplied.)
Consent of the Registrant and
Other air, Just and Equitable
Considerations
Each trademark infringement case presents a unique problem which must be answered by
weighing the conflicting interests of the litigants. 124
Respondents claim that GALLO wines and GALLO cigarettes flow through the same
channels of trade, that is, retail trade. If respondents’ assertion is true, then both goods co-
existed peacefully for a considerable period of time. It took respondents almost 20 years to
know about the existence of GALLO cigarettes and sue petitioners for trademark
infringement. Given, on one hand, the long period of time that petitioners were engaged in
the manufacture, marketing, distribution and sale of GALLO cigarettes and, on the other,
respondents’ delay in enforcing their rights (not to mention implied consent, acquiescence
or negligence) we hold that equity, justice and fairness require us to rule in favor of
petitioners. The scales of conscience and reason tip far more readily in favor of petitioners
than respondents.
(b) Any person who by any artifice, or device, or who employs any other means
calculated to induce the false belief that such person is offering the services of
another who has identified such services in the mind of the public;
(c) Any person who shall make any false statement in the course of trade or who
shall commit any other act contrary to good faith of a nature calculated to
discredit the goods, business or services of another.
The universal test question is whether the public is likely to be deceived. Nothing less than
conduct tending to pass off one man’s goods or business as that of another constitutes
unfair competition. Actual or probable deception and confusion on the part of customers
by reason of defendant’s practices must always appear. 125 On this score, we find that
petitioners never attempted to pass off their cigarettes as those of respondents. There is no
evidence of bad faith or fraud imputable to petitioners in using their GALLO cigarette mark.
All told, after applying all the tests provided by the governing laws as well as those
recognized by jurisprudence, we conclude that petitioners are not liable for trademark
infringement, unfair competition or damages.
WHEREFORE, finding the petition for review meritorious, the same is hereby GRANTED.
The questioned decision and resolution of the Court of Appeals in CA-G.R. CV No. 65175
and the November 26, 1998 decision and the June 24, 1999 order of the Regional Trial
Court of Makati, Branch 57 in Civil Case No. 93-850 are hereby REVERSED and SET ASIDE
and the complaint against petitioners DISMISSED.

Moreover, there exists no evidence that petitioners employed malice, bad faith or fraud, or Costs against respondents.
that they intended to capitalize on respondents’ goodwill in adopting the GALLO mark for
their cigarettes which are totally unrelated to respondents’ GALLO wines. Thus, we rule out SO ORDERED.
trademark infringement on the part of petitioners.

PETITIONERS ARE ALSO NOT LIABLE

FOR UNFAIR COMPETITION

Under Section 29 of the Trademark Law, any person who employs deception or any other
means contrary to good faith by which he passes off the goods manufactured by him or in
which he deals, or his business, or services for those of the one having established such
goodwill, or who commits any acts calculated to produce said result, is guilty of unfair
competition. It includes the following acts:

(a) Any person, who in selling his goods shall give them the general appearance of
goods of another manufacturer or dealer, either as to the goods themselves or in
the wrapping of the packages in which they are contained, or the devices or
words thereon, or in any other feature of their appearance, which would be likely
to influence purchasers to believe that the goods offered are those of a
manufacturer or dealer other than the actual manufacturer or dealer, or who
otherwise clothes the goods with such appearance as shall deceive the public and
defraud another of his legitimate trade, or any subsequent vendor of such goods
or any agent of any vendor engaged in selling such goods with a like purpose;

55 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS

 IDONAH SLADE PERKINS, petitioner,
vs.
ARSENIO P. DIZON, Judge of First Instance of Manila, EUGENE ARTHUR PERKINS, and
BENGUET CONSOLIDATED MINING COMPANY, respondents.

Alva J. Hill for petitioner.

Ross, Lawrence, Selph & Carrascoso for respondent Judge and Benguet Consolidated Mining
Company.
DeWitt, Perkins & Ponce Enrile for respondent Perkins.

MORAN, J.:

On July 6, 1938, respondent, Eugene Arthur Perkins, instituted an action in the Court of
First Instance of Manila against the Benguet Consolidated Mining Company for dividends
amounting to P71,379.90 on 52,874 shares of stock registered in his name, payment of
which was being withheld by the company; and, for the recognition of his right to the
control and disposal of said shares, to the exclusion of all others. To the complaint, the
company filed its answer alleging, by way of defense, that the withholding of such
dividends and the non-recognition of plaintiff's right to the disposal and control of the
shares were due to certain demands made with respect to said shares by the petitioner
herein, Idonah Slade Perkins, and by one George H. Engelhard. The answer prays that the
adverse claimants be made parties to the action and served with notice thereof by
publication, and that thereafter all such parties be required to interplead and settle the
rights among themselves. On September 5, 1938, the trial court ordered respondent
Eugene Arthur Perkins to include in his complaint as parties defendant petitioner, Idonah
Slade Perkins, and George H. Engelhard. The complaint was accordingly amended and in
addition to the relief prayed for in the original complaint, respondent Perkins prayed that
petitioner Idonah Slade Perkins and George Engelhard be adjudged without interest in the
shares of stock in question and excluded from any claim they assert thereon. Thereafter,
summons by publication were served upon the non-resident defendants, Idonah Slade
Perkins and George H. Engelhard, pursuant to the order of the trial court. On December 9,
1938, Engelhard filed his answer to the amended complaint, and on December 10, 1938,
petitioner Idonah Slade Perkins, through counsel, filed her pleading entitled "objection to
venue, motion to quash, and demurrer to jurisdiction" wherein she challenged the
jurisdiction of the lower court over her person. Petitioner's objection, motion and
demurrer having been overruled as well as her motion for reconsideration of the order of
denial, she now brought the present petition for certiorari, praying that the summons by
publication issued against her be declared null and void, and that, with respect to her,
respondent Judge be permanently prohibited from taking any action on the case.

The controlling issue here involved is whether or not the Court of First Instance of Manila
has acquired jurisdiction over the person of the present petitioner as a non-resident
defendant, or, notwithstanding the want of such jurisdiction, whether or not said court
may validly try the case. The parties have filed lengthy memorandums relying on
numerous authorities, but the principles governing the question are well settled in this
G.R. No. 46631 November 16, 1939 jurisdiction.

56 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS

Section 398 of our Code of Civil Procedure provides that when a non-resident defendant is
sued in the Philippine courts and it appears, by the complaint or by affidavits, that the
action relates to real or personal property within the Philippines in which said defendant
has or claims a lien or interest, actual or contingent, or in which the relief demanded
consists, wholly or in part, in excluding such person from any interest therein, service of
summons maybe made by publication.
We have fully explained the meaning of this provision in El Banco Español Filipino vs.
Palanca, 37 Phil., 921, wherein we laid down the following rules:
(1) In order that the court may validly try a case, it must have jurisdiction over
the subject-matter and over the persons of the parties. Jurisdiction over the
subject-matter is acquired by concession of the sovereign authority which
organizes a court and determines the nature and extent of its powers in general
and thus fixes its jurisdiction with reference to actions which it may entertain and
the relief it may grant. Jurisdiction over the persons of the parties is acquired by
their voluntary appearance in court and their submission to its authority, or by
the coercive power of legal process exerted over their persons.
(2) When the defendant is a non-resident and refuses to appear voluntary, the
court cannot acquire jurisdiction over his person even if the summons be served
by publication, for he is beyond the reach of judicial process. No tribunal
established by one State can extend its process beyond its territory so as to
subject to its decisions either persons or property located in another State.
"There are many expressions in the American reports from which it might be
inferred that the court acquires personal jurisdiction over the person of the
defendant by publication and notice; but such is not the case. In truth, the
proposition that jurisdiction over the person of a non-resident cannot be
acquired by publication and notice was never clearly understood even in the
American courts until after the decision had been rendered by the Supreme Court
of the United States in the leading case of Pennoyer v. Neff (95 U.S., 714; 24 Law.
ed., 565). In the light of that decisions which have subsequently been rendered in
that and other courts, the proposition that jurisdiction over the person cannot be
thus acquired by publication and notice is no longer open to question; and it is
now fully established that a personal judgment upon constructive or substituted
service against a non-resident who does not appear is wholly invalid. This
doctrine applies to all kinds of constructive or substituted process, including
service by publication and personal service outside of the jurisdiction in which
the judgment is rendered; and the only exception seems to be found in the case
where the non-resident defendant has expressly or impliedly consented to the
mode of service. (Note to Raher vs. Raher, 35 L. R. A. [N. S.], 292; see also L.R.A.
585; 35 L.R.A. [N.S.], 312.)
(3) The general rule, therefore, is that a suit against a non-resident cannot be
entertained by a Philippine court. Where, however, the action is in rem or quasi in
rem in connection with property located in the Philippines, the court acquires
jurisdiction over the res, and its jurisdiction over the person of the non-resident is
non-essential. In order that the court may exercise power over the res, it is not
necessary that the court should take actual custody of the property, potential
custody thereof being sufficient. There is potential custody when, from the nature
57 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
of the action brought, the power of the court over the property is impliedly
recognized by law. "An illustration of what we term potential jurisdiction over
the res, is found in the proceeding to register the title of land under our system
for the registration of land. Here the court, without taking actual physical control
over the property , assumes, at the instance of some person claiming to be owner,
to exercise a jurisdiction in rem over the property and to adjudicate the title in
favor of the petitioner against all the world."
(4) As before stated, in an action in rem or quasi in rem against a non-resident
defendant, jurisdiction over his person is non-essential, and if the law requires in
such case that the summons upon the defendant be served by publication, it is
merely to satisfy the constitutional requirement of due process. If any be said, in
this connection, that "may reported cases can be cited in which it is assumed that
the question of the sufficiency of publication or notice in the case of this kind is a
question affecting the jurisdiction of the court, and the court is sometimes said to
acquire jurisdiction by virtue of the publication. This phraseology was
undoubtedly originally adopted by the court because of the analogy between
service by publication and personal service of process upon the defendant; and,
as has already been suggested, prior to the decision of Pennoyer v. Neff (supra),
the difference between the legal effects of the two forms of service was obscure. It
is accordingly not surprising that the modes of expression which had already
been moulded into legal tradition before that case was decided have been
brought down to the present day. But it is clear that the legal principle here
involved is not affected by the peculiar languages in which the courts have
expounded their ideas."lawphi1.net
The reason for the rule that Philippine courts cannot acquire jurisdiction over the person
of a non-resident, as laid down by the Supreme Court of the United States in Pennoyer v.
Neff, supra, may be found in a recognized principle of public law to the effect that "no State
can exercise direct jurisdiction and authority over persons or property without its
territory. Story, Confl. L., ch. 2; Wheat, Int. L., pt. 2, ch. 2. The several States are of equal
dignity and authority, and the independence of one implies the exclusion of power from all
others. And so it is laid down by jurists, as an elementary principle, that the laws of one
State have no operation outside of its territory, except so far as is allowed by comity; and
that no tribunal established by it can extend its process beyond that territory so as to
subject either persons or property to its decisions. "Any exertion of authority of this sort
beyond this limit," says Story, "is a mere nullity, and incapable of binding such persons or
property in any other tribunals." Story, Confl. L., sec. 539." (Pennoyer v. Neff, 95 U.S., 714;
24 Law. ed., 565, 568-569.).
When, however, the action relates to property located in the Philippines, the Philippine
courts may validly try the case, upon the principle that a "State, through its tribunals, may
subject property situated within its limits owned by non-residents to the payment of the
demand of its own citizens against them; and the exercise of this jurisdiction in no respect
infringes upon the sovereignty of the State where the owners are domiciled. Every State
owes protection to its citizens; and, when non-residents deal with them, it is a legitimate
and just exercise of authority to hold and appropriate any property owned by such non-
residents to satisfy the claims of its citizens. It is in virtue of the State's jurisdiction over
the property of the non-resident situated within its limits that its tribunals can inquire into
the non-resident's obligations to its own citizens, and the inquiry can then be carried only
to the extent necessary to control the disposition of the property. If the non-resident has no
property in the State, there is nothing upon which the tribunals can adjudicate." (Pennoyer
v. Neff, supra.)
In the instant case, there can be no question that the action brought by Eugene Arthur
Perkins in his amended complaint against the petitioner, Idonah Slade Perkins, seeks to
exclude her from any interest in a property located in the Philippines. That property
consists in certain shares of stocks of the Benguet Consolidated Mining Company,
a sociedad anonima, organized in the Philippines under the provisions of the Spanish Code
of Commerce, with its principal office in the City of Manila and which conducts its mining
activities therein. The situs of the shares is in the jurisdiction where the corporation is
created, whether the certificated evidencing the ownership of those shares are within or
without that jurisdiction. (Fletcher Cyclopedia Corporations, Permanent ed. Vol. 11, p. 95).
Under these circumstances, we hold that the action thus brought is quasi in rem, for while
the judgement that may be rendered therein is not strictly a judgment in rem, "it fixes and
settles the title to the property in controversy and to that extent partakes of the nature of
the judgment in rem." (50 C.J., p 503). As held by the Supreme Court of the United States
in Pennoyer v. Neff (supra);
It is true that, in a strict sense, a proceeding in rem is one taken directly against
property, and has for its object the disposition of the property, without reference
to the title of individual claimants; but , in a large and more general sense, the
terms are applied to actions between parties, where the direct object is to reach
and dispose of property owned by them, or of some interest therein.
The action being in quasi in rem, The Court of First Instance of Manila has jurisdiction over
the person of the non-resident. In order to satisfy the constitutional requirement of due
process, summons has been served upon her by publication. There is no question as to the
adequacy of publication made nor as to the mailing of the order of publication to the
petitioner's last known place of residence in the United States. But, of course, the action
being quasi in rem and notice having be made by publication, the relief that may be granted
by the Philippine court must be confined to the res, it having no jurisdiction to render a
personal judgment against the non-resident. In the amended complaint filed by Eugene
Arthur Perkins, no money judgment or other relief in personam is prayed for against the
petitioner. The only relief sought therein is that she be declared to be without any interest
in the shares in controversy and that she be excluded from any claim thereto.
Petitioner contends that the proceeding instituted against her is one of interpleading and is
therefore an action in personam. Section 120 of our Code of Civil Procedure provides that
whenever conflicting claims are or may be made upon a person for or relating to personal
property, or the performance of an obligation or any portion thereof, so that he may be
made subject to several actions by different persons, such person may bring an action
against the conflicting claimants, disclaiming personal interest in the controversy, and the
court may order them to interplead with one another and litigate their several claims
among themselves, there upon proceed to determine their several claims. Here, The
Benguet Consolidated Mining Company, in its answer to the complaint filed by Eugene
Arthur Perkins, averred that in connection with the shares of stock in question, conflicting
claims were being made upon it by said plaintiff, Eugene Arthur Perkins, his wife Idonah
Slade Perkins, and one named George H. Engelhard, and prayed that these last two be made
parties to the action and served with summons by publication, so that the three claimants
58 | P a g e TORTS AND DAMAGAS, AND PROPERTY – CONFLICT OF LAWS
may litigate their conflicting claims and settle their rights among themselves. The court has
not issued an order compelling the conflicting claimants to interplead with one another
and litigate their several claims among themselves, but instead ordered the plaintiff to
amend his complaint including the other two claimants as parties defendant. The plaintiff
did so, praying that the new defendants thus joined be excluded fro any interest in the
shares in question, and it is upon this amended complaint that the court ordered the
service of the summons by publication. It is therefore, clear that the publication of the
summons was ordered not in virtue of an interpleading, but upon the filing of the amended
complaint wherein an action quasi in rem is alleged.
Had not the complaint been amended, including the herein petitioner as an additional
defendant, and had the court, upon the filing of the answer of the Benguet Consolidated
Mining Company, issued an order under section 120 of the Code of Civil Procedure, calling
the conflicting claimants into court and compelling them to interplead with one another,
such order could not perhaps have validly been served by publication or otherwise, upon
the non-resident Idonah Slade Perkins, for then the proceeding would be purely one of
interpleading. Such proceeding is a personal action, for it merely seeks to call conflicting
claimants into court so that they may interplead and litigate their several claims among
themselves, and no specific relief is prayed for against them, as the interpleader have
appeared in court, one of them pleads ownership of the personal property located in the
Philippines and seeks to exclude a non-resident claimant from any interest therein, is a
question which we do not decide not. Suffice it to say that here the service of the summons
by publication was ordered by the lower court by virtue of an action quasi in rem against
the non-resident defendant.
Respondents contend that, as the petitioner in the lower court has pleaded over the
subject-matter, she has submitted herself to its jurisdiction. We have noticed, however, that
these pleas have been made not as independent grounds for relief, but merely as additional
arguments in support of her contention that the lower court had no jurisdiction over the
person. In other words, she claimed that the lower court had no jurisdiction over her
person not only because she is a non-resident, but also because the court had no
jurisdiction over the subject-matter of the action and that the issues therein involved have
already been decided by the New York court and are being relitigated in the California
court. Although this argument is obviously erroneous, as neither jurisdiction over the
subject-matter nor res adjudicata nor lis pendens has anything to do with the question of
jurisdiction over her person, we believe and so hold that the petitioner has not, by such
erroneous argument, submitted herself to the jurisdiction of the court. Voluntary
appearance cannot be implied from either a mistaken or superflous reasoning but from the
nature of the relief prayed for.
For all the foregoing, petition is hereby denied, with costs against petitioner.
Avanceña, C.J., Villa-Real, Imperial, Diaz and Concepcion, JJ., concur.