Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. L-28744 April 29, 1971

ACOJE MINING CO., INC., petitioner-applicant,
vs.
THE DIRECTOR OF PATENTS, respondent.
Manuel M. Antonio and Roman G. Pacia for petitioner.
Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor
General Frine' C. Zaballero, Solicitor Antonio M. Martinez and Attorney
Amado L. Marquez for respondent.

FERNANDO, J.:
The issue before us is simple and uncomplicated. May petitioner Acoje
Mining Company register for the purpose of advertising its product, soy
sauce, the trademark LOTUS, there being already in existence one such
registered in favor of the Philippine Refining Company for its product, edible
oil, it being further shown that the trademark applied for is in smaller type,
colored differently, set on a background which is dissimilar as to yield a
distinct appearance? The answer of the Director of Patents was in the
negative. Hence this appeal which we sustain in the light of the controlling
norm as set forth in the American Wire & Cable Co. care. 1 The facts as set
forth in the appealed decision follow: "On September 14, 1965, Acoje
Mining Co., Inc. a domestic corporation, filed an application for registration

of the trademark LOTUS, used on Soy Sauce, Class 47. Use in commerce in
the Philippines since June 1, 1965 is asserted. The Chief trademark Examiner
finally rejected the application by reason of confusing similarity with the
trademark LOTUS registered in this Office under Certificate of Registration
No. 12476 issued in favor of Philippine Refining CO., Inc., another domestic
corporation. The cited mark is being used on edible oil, Class 47." 2 The
matter was then elevated to respondent Director of Patents who, on January
31, 1968, upheld the view of the Chief Trademark Examiner and rejected the
application of Petitioner on the ground that while there is a difference
between soy sauce and edible oil and there were dissimilarities in the
trademarks due to type of letters used as well as in the size, color and design
employed, still the close relationship of the products, soy sauce and edible
oil, is such "that purchasers would be misled into believing that they have a
common source." 3
This petition for its review was filed with this Court on March 6, 1968. After
the submission of the briefs on behalf of petitioner and respondent, the case
was deemed submitted. As set forth at the outset the decision of respondent
Director of Patents is reversed.
The decisive test as to whether an application for a trademark should be
affirmatively acted upon or not is clearly set forth in the decision already
referred to, promulgated barely a year ago. In the language of Justice J. B. L.
Reyes, who spoke for the Court in American Wire & Cable Co. v. Director of
Patents: 4 "It is clear from the above-quoted provision that the determinative
factor in a contest involving registration of trade mark is not whether the
challenging mark would actually cause confusion or deception of the
purchasers but whether the use of such mark would likely cause confusion or
mistake on the part of the buying public. In short, to constitute an
infringement of an existing trade-mark patent and warrant a denial of an
application for registration, the law does not require that the competing
trademarks must be so identical as to produce actual error or mistake; it
would be sufficient, for purposes of the law, that the similarity between the
two labels, is such that there is a possibility or likelihood of the purchaser of
the older brand mistaking the newer brand for it." 5
1

Can it be said then that petitioner's application would be likely to cause

confusion or mistake on the part of the buying public? The answer should be
in the negative. It does not defy common sense to assert that a purchaser
would be cognizant of the product he is buying. There is quite difference
between soy sauce and edible oil. If one is in the market for the former, he is
not likely to purchase the latter just because of the trademark LOTUS. Even
on the rare occasions that a mistake does occur, it can easily be rectified.
Moreover, there is no denying that the possibility of confusion is remote
considering the difference in the type used, the coloring, the petitioner's
trademark being in yellow and red while that of the Philippine Refining
Company being in green and yellow, and the much smaller size of petitioner's
trademark. When regard is had for the principle that the two trademarks in
their entirety as they appear in their respective labels should be considered in
relation to the goods advertised before registration could be denied, the
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-26676 July 30, 1982
PHILIPPINE REFINING CO., INC., petitioner,
vs.
NG SAM and THE DIRECTOR OF PATENTS, respondents.
Ponce Enrile, Siguion Reyna, Montecillo & Bello and Associates for
petitioner.

conclusion is inescapable that respondent Director ought to have reached a

different conclusion. Petitioner has successfully made out a case for
registration. 6
WHEREFORE, the decision of respondent Director of Patents of January 31,
1968 is reversed and petitioner's application for registration of its trademark
LOTUS granted. Without costs.
Concepcion, C.J., Reyes, J.B.L., Dizon,, Makalintal, Zaldivar, Castro,
Teehankee, Villamor and Makasiar, JJ., concur.
Barredo, J., took no part.

The sole issue raised in this petition for review of the decision of the Director
of patents is whether or not the product of respondent, Ng Sam, which is
ham, and those of petitioner consisting of lard, butter, cooking oil and soap
are so related that the use of the same trademark "CAMIA" on said goods
would likely result in confusion as to their source or origin.
The trademark "CAMIA" was first used ill the Philippines by petitioner on
its products in 1922. In 1949, petitioner caused the registration of said
trademark with the Philippine Patent Office under certificates of registration
Nos. 1352-S and 1353-S, both issued on May 3, 1949. Certificate of
Registration No. 1352-S covers vegetable and animal fats, particularly lard,
butter and cooking oil, all classified under Class 47 (Foods and Ingredients of
Food) of the Rules of Practice of the Patent Office, while certificate of
registration No. 1353-S applies to abrasive detergents, polishing materials
and soap of all kinds (Class 4).

Primitivo C. Bucasas for respondents.

ESCOLIN, J.:

On November 25, 1960, respondent Ng Sam, a citizen residing in Iloilo City,

filed an application with the Philippine Patent office for registration of the
Identical trademark "CAMIA" for his product, ham, which likewise falls
2

under Class 47. Alleged date of first use of the trademark by respondent was
on February 10, 1959.
After due publication of the application, petitioner filed an opposition, in
accordance with Section 8 of Republic Act No. 166, otherwise known as the
Trademark Law, as amended. Basis of petitioner's opposition was Section
4(d) of said law, which provides as unregistrable:
a mark which consists of or comprises a mark or tradename
which so resembles a mark or tradename registered in the
Philippines or a mark or tradename previously used in the
Philippines by another and not abandoned, as to be likely,
when applied to or used in connection with the goods,
business services of the applicant, to cause confusion or
mistake or to deceive purchasers.
The parties submitted the case for decision without presenting any evidence:
thereafter the Director of patents rendered a decision allowing registration of
the trademark "CAMIA" in favor of Ng Sam.

allow such registration could likely result in confusion, mistake or deception

to the consumers. Conversely, where no confusion is likely to arise, as in this
case, registration of a similar or even Identical mark may be allowed.
The term "CAMIA" is descriptive of a whole genus of garden plants with
fragrant white flowers. Some people call the "CAMIA" the "white ginger
plant" because of its tuberous roots, while children refer to it as the butterfly
flower because of its shape. Being a generic and common term, its
appropriation as a trademark, albeit in a fanciful manner in that it bears no
relation to the product it Identifies, is valid. However, the degree of
exclusiveness accorded to each user is closely restricted. 3
The records of this case disclose that the term "CAMIA" has been registered
as a trademark not only by petitioner but by two (2) other concerns, as
follows:
1. CAMIA Application No. 280 Registration No. SR-320
Date Registered May 26, 1960 Owner Everbright
Development Company Business Address 310 M. H. del
Pilar Grace Park, Caloocan City Class 4 Thread and Yarn

Petitioner moved for a reconsideration, but the same was denied.

Hence, this petition.

2. CAMIA and Representation Application No. 538 Date

Filed August 10, 1945 Date Registered - April 20, 1946
Owner F.E. Zuellig, Inc. Business Address 55 Rosario
St., Manila Class 43 Particular Good on which mark is
used: Textiles, Embroideries laces, etc.

A rudimentary precept in trademark protection is that "the right to a

trademark is a limited one, in the sense that others may used the same mark
on unrelated goods." 1 Thus, as pronounced by the United States Supreme
Court in the case of American Foundries vs. Robertson 2, "the mere fact that
one person has adopted and used a trademark on his goods does not prevent
the adoption and use of the same trademark by others on articles of a
different description."

A trademark is designed to Identify the user. But it should be so distinctive

and sufficiently original as to enable those who come into contact with it to
recognize instantly the Identity of the user. " It must be affirmative and
definite, significant and distinctive, capable to indicate origin." 4

Such restricted right over a trademark is likewise reflected in our Trademark

law. Under Section 4(d) of the law, registration of a trademark which so
resembles another already registered or in use should be denied, where to

It is evident that "CAMIA" as a trademark is far from being distinctive. By

itself, it does not Identify petitioner as the manufacturer or producer of the
goods upon which said mark is used, as contra-distinguished to trademarks
3

derived from coined words such as "Rolex", "Kodak" or "Kotex". It has been
held that if a mark is so commonplace that it cannot be readily distinguished
from others, then it is apparent that it cannot Identify a particular business;
and he who first adopted it cannot be injured by any subsequent
appropriation or imitation by others, and the public will not be deceived." 5
The trademark "CAMIA" is used by petitioner on a wide range of products:
lard, butter, cooking oil, abrasive detergents, polishing materials and soap of
all kinds. Respondent desires to use the same on his product, ham. While
ham and some of the products of petitioner are classified under Class 47
(Foods and Ingredients of Food), this alone cannot serve as the decisive
factor in the resolution of whether or not they 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.
In his decision, the Director of Patents enumerated the factors that set
respondent's product 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 be likely to
attribute to a common origin. (p. 23, Rollo).

The observation 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 or origin of the product of the
other. "Ham" is not a daily food fare for the average consumer. One
purchasing ham would exercise a more cautious inspection of what he buys
on account of it price. Seldom, if ever, is the purchase of said food product
delegated to household helps, except perhaps to those who, like the cooks,
are expected to know their business. Besides, there can be no likelihood for
the consumer of respondent's ham to confuse its source as anyone but
respondent. The facsimile of the label attached by him on his product, his
business name "SAM'S HAM AND BACON FACTORY" written in bold
white letters against a reddish orange background 6, is certain to catch the eye
of the class of consumers to which he caters.
In addition, the goods of petitioners are basically derived from vegetable oil
and animal fats, while the product of respondent is processed from pig's legs.
A consumer would not reasonably assume that, petitioner has so diversified
its business as to include the product of respondent.
Mr. Runolf Callman, in Section 80.3, VOL. I, p. 1121 of his book, Unfair
Competition and Trade Marks, declare:
While confusion of goods can only be evident, where the
litigants are actually in competition, confusion of business
may arise between non-competitive interests as well. This is
true whether or not the trademarks are registered. Sec. 16 of
the Trademark Act, in referring to 'merchandise of
substantially the same descriptive properties, embraces
competitive and non-competitive trademark infringement
but it is not so extensive as to be applicable to cases where
the public would not reasonably expect the plaintiff to make
or sell the same class of goods as those made or sold by the
defendant. (Emphasis supplied).

In fine, We hold that the businesss of the parties are non-competitive and
their products so unrelated that the use of Identical trademarks is not likely to
give rise to confusion, much less cause damage to petitioner.
WHEREFORE, the instant petition is hereby dismissed and the decision of
the Director of Patents in Inter Partes Case No. 231 affirmed in toto. Costs
against petitioner.

purchasers, some measure of deception may take effect upon them. Thus, the
use of the same trademark on the ham would likely result in confusion as to
the source or origin thereof, to the damage or detriment of the petitioner. The
purpose of the law will be served better by not allowing the registration of
the trademark "CAMIA" for respondent's ham, with such a limitless number
of other words respondent may choose from, as trademark for his product.

SO ORDERED.
Barredo (Chairman), Aquino, Concepcion, Jr., Guerrero, Abad Santos and
De Castro, JJ., concur.

Separate Opinions
DE CASTRO, J., dissenting:

Separate Opinions

DE CASTRO, J., dissenting:

I vote to grant the petition of the Philippine Refining Co. Inc. As the
registered owner and prior user of the trademark, "CAMIA" on a wide
variety of products such as lard, butter, cooking oil, abrasive detergents,
polishing materials and soap of all kinds, the respondent's ham which comes
under the same classification of "Food and Ingredients of Foods" under
which petitioner has registered its trademark, if given the same trademark,
"CAMIA" is likely to confuse the public that the source of the ham is the
petitioner. if the respondent's ham is of poor quality, petitioner's business
may thus be affected adversely as a result, while from the standpoint of the

I vote to grant the petition of the Philippine Refining Co. Inc. As the
registered owner and prior user of the trademark, "CAMIA" on a wide
variety of products such as lard, butter, cooking oil, abrasive detergents,
polishing materials and soap of all kinds, the respondent's ham which comes
under the same classification of "Food and Ingredients of Foods" under
which petitioner has registered its trademark, if given the same trademark,
"CAMIA" is likely to confuse the public that the source of the ham is the
petitioner. if the respondent's ham is of poor quality, petitioner's business
may thus be affected adversely as a result, while from the standpoint of the
purchasers, some measure of deception may take effect upon them. Thus, the
use of the same trademark on the ham would likely result in confusion as to
the source or origin thereof, to the damage or detriment of the petitioner. The
purpose of the law will be served better by not allowing the registration of
the trademark "CAMIA" for respondent's ham, with such a limitless number
of other words respondent may choose from, as trademark for his product.
Footnotes

Republic of the Philippines

SUPREME COURT
Manila

An examination of the trademark of petitioner-appellee and

that of registrant-appellant convinces us that there is a
difference in the design and the coloring of, as well as in the
words on the ribbons, the two trademarks.

FIRST DIVISION
G.R. No. L-44707 August 31, 1982
HICKOK MANUFACTURING CO., INC., petitioner,
vs.
COURT OF APPEALS ** and SANTOS LIM BUN LIONG, respondents.
Sycip, Salazar, Feliciano, Hernandez & Castillo Law Offices for petitioner.
Taada, Sanchez, Tafiada & Tanada Law Offices and George R. Arbolario
for respondents.
&
TEEHANKEE, J.:1wph1.t
The Court affirms on the strength of controlling doctrine as reaffirmed in the
companion case of Esso Standard Eastern Inc. vs. Court of Appeals 1
promulgated also on this date and the recent case of Philippine Refining Co.,
Inc. vs. Ng Sam and Director of Parents 2 the appealed decision of the Court
of Appeals reversing the patent director's decision and instead dismissing
petitioner's petition to cancel private respondent's registration of the
trademark of HICKOK for its Marikina shoes as against petitioner's earlier
registration of the same trademark for its other non-competing products.
On the basis of the applicable reasons and considerations extensively set
forth in the above-cited controlling precedents and the leading case of Acoje
Mining Co., Inc. vs. Director of Patents 3 on which the appellate court
anchored its decision at bar, said decision must stand affirmed, as follows:
1wph1.t

In petitioner-appellee's trademark for handkerchiefs (Exhibit

'Q'), the word 'HICKOK' is in red with white background in
the middle of two branches of laurel in light gold. At the
lower part thereof is a ribbon on which are the words
'POSITIVELY FINER' in light gold. In the trademark for
underwear (Exhibit 'R'), the word 'HICKOK' is also in red
with white background in the middle of two branches of
laurel in dark gold with similar ribbons and the words
'POSITIVELY FINER' in dark gold. And in the trademark
for briefs (Exhibit 'S'), the word 'HICKOK' is in white but
with red background in the middle of two branches of laurel,
the leaves being in dark gold with white edges, and with
similar ribbon and words 'POSITIVELY FINER' in dark
gold. In contrast, in respondent-appellant's trademark
(Exhibit 'J'), the word 'HICKOK' is in white with gold
background between the two branches of laurel in red, with
the word 'SHOES' also in red below the word 'HICKOK'.t
@lF The ribbon is in red with the words 'QUALITY AT
YOUR FEET,' likewise in red.
While the law does not require that the competing
trademarks be Identical, the two marks must be considered
in their entirety, as they appear in the respective labels, in
relation to the goods to which they are attached.
The case of H.E. Heacock Co. vs. American Trading Co., 56
Phil. 763, cited by petitioner - appellee, is hardly applicable
here, because the defendant in that case imported and sold
merchandise which are very similar to, and precisely of the
same designs as, that imported and sold by the plaintiff. ...
6

In the recent case of Acoje Mining Co., Inc. vs. Director of

Patents, 38 SCRA 480, 482-483, the Supreme Court stated 1wph1.t
Can it be said then that petitioner's
application would be likely to cause
confusion or mistake on the part of the
buying public? The answer should be in the
negative. It does not defy common sense to
assert that a purchaser would be cognizant
of the product he is buying. There is quite a
difference between soy sauce and edible oil.
If one is in the market for the former, he is
not likely to purchase the latter just because
on the trademark LOTUS. Even on the rare
occasion that a mistake does occur, it can
easily be rectified. Moreover, there is no
denying that the possibility of confusion is
remote considering petitioner's trademark
being in yellow and red while that of the
Philippine Refining Company being in green
and yellow, and the much smaller size of
petitioner's trademark. When regard is had
for the principle that the two trademarks in
their entirety as they appear in their
respective labels should be considered in
relation to the goods advertised before
registration could be denied, the conclusion
is inescapable that respondent Director
ought to have reached a different
conclusion. Petitioner has successfully made
out a case for registration.
From the statements of the Supreme Court in the two cases
aforementioned, we gather that there must be not only

resemblance between the trademark of the plaintiff and that

of the defendant, but also similarity of the goods to which
the two trademarks are respectively attached.
Since in this case the trademark of petitioner-appellee is used
in the sale of leather wallets, key cases, money folds made of
leather, belts, men's briefs, neckties, handkerchiefs and men's
socks, and the trademark of registrant-appellant is used in
the sale of shoes, which have different channels of trade, the
Director of Patents, as in the case of Acoje Mining Co., Inc.
vs. Director of Patents, supra, 'ought to have reached a
different conclusion.
It is established doctrine, as held in the above-cited cases, that "emphasis
should be on the similarity of the products involved and not on the arbitrary
classification or general description of their properties or characteristics" 4
and that "the mere fact that one person has adopted and used a trademark on
his goods does not prevent the adoption and use of the same trademark by
others on unrelated articles of a different kind." 5 Taking into account the
facts of record that petitioner, a foreign corporation registered the trademark
for its diverse articles of men's wear such as wallets, belts and men's briefs
which are all manufactured here in the Philippines by a licensee Quality
House, Inc. (which pays a royalty of 1-1/2 % of the annual net sales) but are
so labelled as to give the misimpression that the said goods are of foreign
(stateside) manufacture and that respondent secured its trademark registration
exclusively for shoes (which neither petitioner nor the licensee ever
manufactured or traded in) and which are clearly labelled in block letters as
"Made in Marikina, Rizal, Philippines," no error can be attributed to the
appellate court in upholding respondent's registration of the same trademark
for his unrelated and non-competing product of Marikina shoes. 6
ACCORDINGLY, the petition is dismissed and the appealed judgment of the
Court of Appeals is hereby affirmed.
Melencio-Herrera, Plana, Relova and Gutierrez, Jr., JJ., concur.1wph1.t
7

Makasiar, J., is on leave.

Vasquez, J., took no part.

Republic of the Philippines
SUPREME COURT
Manila

business, factory and patent rights of its predecessor La Oriental Tobacco

Corporation, one of the rights thus acquired having been the use of the
trademark ESSO on its cigarettes, for which a permit had been duly granted
by the Bureau of Internal Revenue.

FIRST DIVISION
G.R. No. L-29971 August 31, 1982
ESSO STANDARD EASTERN, INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS ** and UNITED
CIGARETTE CORPORATION, respondents.
&

Barely had respondent as such successor started manufacturing cigarettes

with the trademark ESSO, when petitioner commenced a case for trademark
infringement in the Court of First Instance of Manila. The complaint alleged
that the petitioner had been for many years engaged in the sale of petroleum
products and its trademark ESSO had acquired a considerable goodwill to
such an extent that the buying public had always taken the trademark ESSO
as equivalent to high quality petroleum products. Petitioner asserted that the
continued use by private respondent of the same trademark ESSO on its
cigarettes was being carried out for the purpose of deceiving the public as to
its quality and origin to the detriment and disadvantage of its own products.

TEEHANKEE, J.:1wph1.t
The Court affirms on the basis of controlling doctrine the appealed decision
of the Court of Appeals reversing that of the Court of First Instance of
Manila and dismissing the complaint filed by herein petitioner against private
respondent for trade infringement for using petitioner's trademark ESSO,
since it clearly appears that the goods on which the trademark ESSO is used
by respondent is non-competing and entirely unrelated to the products of
petitioner so that there is no likelihood of confusion or deception on the part
of the purchasing public as to the origin or source of the goods.
Petitioner Esso Standard Eastern, Inc., 1 then a foreign corporation duly
licensed to do business in the Philippines, is engaged in the sale of petroleum
products which are Identified with its trademark ESSO (which as successor
of the defunct Standard Vacuum Oil Co. it registered as a business name with
the Bureaus of Commerce and Internal Revenue in April and May, 1962).
Private respondent in turn is a domestic corporation then engaged in the
manufacture and sale of cigarettes, after it acquired in November, 1963 the

In its answer, respondent admitted that it used the trademark ESSO on its
own product of cigarettes, which was not Identical to those produced and
sold by petitioner and therefore did not in any way infringe on or imitate
petitioner's trademark. Respondent contended that in order that there may be
trademark infringement, it is indispensable that the mark must be used by one
person in connection or competition with goods of the same kind as the
complainant's.
The trial court, relying on the old cases of Ang vs. Teodoro 2 and Arce &
Sons, Inc. vs. Selecta Biscuit Company, 3 referring to related products,
decided in favor of petitioner and ruled that respondent was guilty of
infringement of trademark.
On appeal, respondent Court of Appeals found that there was no trademark
infringement and dismissed the complaint. Reconsideration of the decision
having been denied, petitioner appealed to this Court by way of certiorari to
reverse the decision of the Court of Appeals and to reinstate the decision of
8

the Court of First Instance of Manila. The Court finds no ground for granting
the petition.

goods" 9 which the Court has likewise adopted and uniformly recognized and
applied. 10

The law defines infringement as the use without consent of the trademark
owner of any "reproduction, counterfeit, copy or colorable limitation of any
registered mark or tradename in connection with the sale, offering for sale, or
advertising of any goods, business or services on 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
limitation to labels, signs, prints, packages, wrappers, receptacles or
advertisements intended to be used upon or in connection with such goods,
business or services." 4 Implicit in this definition is the concept that the goods
must be so related that there is a likelihood either of confusion of goods or
business. 5 But likelihood of confusion is a relative concept; to be determined
only according to the particular, and sometimes peculiar, circumstances of
each case. 6 It is unquestionably true that, as stated in Coburn vs. Puritan
Mills, Inc. 7 "In trademark cases, even more than in other litigation, precedent
must be studied in the light of the facts of the particular case.

Goods are related when they belong to the same class or have the same
descriptive properties; when they possess the same physical attributes or
essential characteristics with reference to their form, composition, texture or
quality. They may also be related because they serve the same purpose or are
sold in grocery stores. 11 Thus, biscuits were held related to milk because they
are both food products. 12 Soap and perfume, lipstick and nail polish are
similarly related because they are common household items now a days. 13
The trademark "Ang Tibay" for shoes and slippers was disallowed to be used
for shirts and pants because they belong to the same general class of goods. 14
Soap and pomade although non- competitive, were held to be similar or to
belong to the same class, since both are toilet articles. 15 But no confusion or
deception can possibly result or arise when the name "Wellington" which is
the trademark for shirts, pants, drawers and other articles of wear for men,
women and children is used as a name of a department store. 16

It is undisputed that the goods on which petitioner uses the trademark ESSO,
petroleum products, and the product of respondent, cigarettes, are noncompeting. But as to whether trademark infringement exists depends for the
most part upon whether or not the goods are so related that the public may
be, or is actually, deceived and misled that they came from the same maker
or manufacturer. For non-competing goods may be those which, though they
are not in actual competition, are so related to each other that it might
reasonably be assumed that they originate from one manufacturer. Noncompeting goods may also be those which, being entirely unrelated, could
not reasonably be assumed to have a common source. in the former case of
related goods, confusion of business could arise out of the use of similar
marks; in the latter case of non-related goods, it could not. 8 The vast
majority of courts today follow the modern theory or concept of "related

Thus, in Acoje Mining Co., Inc. vs. Director of Patents, 17 the Court, through
now Chief Justice Fernando, reversed the patent director's decision on the
question of "May petitioner Acoje Mining Company register for the purpose
of advertising its product, soy sauce, the trademark LOTUS, there being
already in existence one such registered in favor of the Philippine Refining
Company for its product, edible oil, it being further shown that the trademark
applied for is in smaller type, colored differently, set on a background which
is dissimilar as to yield a distinct appearance?" and ordered the granting of
petitioner's application for registration ruling that "there is quite a difference
between soy sauce and edible oil. If one is in the market for the former, he is
not likely to purchase the latter just because of the trademark LOTUS" and
"when regard is had for the principle that the two trademarks in their entirety
as they appear in their respective labels should be considered in relation to
the goods advertised before registration could be denied, the conclusion is
inescapable that respondent Director ought to have reached a different
conclusion. "
9

By the same token, in the recent case of Philippine Refining Co., Inc. vs. Ng
Sam and Director of Patents, 18 the Court upheld the patent director's
registration of the same trademark CAMIA for therein respondent's product
of ham notwithstanding its already being used by therein petitioner for a
wide range of products: lard butter, cooking oil, abrasive detergents,
polishing materials and soap of all kinds. The Court, after noting that the
same CAMIA trademark had been registered by two other companies,
Everbright Development Company and F. E. Zuellig, Inc. for their respective
products of thread and yarn (for the former) and textiles, embroideries and
laces (for the latter) ruled that "while ham and some of the products of
petitioner are classified under Class 47 (Foods and Ingredients of Food), this
alone cannot serve as the decisive factor in the resolution of whether or not
they 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." The Court, therefore, concluded that "In fine,
We hold that the businesses of the parties are non-competitive and their
products so unrelated that the use of Identical trademarks is not likely to give
rise to confusion, much less cause damage to petitioner."
In the situation before us, the goods are obviously different from each other
with "absolutely no iota of similitude" 19 as stressed in respondent court's
judgment. They are so foreign to each other as to make it unlikely that
purchasers would think that petitioner is the manufacturer of respondent's
goods.t@lF The mere fact that one person has adopted and used a
trademark on his goods does not prevent the adoption and use of the same
trademark by others on unrelated articles of a different kind. 20
Petitioner uses the trademark ESSO and holds certificate of registration of
the trademark for petroleum products, including aviation gasoline, grease,
cigarette lighter fluid and other various products such as plastics, chemicals,
synthetics, gasoline solvents, kerosene, automotive and industrial fuel,
bunker fuel, lubricating oil, fertilizers, gas, alcohol, insecticides and the
ESSO Gasul" burner, while respondent's business is solely for the
manufacture and sale of the unrelated product of cigarettes. The public
knows too well that petitioner deals solely with petroleum products that there

is no possibility that cigarettes with ESSO brand will be associated with

whatever good name petitioner's ESSO trademark may have generated.
Although petitioner's products are numerous, they are of the same class or
line of merchandise which are non-competing with respondent's product of
cigarettes, which as pointed out in the appealed judgment is beyond
petitioner's "zone of potential or natural and logical expansion" 21 When a
trademark is used by a party for a product in which the other party does not
deal, the use of the same trademark on the latter's product cannot be validly
objected to. 22
Another factor that shows that the goods involved are non-competitive and
non-related is the appellate court's finding that they flow through different
channels of trade, thus: "The products of each party move along and are
disposed through different channels of distribution. The (petitioner's)
products are distributed principally through gasoline service and lubrication
stations, automotive shops and hardware stores. On the other hand, the
(respondent's) cigarettes are sold in sari-sari stores, grocery stores, and other
small distributor outlets. (Respondent's) cigarettes are even peddled in the
streets while (petitioner's) 'gasul' burners are not. Finally, there is a marked
distinction between oil and tobacco, as well as between petroleum and
cigarettes. Evidently, in kind and nature the products of (respondent) and of
(petitioner) are poles apart." 23
Respondent court correctly ruled that considering the general appearances of
each mark as a whole, the possibility of any confusion is unlikely. A
comparison of the labels of the samples of the goods submitted by the parties
shows a great many differences on the trademarks used. As pointed out by
respondent court in its appealed decision, "(A) witness for the plaintiff, Mr.
Buhay, admitted that the color of the "ESSO" used by the plaintiff for the
oval design where the blue word ESSO is contained is the distinct and unique
kind of blue. In his answer to the trial court's question, Mr. Buhay informed
the court that the plaintiff never used its trademark on any product where the
combination of colors is similar to the label of the Esso cigarettes," and
"Another witness for the plaintiff, Mr. Tengco, testified that generally, the
plaintiff's trademark comes all in either red, white, blue or any combination
10

of the three colors. It is to be pointed out that not even a shade of these colors
appears on the trademark of the appellant's cigarette. The only color that the
appellant uses in its trademark is green." 24
Even the lower court, which ruled initially for petitioner, found that a
"noticeable difference between the brand ESSO being used by the defendants
and the trademark ESSO of the plaintiff is that the former has a rectangular
background, while in that of the plaintiff the word ESSO is enclosed in an
oval background."
In point of fact and time, the Court's dismissal of the petition at bar was
presaged by its Resolution of May 21, 1979 dismissing by minute resolution
the petition for review for lack of merit in the Identical case of Shell
Company of the Philippines, Ltd vs. Court of Appeals 25, wherein the Court
thereby affirmed the patent office's registration of the trademark SHELL as
used in the cigarettes manufactured by therein respondent Fortune Tobacco
Corporation notwithstanding the therein petitioner Shell Company's
opposition thereto as the prior registrant of the same trademark for its
gasoline and other petroleum trademarks, on the strength of the controlling

authority of Acoje Mining Co. vs. Director of Patents, Supra, and the same
rationale that "(I)n the Philippines, where buyers of appellee's (Fortune
Corp.'s) cigarettes, which are low cost articles, can be more numerous
compared to buyers of the higher priced petroleum and chemical products of
appellant (Shell Co.) and where appellant (Shell) is known to be in the
business of selling petroleum and petroleum-based chemical products, and no
others, it is difficult to conceive of confusion in the minds of the buying
public in the sense it can be thought that appellant (Shell) is the manufacturer
of appellee's (Fortune's) cigarettes, or that appellee (Fortune) is the
manufacturer or processor of appellant's (Shell's) petroleum and chemical
products." 26
ACCORDINGLY, the petition is dismissed and the decision of respondent
Court of Appeals is hereby affirmed.
Melencio-Herrera, Plana, Relova and Gutierrez, Jr., JJ., concur.1wph1.t
Makasiar, J., is on leave.
Vasquez, J., took no part.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 120900

July 20, 2000

CANON KABUSHIKI KAISHA, petitioner,

vs.
COURT OF APPEALS and NSR RUBBER CORPORATION,
respondents.
GONZAGA-REYES, J.:

Before us is a petition for review that seeks to set aside the Decision 1 dated
February 21, 1995 of the Court of Appeals in CA-GR SP No. 30203, entitled
"Canon Kabushiki Kaisha vs. NSR Rubber Corporation" and its Resolution
dated June 27, 1995 denying the motion for reconsideration of herein
petitioner Canon Kabushiki Kaisha (petitioner).
On January 15, 1985, private respondent NSR Rubber Corporation (private
respondent) filed an application for registration of the mark CANON for
sandals in the Bureau of Patents, Trademarks, and Technology Transfer
(BPTTT). A Verified Notice of Opposition was filed by petitioner, a foreign
corporation duly organized and existing under the laws of Japan, alleging
that it will be damaged by the registration of the trademark CANON in the
name of private respondent. The case was docketed as Inter Partes Case No.
3043.
11

Petitioner moved to declare private respondent in default for its failure to file
its answer within the prescribed period. The BPTTT then declared private
respondent in default and allowed petitioner to present its evidence ex-parte.
Based on the records, the evidence presented by petitioner consisted of its
certificates of registration for the mark CANON in various countries
covering goods belonging to class 2 (paints, chemical products, toner, and
dye stuff). Petitioner also submitted in evidence its Philippine Trademark
Registration No. 39398, showing its ownership over the trademark CANON
also under class 2.
On November 10, 1992, the BPTTT issued its decision dismissing the
opposition of petitioner and giving due course to private respondent's
application for the registration of the trademark CANON. On February 16,
1993, petitioner appealed the decision of the BPTTT with public respondent
Court of Appeals that eventually affirmed the decision of BPTTT. Hence, this
petition for review.
Petitioner anchors this instant petition on these grounds:
A) PETITIONER IS ENTITLED TO EXCLUSIVE USE OF THE
MARK CANON BECAUSE IT IS ITS TRADEMARK AND IS
USED ALSO FOR FOOTWEAR.
B) TO ALLOW PRIVATE RESPONDENT TO REGISTER CANON
FOR FOOTWEAR IS TO PREVENT PETITIONER FROM USING
CANON FOR VARIOUS KINDS OF FOOTWEAR, WHEN IN
FACT, PETITIONER HAS EARLIER USED SAID MARK FOR
SAID GOODS.
C) PETITIONER IS ALSO ENTITLED TO THE RIGHT TO
EXCLUSIVELY USE CANON TO PREVENT CONFUSION OF
BUSINESS.

D) PETITIONER IS ALSO ENTITLED TO THE EXCLUSIVE USE

OF CANON BECAUSE IT FORMS PART OF ITS CORPORATE
NAME, PROTECTED BY THE PARIS CONVENTION.2
The BPTTT and the Court of Appeals share the opinion that the trademark
"CANON" as used by petitioner for its paints, chemical products, toner, and
dyestuff, can be used by private respondent for its sandals because the
products of these two parties are dissimilar. Petitioner protests the
appropriation of the mark CANON by private respondent on the ground that
petitioner has used and continues to use the trademark CANON on its wide
range of goods worldwide. Allegedly, the corporate name or tradename of
petitioner is also used as its trademark on diverse goods including footwear
and other related products like shoe polisher and polishing agents. To lend
credence to its claim, petitioner points out that it has branched out in its
business based on the various goods carrying its trademark CANON3,
including footwear which petitioner contends covers sandals, the goods for
which private respondent sought to register the mark CANON. For petitioner,
the fact alone that its trademark CANON is carried by its other products like
footwear, shoe polisher and polishing agents should have precluded the
BPTTT from giving due course to the application of private respondent.
We find the arguments of petitioner to be unmeritorious. Ordinarily, the
ownership of a trademark or tradename is a property right that the owner is
entitled to protect4 as mandated by the Trademark Law.5 However, when a
trademark is used by a party for a product in which the other party does not
deal, the use of the same trademark on the latter's product cannot be validly
objected to.6
A review of the records shows that with the order of the BPTTT declaring
private respondent in default for failure to file its answer, petitioner had
every opportunity to present ex-parte all of its evidence to prove that its
certificates of registration for the trademark CANON cover footwear. The
certificates of registration for the trademark CANON in other countries and
in the Philippines as presented by petitioner, clearly showed that said
certificates of registration cover goods belonging to class 2 (paints, chemical
12

products, toner, dyestuff). On this basis, the BPTTT correctly ruled that since
the certificate of registration of petitioner for the trademark CANON covers
class 2 (paints, chemical products, toner, dyestuff), private respondent can
use the trademark CANON for its goods classified as class 25 (sandals).
Clearly, there is a world of difference between the paints, chemical products,
toner, and dyestuff of petitioner and the sandals of private respondent.
Petitioner counters that notwithstanding the dissimilarity of the products of
the parties, the trademark owner is entitled to protection when the use of by
the junior user "forestalls the normal expansion of his business". 7 Petitioner's
opposition to the registration of its trademark CANON by private respondent
rests upon petitioner's insistence that it would be precluded from using the
mark CANON for various kinds of footwear, when in fact it has earlier used
said mark for said goods. Stretching this argument, petitioner claims that it is
possible that the public could presume that petitioner would also produce a
wide variety of footwear considering the diversity of its products marketed
worldwide.
We do not agree. Even in this instant petition, except for its bare assertions,
petitioner failed to attach evidence that would convince this Court that
petitioner has also embarked in the production of footwear products. We
quote with approval the observation of the Court of Appeals that:
"The herein petitioner has not made known that it intends to venture
into the business of producing sandals. This is clearly shown in its
Trademark Principal Register (Exhibit "U") where the products of
the said petitioner had been clearly and specifically described as
"Chemical products, dyestuffs, pigments, toner developing
preparation, shoe polisher, polishing agent". It would be taxing one's
credibility to aver at this point that the production of sandals could
be considered as a possible "natural or normal expansion" of its
business operation".8
In Faberge, Incorporated vs. Intermediate Appellate Court,9 the Director of
patents allowed the junior user to use the trademark of the senior user on the

ground that the briefs manufactured by the junior user, the product for which
the trademark BRUTE was sought to be registered, was unrelated and noncompeting with the products of the senior user consisting of after shave
lotion, shaving cream, deodorant, talcum powder, and toilet soap. The senior
user vehemently objected and claimed that it was expanding its trademark to
briefs and argued that permitting the junior user to register the same
trademark would allow the latter to invade the senior user's exclusive
domain. In sustaining the Director of Patents, this Court said that since "(the
senior user) has not ventured in the production of briefs, an item which is not
listed in its certificate of registration, (the senior user), cannot and should not
be allowed to feign that (the junior user) had invaded (the senior user's)
exclusive domain."10 We reiterated the principle that the certificate of
registration confers upon the trademark owner the exclusive right to use its
own symbol only to those goods specified in the certificate, subject to the
conditions and limitations stated therein.11 Thus, the exclusive right of
petitioner in this case to use the trademark CANON is limited to the products
covered by its certificate of registration.
Petitioner further argues that the alleged diversity of its products all over the
world makes it plausible that the public might be misled into thinking that
there is some supposed connection between private respondent's goods and
petitioner. Petitioner is apprehensive that there could be confusion as to the
origin of the goods, as well as confusion of business, if private respondent is
allowed to register the mark CANON. In such a case, petitioner would
allegedly be immensely prejudiced if private respondent would be permitted
to take "a free ride on, and reap the advantages of, the goodwill and
reputation of petitioner Canon".12 In support of the foregoing arguments,
petitioner invokes the rulings in Sta. Ana vs. Maliwat13 , Ang vs. Teodoro14
and Converse Rubber Corporation vs. Universal Rubber Products, Inc. 15.
The likelihood of confusion of goods or business is a relative concept, to be
determined only according to the particular, and sometimes peculiar,
circumstances of each case.16 Indeed, in trademark law cases, even more than
in other litigation, precedent must be studied in the light of the facts of the
particular case.17 Contrary to petitioner's supposition, the facts of this case
13

will show that the cases of Sta. Ana vs. Maliwat,, Ang vs. Teodoro and
Converse Rubber Corporation vs. Universal Rubber Products, Inc. are hardly
in point. The just cited cases involved goods that were confusingly similar, if
not identical, as in the case of Converse Rubber Corporation vs. Universal
Rubber Products, Inc. Here, the products involved are so unrelated that the
public will not be misled that there is the slightest nexus between petitioner
and the goods of private respondent.
In cases of confusion of business or origin, the question that usually arises is
whether the respective goods or services of the senior user and the junior user
are so related as to likely cause confusion of business or origin, and thereby
render the trademark or tradenames confusingly similar.18 Goods are related
when they belong to the same class or have the same descriptive properties;
when they possess the same physical attributes or essential characteristics
with reference to their form, composition, texture or quality.19 They may also
be related because they serve the same purpose or are sold in grocery stores. 20
Thus, in Esso Standard Eastern, Inc. vs. Court of Appeals, this Court ruled
that the petroleum products on which the petitioner therein used the
trademark ESSO, and the product of respondent, cigarettes are "so foreign to
each other as to make it unlikely that purchasers would think that petitioner is
the manufacturer of respondent's goods"21. Moreover, the fact that the goods
involved therein flow through different channels of trade highlighted their
dissimilarity, a factor explained in this wise:
"The products of each party move along and are disposed through
different channels of distribution. The (petitioner's) products are
distributed principally through gasoline service and lubrication
stations, automotive shops and hardware stores. On the other hand,
the (respondent's) cigarettes are sold in sari-sari stores, grocery store,
and other small distributor outlets. (Respondnet's) cigarettes are even
peddled in the streets while (petitioner's) 'gasul' burners are not.
Finally, there is a marked distinction between oil and tobacco, as
well as between petroleum and cigarettes. Evidently, in kind and

nature the products of (respondent) and of (petitioner) are poles

apart."22
Undoubtedly, the paints, chemical products, toner and dyestuff of petitioner
that carry the trademark CANON are unrelated to sandals, the product of
private respondent. We agree with the BPTTT, following the Esso doctrine,
when it noted that the two classes of products in this case flow through
different trade channels. The products of petitioner are sold through special
chemical stores or distributors while the products of private respondent are
sold in grocery stores, sari-sari stores and department stores. 23 Thus, the
evident disparity of the products of the parties in the case at bar renders
unfounded the apprehension of petitioner that confusion of business or origin
might occur if private respondent is allowed to use the mark CANON.
In its bid to bar the registration of private respondent of the mark CANON,
petitioner invokes the protective mantle of the Paris Convention. Petitioner
asserts that it has the exclusive right to the mark CANON because it forms
part of its corporate name or tradename, protected by Article 8 of the Paris
Convention, to wit:
"A tradename 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."
Public respondents BPTTT and the Court of Appeals allegedly committed an
oversight when they required petitioner to prove that its mark is a wellknown mark at the time the application of private respondent was filed.
Petitioner questions the applicability of the guidelines embodied in the
Memorandum of then Minister of Trade and Industry Roberto Ongpin
(Ongpin) dated October 25, 1983 which according to petitioner implements
Article 6bis of the Paris Convention, the provision referring to the protection
of trademarks. The memorandum reads:
"a) the mark must be internationally known;
14

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 class of goods;

Petitioner insists that what it seeks is the protection of Article 8 of the Paris
Convention, the provision that pertains to the protection of tradenames.
Petitioner believes that the appropriate memorandum to consider is that
issued by the then Minister of Trade and Industry, Luis Villafuerte, directing
the Director of patents to:

d) the person claiming must be the owner of the mark."

According to petitioner, it should not be required to prove that its trademark
is well-known and that the products are not similar as required by the quoted
memorandum. Petitioner emphasizes that the guidelines in the memorandum
of Ongpin implement Article 6bis of the Paris Convention, the provision for
the protection of trademarks, not tradenames. Article 6bis of the Paris
Convention states:
(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.
(2) A period of at least five years from the date of registration shall
be allowed for seeking the cancellation of such a mark. The countries
of the Union may provide for a period within which the prohibition
of use must be sought.
(3) No time limit shall be fixed for seeking the cancellation or the
prohibition of the use of marks or used in bad faith."

"reject all pending applications for Philippine registration of

signature and other world famous trademarks by applicants other
than the original owners or users."
As far as petitioner is concerned, the fact that its tradename is at risk would
call for the protection granted by Article 8 of the Paris Convention. Petitioner
calls attention to the fact that Article 8, even as embodied in par. 6, sec. 37 of
RA 166, mentions no requirement of similarity of goods. Petitioner claims
that the reason there is no mention of such a requirement, is "because there is
a difference between the referent of the name and that of the mark" 24 and that
"since Art. 8 protects the tradename in the countries of the Union, such as
Japan and the Philippines, Petitioner's tradename should be protected here." 25
We cannot uphold petitioner's position.
The term "trademark" is defined by RA 166, the Trademark Law, as
including "any word, name, symbol, emblem, sign or device or any
combination thereof adopted and used by a manufacturer or merchant to
identify his goods and distinguish them for those manufactured, sold or dealt
in by others."26 Tradename is defined by the same law as including
"individual names and surnames, firm names, tradenames, devices or words
used by manufacturers, industrialists, merchants, agriculturists, and others to
identify their business, vocations, or occupations; the names or titles lawfully
adopted and used by natural or juridical persons, unions, and any
manufacturing, industrial, commercial, agricultural or other organizations
engaged in trade or commerce."27 Simply put, a trade name refers to the
business and its goodwill; a trademark refers to the goods. 28

15

The Convention of Paris for the Protection of Industrial Property, otherwise

known as the Paris Convention, of which both the Philippines and Japan, the
country of petitioner, are signatories29, is a multilateral treaty that seeks to
protect industrial property consisting of patents, utility models, industrial
designs, trademarks, service marks, trade names and indications of source or
appellations of origin, and at the same time aims to repress unfair
competition.30 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.31 As
pointed out by the BPTTT:
"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 Transportation", it does
not necessarily follow that "Rapid" can no longer be
registered in Uganda, Fiji, or the Philippines.
This office is not unmindful that in 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 6bis (sic) 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. " 32
Petitioner assails the application of the case of Kabushi Kaisha Isetan vs.
Intermediate Appellate Court to this case. Petitioner points out that in the
case of Kabushi Kaisha Isetan vs. Intermediate Appellate Court, petitioner
therein was found to have never at all conducted its business in the
Philippines unlike herein petitioner who has extensively conducted its
business here and also had its trademark registered in this country. Hence,
petitioner submits that this factual difference renders inapplicable our ruling
16

in the case of Kabushi Kaisha Isetan vs. Intermediate Appellate Court that
Article 8 of the Paris Convention does not automatically extend protection to
a tradename that is in danger of being infringed in a country that is also a
signatory to said treaty. This contention deserves scant consideration. Suffice
it to say that the just quoted pronouncement in the case of Kabushi Kaisha
Isetan vs. Intermediate Appellate Court, was made independent of the factual
finding that petitioner in said case had not conducted its business in this
country.

BIENVENIDO S. REYES, JR., Sheriff, Regional Trial Court of Quezon City,

Branch 98, Respondents.

DECISION

ABAD, J.:

WHEREFORE, in view of the foregoing, the instant petition for review on

certiorari is DENIED for lack of merit.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

In late 2001 the Traders Royal Bank (TRB) proposed to sell to petitioner
Bank of Commerce (Bancommerce) for P10.4 billion its banking business
consisting of specified assets and liabilities. Bancommerce agreed subject to
prior Bangko Sentral ng Pilipinas' (BSP's) approval of their Purchase and
Assumption (P & A) Agreement. On November 8, 2001 the BSP approved
that agreement subject to the condition that Bancommerce and TRB would
set up an escrow fund of PSO million with another bank to cover TRB
liabilities for contingent claims that may subsequently be adjudged against it,
which liabilities were excluded from the purchase.

THIRD DIVISION

G.R. No. 195615

April 21, 2014

BANK OF COMMERCE, Petitioner,

vs.
RADIO PHILIPPINES NETWORK, INC., INTERCONTINENTAL
BROADCASTING CORPORATION, and BANAHA W BROADCASTING
CORPORATION, THRU BOARD OF ADMINISTRATOR, and SHERIFF

Specifically, the BSP Monetary Board Min. No. 58 (MB Res. 58) decided as
follows:

1. To approve the revised terms sheet as finalized on September 21, 2001

granting certain incentives pursuant to Circular No. 237, series of 2000 to
serve as a basis for the final Purchase and Assumption (P & A) Agreement
between the Bank of Commerce (BOC) and Traders Royal Bank (TRB);
subject to inclusion of the following provision in the P & A:

17

The parties to the P & A had considered other potential liabilities against
TRB, and to address these claims, the parties have agreed to set up an escrow
fund amounting to Fifty Million Pesos (P50,000,000.00) in cash to be
invested in government securities to answer for any such claim that shall be
judicially established, which fund shall be kept for 15 years in the trust
department of any other bank acceptable to the BSP. Any deviation therefrom
shall require prior approval from the Monetary Board.

xxxx

Following the above approval, on November 9, 2001 Bancommerce entered

into a P & A Agreement with TRB and acquired its specified assets and
liabilities, excluding liabilities arising from judicial actions which were to be
covered by the BSP-mandated escrow of P50 million.

To comply with the BSP mandate, on December 6, 2001 TRB placed P50
million in escrow with Metropolitan Bank and Trust Co. (Metrobank) to
answer for those claims and liabilities that were excluded from the P & A
Agreement and remained with TRB. Accordingly, the BSP finally approved
such agreement on July 3, 2002.

Shortly after or on October 10, 2002, acting in G.R. 138510, Traders Royal
Bank v. Radio Philippines Network (RPN), Inc., this Court ordered TRB to
pay respondents RPN, Intercontinental Broadcasting Corporation, and
Banahaw Broadcasting Corporation (collectively, RPN, et al.) actual
damages of P9,790,716.87 plus 12% legal interest and some amounts. Based
on this decision, RPN, et al.filed a motion for execution against TRB before
the Regional Trial Court (RTC) of Quezon City. But rather than pursue a levy
in execution of the corresponding amounts on escrow with Metrobank, RPN,
et al. filed a Supplemental Motion for Execution1 where they described TRB

as "now Bank of Commerce" based on the assumption that TRB had been
merged into Bancommerce.

On February 20, 2004, having learned of the supplemental application for

execution, Bancommerce filed its Special Appearance with Opposition to the
same2 questioning the jurisdiction of the RTC over Bancommerce and
denying that there was a merger between TRB and Bancommerce. On August
15, 2005 the RTC issued an Order3 granting and issuing the writ of execution
to cover any and all assets of TRB, "including those subject of the
merger/consolidation in the guise of a Purchase and Sale Agreement with
Bank of Commerce, and/or against the Escrow Fund established by TRB and
Bank of Commerce with the Metropolitan Bank and Trust Company."

This prompted Bancommerce to file a petition for certiorari with the Court of
Appeals (CA) in CA-G.R. SP 91258 assailing the RTCs Order. On
December 8, 2009 the CA4 denied the petition. The CA pointed out that the
Decision of the RTC was clear in that Bancommerce was not being made to
answer for the liabilities of TRB, but rather the assets or properties of TRB
under its possession and custody.5

In the same Decision, the CA modified the Decision of the RTC by deleting
the phrase that the P & A Agreement between TRB and Bancommerce is a
farce or "a mere tool to effectuate a merger and/or consolidation between
TRB and BANCOM." The CA Decision partly reads:

xxxx

18

We are not prepared though, unlike the respondent Judge, to declare the PSA
between TRB and BANCOM as a farce or "a mere tool to effectuate a merger
and/or consolidation" of the parties to the PSA. There is just a dearth of
conclusive evidence to support such a finding, at least at this point.
Consequently, the statement in the dispositive portion of the assailed August
15, 2005 Order referring to a merger/consolidation between TRB and
BANCOM is deleted.6

xxxx

WHEREFORE, the herein consolidated Petitions are DENIED. The assailed

Orders dated August 15, 2005 and February 22, 2006 of the respondent
Judge, are AFFIRMED with the MODIFICATION that the pronouncement of
respondent Judge in the August 15, 2005 Order that the PSA between TRB
and BANCOM is a farce or "a mere tool to effectuate a merger and/or
consolidation between TRB and BANCOM" is DELETED.

SO ORDERED.7

On January 8, 2010 RPN, et al. filed with the RTC a motion to cause the
issuance of an alias writ of execution against Bancommerce based on the CA
Decision. The RTC granted8 the motion on February 19, 2010 on the premise
that the CA Decision allowed it to execute on the assets that Bancommerce
acquired from TRB under their P & A Agreement.

On March 10, 2010 Bancommerce sought reconsideration of the RTC Order

considering that the December 8,2009 CA Decision actually declared that no
merger existed between TRB and Bancommerce. But, since the RTC had

already issued the alias writ on March 9, 2010 Bancommerce filed on March
16, 2010 a motion to quash the same, followed by supplemental Motion9 on
April 29, 2010.

On August 18, 2010 the RTC issued the assailed Order10 denying
Bancommerce pleas and, among others, directing the release to the Sheriff of
Bancommerces "garnished monies and shares of stock or their monetary
equivalent" and for the sheriff to pay 25% of the amount "to the respondents
counsel representing his attorneys fees and P200,000.00 representing his
appearance fees and litigation expenses" and the balance to be paid to the
respondents after deducting court dues.

Aggrieved, Bancommerce immediately elevated the RTC Order to the CA via

a petition for certiorari under Rule 65 to assail the Orders dated February 19,
2010 and August 18, 2010. On November 26, 2010 the CA11 dismissed the
petition outright for the supposed failure of Bancommerce to file a motion
for reconsideration of the assailed order. The CA denied Bancommerces
motion for reconsideration on February 9, 2011, prompting it to come to this
Court.

The issues this case presents are:

1. Whether or not the CA gravely erred in holding that Bancommerce had no

valid excuse in failing to file the required motion for reconsideration of the
assailed RTC Order before coming to the CA; and

2. Whether or not the CA gravely erred in failing to rule that the RTCs Order
of execution against Bancommerce was a nullity because the CA Decision of
19

December 8, 2009 in CA-G.R. SP 91258 held that TRB had not been merged
into Bancommerce as to make the latter liable for TRBs judgment debts.

Bancommerce motion for reconsideration of the February 19, 2010 Order

which granted the application for the issuance of the alias writ.

Direct filing of the petition for

Significantly, the alias writ of execution itself, the quashal of which was
sought by Bancommerce two times (via a motion to quash the writ and a
supplemental motion to quash the writ) derived its existence from the RTCs
February 19, 2010 Order. Another motion for reconsideration would have
been superfluous. The RTC had not budge on those issues in the preceding
incidents. There was no point in repeatedly asking it to reconsider.

certiorari by Bancommerce

Section 1, Rule 65 of the Rules of Court provides that a petition for certiorari
may only be filed when there is no plain, speedy, and adequate remedy in the
course of law. Since a motion for reconsideration is generally regarded as a
plain, speedy, and adequate remedy, the failure to first take recourse to is
usually regarded as fatal omission.

But Bancommerce invoked certain recognized exceptions to the rule.12 It

had to forego the filing of the required motion for reconsideration of the
assailed RTC Order because a) there was an urgent necessity for the CA to
resolve the questions it raised and any further delay would prejudice its
interests; b) under the circumstances, a motion for reconsideration would
have been useless; c) Bancommerce had been deprived of its right to due
process when the RTC issued the challenged order ex parte, depriving it of an
opportunity to object; and d) the issues raised were purely of law.

In this case, the records amply show that Bancommerces action fell within
the recognized exceptions to the need to file a motion for reconsideration
before filing a petition for certiorari.

Second. An urgent necessity for the immediate resolution of the case by the
CA existed because any further delay would have greatly prejudiced
Bancommerce. The Sheriff had been resolute and relentless in trying to
execute the judgment and dispose of the levied assets of Bancommerce.
Indeed, on April 22, 2010 the Sheriff started garnishing Bancommerces
deposits in other banks, including those in Banco de Oro-Salcedo-Legaspi
Branch and in the Bank of the Philippine Islands Ayala Paseo Branch.

Further, the Sheriff forcibly levied on Bancommerces Lipa Branch cash on

hand amounting to P1,520,000.00 and deposited the same with the
Landbank. He also seized the banks computers, printers, and monitors,
causing the temporary cessation of its banking operations in that branch and
putting the bank in an unwarranted danger of a run. Clearly, Bancommerce
had valid justifications for skipping the technical requirement of a motion for
reconsideration.

Merger and De Facto Merger

First. The filing of a motion for reconsideration would be redundant since
actually the RTCs August 18, 2010 Order amounts to a denial of
20

Merger is a re-organization of two or more corporations that results in their

consolidating into a single corporation, which is one of the constituent
corporations, one disappearing or dissolving and the other surviving. To put
it another way, merger is the absorption of one or more corporations by
another existing corporation, which retains its identity and takes over the
rights, privileges, franchises, properties, claims, liabilities and obligations of
the absorbed corporation(s). The absorbing corporation continues its
existence while the life or lives of the other corporation(s) is or are
terminated.13

The Corporation Code requires the following steps for merger or

consolidation:

(1) The board of each corporation draws up a plan of merger or

consolidation. Such plan must include any amendment, if necessary, to the
articles of incorporation of the surviving corporation, or in case of
consolidation, all the statements required in the articles of incorporation of a
corporation.

(2) Submission of plan to stockholders or members of each corporation for

approval. A meeting must be called and at least two (2) weeks notice must
be sent to all stockholders or members, personally or by registered mail. A
summary of the plan must be attached to the notice. Vote of two-thirds of the
members or of stockholders representing two thirds of the outstanding capital
stock will be needed. Appraisal rights, when proper, must be respected.

(3) Execution of the formal agreement, referred to as the articles of merger

o[r] consolidation, by the corporate officers of each constituent corporation.
These take the place of the articles of incorporation of the consolidated

corporation, or amend the articles of incorporation of the surviving

corporation.

(4) Submission of said articles of merger or consolidation to the SEC for

approval.

(5) If necessary, the SEC shall set a hearing, notifying all corporations
concerned at least two weeks before.

(6) Issuance of certificate of merger or consolidation.14

Indubitably, it is clear that no merger took place between Bancommerce and

TRB as the requirements and procedures for a merger were absent. A merger
does not become effective upon the mere agreement of the constituent
corporations.15 All the requirements specified in the law must be complied
with in order for merger to take effect. Section 79 of the Corporation Code
further provides that the merger shall be effective only upon the issuance by
the Securities and Exchange Commission (SEC) of a certificate of merger.

Here, Bancommerce and TRB remained separate corporations with distinct

corporate personalities. What happened is that TRB sold and Bancommerce
purchased identified recorded assets of TRB in consideration of
Bancommerces assumption of identified recorded liabilities of TRB
including booked contingent accounts. There is no law that prohibits this
kind of transaction especially when it is done openly and with appropriate
government approval. Indeed, the dissenting opinions of Justices Jose Catral
Mendoza and Marvic Mario Victor F. Leonen are of the same opinion. In
strict sense, no merger or consolidation took place as the records do not show
21

any plan or articles of merger or consolidation. More importantly, the SEC

did not issue any certificate of merger or consolidation.

The dissenting opinion of Justice Mendoza finds, however, that a "de facto"
merger existed between TRB and Bancommerce considering that (1) the P &
A Agreement between them involved substantially all the assets and
liabilities of TRB; (2) in an Ex Parte Petition for Issuance of Writ of
Possession filed in a case, Bancommerce qualified TRB, the petitioner, with
the words "now known as Bancommerce;" and (3) the BSP issued a Circular
Letter (series of 2002) advising all banks and non-bank financial
intermediaries that the banking activities and transaction of TRB and
Bancommerce were consolidated and that the latter continued the operations
of the former.

The idea of a de facto merger came about because, prior to the present
Corporation Code, no law authorized the merger or consolidation of
Philippine Corporations, except insurance companies, railway corporations,
and public utilities.16 And, except in the case of insurance corporations, no
procedure existed for bringing about a merger.17 Still, the Supreme Court
held in Reyes v. Blouse,18 that authority to merge or consolidate can be
derived from Section 28 (now Section 40) of the former Corporation Law
which provides, among others, that a corporation may "sell, exchange, lease
or otherwise dispose of all or substantially all of its property and assets" if
the board of directors is so authorized by the affirmative vote of the
stockholders holding at least two-thirds of the voting power. The words "or
otherwise dispose of," according to the Supreme Court, is very broad and in a
sense, covers a merger or consolidation.

It is apparent that the purpose of the resolution is not to dissolve the

[company] but merely to transfer its assets to a new corporation in exchange
for its corporation stock. This intent is clearly deducible from the provision
that the [company] will not be dissolved but will continue existing until its
stockholders decide to dissolve the same. This comes squarely within the
purview of Section 28 of the corporation law which provides, among
others, that a corporation may sell, exchange, lease, or otherwise dispose of
all its property and assets, including its good will, upon such terms and
conditions as its Board of Directors may deem expedient when authorized by
the affirmative vote of the shareholders holding at least 2/3 of the voting
power. [The phrase] "or otherwise dispose of" is very broad and in a sense
covers a merger or consolidation."19

In his book, Philippine Corporate Law,20 Dean Cesar Villanueva explained

that under the Corporation Code, "a de facto merger can be pursued by one
corporation acquiring all or substantially all of the properties of another
corporation in exchange of shares of stock of the acquiring corporation. The
acquiring corporation would end up with the business enterprise of the target
corporation; whereas, the target corporation would end up with basically its
only remaining assets being the shares of stock of the acquiring corporation."
(Emphasis supplied)

No de facto merger took place in the present case simply because the TRB
owners did not get in exchange for the banks assets and liabilities an
equivalent value in Bancommerce shares of stock. Bancommerce and TRB
agreed with BSP approval to exclude from the sale the TRBs contingent
judicial liabilities, including those owing to RPN, et al.21

But the facts in Reyes show that the Board of Directors of the Corporation
being dissolved clearly intended to be merged into the other corporations.
Said this Court:
22

The Bureau of Internal Revenue (BIR) treated the transaction between the
two banks purely as a sale of specified assets and liabilities when it rendered
its opinion22 on the tax consequences of the transaction given that there is a
difference in tax treatment between a sale and a merger or consolidation.

The pertinent provision of the P & A provides:

Article II
CONSIDERATION: ASSUMPTION OF LIABILITIES

Indubitably, since the transaction between TRB and Bancommerce was

neither a merger nor a de facto merger but a mere "sale of assets with
assumption of liabilities," the next question before the Court is whether or
not the RTC could regard Bancommerce as RPN, et al.s judgment debtor.

It is pointed out that under common law,23 if one corporation sells or

otherwise transfers all its assets to another corporation, the latter is not liable
for the debts and liabilities of the transferor if it has acted in good faith and
has paid adequate consideration for the assets, except: (1) where the
purchaser expressly or impliedly agrees to assume such debts; (2) where the
transaction amounts to a consolidation or merger of the corporations; (3)
where the purchasing corporation is merely a continuation of the selling
corporation; and (4) where the transaction is entered into fraudulently in
order to escape liability for such debts.24

In consideration of the sale of identified recorded assets and properties

covered by this Agreement, BANCOMMERCE shall assume identified
recorded TRBs liabilities including booked contingent liabilities as listed
and referred to in its Consolidated Statement of Condition as of August 31,
2001, in the total amount of PESOS: TEN BILLION FOUR HUNDRED
ONE MILLION FOUR HUNDRED THIRTY SIX THOUSAND
(P10,410,436,000.00), provided that the liabilities so assumed shall not
include:

xxxx

2. Items in litigation, both actual and prospective, against TRB which

include but not limited to the following:
But, in the first place, common law has no application in this jurisdiction
where existing statutes governing the situation are in place. Secondly, none
of the cited exceptions apply to this case.

1. Bancommerce agreed to assume those liabilities of TRB that are specified

in their P & A Agreement. That agreement specifically excluded TRBs
contingent liabilities that the latter might have arising from pending
litigations in court, including the claims of respondent RPN, et al.

2.1 Claims of sugar planters for alleged under valuation of sugar export
sales x x x;

2.2 Claims of the Republic of the Philippines for peso-denominated

certificates supposed to have been placed by the Marcos family with TRB;

23

2.3 Other liabilities not included in said Consolidated Statement of

Condition; and

2.4 Liabilities accruing after the effectivity date of this Agreement that
were not incurred in the ordinary course of business.25 (Underscoring
supplied)

2. As already pointed out above, the sale did not amount to merger or de
facto merger of Bancommerce and TRB since the elements required of both
were not present.

3. The evidence in this case fails to show that Bancommerce was a mere
continuation of TRB. TRB retained its separate and distinct identity after the
purchase. Although it subsequently changed its name to Traders Royal
Holdings, Inc. such change did not result in its dissolution. "The changing of
the name of a corporation is no more than creation of a corporation than the
changing of the name of a natural person is the begetting of a natural person.
The act, in both cases, would seem to be what the language which we use to
designate it importsa change of name and not a change of being."26 As
such, Bancommerce and TRB remained separate corporations.

4. To protect contingent claims, the BSP directed Bancommerce and TRB

to put up P50 million in escrow with another bank. It was the BSP, not
Bancommerce that fixed the amount of the escrow. Consequently, it cannot
be said that the latter bank acted in bad faith with respect to the excluded
liabilities. They did not enter into the P & A Agreement to enable TRB to
escape from its liability to creditors with pending court cases.

Further, even without the escrow, TRB continued to be liable to its creditors
although under its new name. Parenthetically, the P & A Agreement shows
that Bancommerce acquired greater amount of TRB liabilities than assets.
Article II of the P & A Agreement shows that Bancommerce assumed total
liabilities of P10,401,436,000.00 while it received total assets of only
P10,262,154,000.00. This proves the arms length quality of the transaction.

The dissenting opinion of Justice Mendoza cites certain instances indicating

the existence of a de facto merger in this case. One of these is the fact that the
P & A Agreement involved substantially all the assets and liabilities of TRB.
But while this is true, such fact alone would not prove the existence of a de
facto merger because a corporation "does not really lose its juridical
entity"27 on account of such sale. Actually, the law allows a corporation to
"sell, lease, exchange, mortgage, pledge or otherwise dispose of all or
substantially all of its properties and assets including its goodwill" to another
corporation.28 This is not merger because it recognizes the separate
existence of the two corporations that transact the sale.

The dissenting opinion of Justice Mendoza claims that another proof of a de

facto merger is that in a case, Bancommerce qualified TRB in its Ex Parte
Petition for Issuance of Writ of Possession with the words "now known as
Bancommerce." But paragraph 3 of the Ex Parte Petition shows the context
in which such qualification was made. It reads:29

3. On November 09, 2001, Bank of Commerce and Traders Royal Bank

executed and signed a Purchase and Sale Agreement. The account of the
mortgagor was among those acquired under the agreement. Photocopy of the
agreement is hereto attached as Annex "A."

24

It is thus clear that the phrase "now known as Bank of Commerce" used in
the petition served only to indicate that Bancommerce is now the former
property owners creditor that filed the petition for writ of possession as a
result of the P & A Agreement. It does not indicate a merger.

Effective July 3, 2002, the banking activities and transactions of Bank of

Commerce and Traders Royal Bank have been consolidated and the former
has carried their operations since then.

For your information and guidance.

Lastly, the dissenting opinion of Justice Mendoza cited the Circular Letter
(series of 2002) issued by the BSP advising all banks and non-bank financial
intermediaries that the banking activities and transaction of TRB and
Bancommerce were consolidated and that the latter continued the operations
of the former as an indication of a de facto merger. The Circular Letter30
reads:

(Sgd.)

ALBERTO V. REYES
Deputy Governor

CIRCULAR LETTER
(series of 2002)

TO: ALL BANK AND NON-BANK

FINANCIAL INTERMEDIARIES

The Securities and Exchange Commission approved on August 15, 2002

the Amendment of the Articles of Incorporation and By-Laws of Traders
Royal Bank on the deletion of the term "banks" and "banking" from the
corporate name and purpose, pursuant to the purchase of assets and
assumption of liabilities of Traders Royal Bank by Bank of Commerce.
Accordingly, the bank franchise of Traders Royal Bank has been
automatically revoked and Traders Royal Bank has ceased to operate as a
banking entity.

Indeed, what was "consolidated" per the above letter was the banking
activities and transactions of Bancommerce and TRB, not their corporate
existence. The BSP did not remotely suggest a merger of the two
corporations. What controls the relationship between those corporations
cannot be the BSP letter circular, which had been issued without their
participation, but the terms of their P & A Agreement that the BSP approved
through its Monetary Board.

Also, in a letter dated November 2,2005 Atty. Juan De Zuiga, Jr., Assistant
Governor and General Counsel of the BSP, clarified to the RTC the use of the
word "merger" in their January 29, 2003 letter. According to him, the word
"merger" was used "in a very loose sense x x x and merely repeated, for
convenience" the term used by the RTC.31 It further stated that "Atty.
Villanueva did not issue any legal pronouncement in the said letter, which is
merely transmittal in nature. Thus it cannot, by any stretch of construction,
be considered as binding on the BSP. What is binding to the BSP is MB Res.
25

58 referring to the aforementioned transaction between TRB and

Bancommerce as a purchase and assumption agreement."32

Since there had been no merger, Bancommerce cannot be considered as

TRBs successor-in-interest and against which the Courts Decision of
October 10, 2002 in G.R. 138510 may been forced. Bancommerce did not
hold the former TRBs assets in trust for it as to subject them to garnishment
for the satisfaction of the latters liabilities to RPN, et al. Bancommerce
bought and acquired those assets and thus, became their absolute owner.

The CA Decision in
CA-G.R. SP 91258

According to the dissenting opinion of Justice Mendoza, the CA Decision

dated December 8, 2009 did not reverse the RTCs Order causing the
issuance of a writ of execution against Bancommerce to enforce the
judgment against TRB. It also argues that the CA did not find grave abuse of
discretion on the RTCs part when it issued its August 15, 2005 Order
granting the issuance of a writ of execution. In fact, it affirmed that
order.1wphi1 Moreover, it argued that the CAs modification of the RTC
Order merely deleted an opinion there expressed and not reversed such order.

But it should be the substance of the CAs modification of the RTC Order
that should control, not some technical flaws that are taken out of context.
Clearly, the RTCs basis for holding Bancommerce liable to TRB was its
finding that TRB had been merged into Bancommerce, making the latter
liable for TRBs debts to RPN, et al. The CA clearly annulled such finding in
its December 8, 2009 Decision in CA-G.R. SP 91258, thus:

WHEREFORE, the herein consolidated Petitions are DENIED. The assailed

Orders dated August 15, 2005 and February 22, 2006 of the respondent
Judge, are AFFIRMED with the MODIFICATION that the pronouncement of
respondent Judge in the August 15, 2005 Order that the PSA between TRB
and BANCOM is a farce or "a mere tool to effectuate a merger and/or
consolidation between TRB and BANCOM" is DELETED.

SO ORDERED.33

Thus, the CA was careful in its decision to restrict the enforcement of the
writ of execution only to "TRBs properties found in Bancommerces
possession." Indeed, the CA clearly said in its decision that it was not
Bancommerce that the RTC Order was being made to answer for TRBs
judgment credit but "the assets/properties of TRB in the hands of
BANCOM." The CA then went on to state that it is not prepared, unlike the
RTC, to declare the P & A Agreement but a farce or a "mere tool to effectuate
a merger and/or consolidation." Thus, the CA deleted the RTCs reliance on
such supposed merger or consolidation between the two as a basis for its
questioned order.

The enforcement, therefore, of the decision in the main case should not
include the assets and properties that Bancommerce acquired from TRB.
These have ceased to be assets and properties of TRB under the terms of the
BSP-approved P & A Agreement between them. They are not TRB assets and
properties in the possession of Bancommerce. To make them so would be an
unwarranted departure from the CAs Decision in CA-G.R. SP 91258.

26

WHEREFORE, the petition is GRANTED. The assailed Resolution of

November 26, 2010 and the Resolution of February 9, 2011 of the Court of
Appeals both in CA-G.R. SP 116704 are REVERSED and SET ASIDE.
Accordingly, the assailed Orders dated February 19, 2010 and August 18,
2010, the Alias Writ of Execution dated March 9, 2010, all issued by the
Regional Trial Court and all orders, notices of garnishment/levy, or notices of
sale and any other action emanating from the Orders dated February 19, 2010

and August 18, 2010 in Civil Case Q-89-3580 are ANNULLED and SET
ASIDE. The Temporary Restraining Order issued by this Court on April 13,
2011 is hereby made PERMANENT.

Patents

Before us is a petition for review on certiorari which seeks to reverse

and set aside the Decision1 dated March 31, 2009 of the Court of
Appeals in CA-G.R. CV No. 88952 and the Resolution2 dated July 2,
2009, which denied reconsideration thereof. The CA reversed the
Order3 dated September 25, 2006 of the Regional Trial Court (RTC),
Branch 143, Makati City, quashing Search Warrants Nos. 05-030, 05033, 05-038, 05-022, 05-023, 05-025, 05-042 and 05-043, and the
Order4 dated March 7, 2007 denying reconsideration thereof.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 188526

November 11, 2013

CENTURY CHINESE MEDICINE CO., MING SENG CHINESE

DRUGSTORE, XIANG JIAN CHINESE DRUG STORE, TEK
SAN CHINESE DRUG STORE, SIM SIM CHINESE DRUG
STORE, BAN SHIONG TAY CHINESE DRUG STORE and/or
WILCENDO TAN MENDEZ, SHUANG YING CHINESE
DRUGSTORE, and BACLARAN CHINESE DRUG STORE,
Petitioners,
vs.
PEOPLE OF THE PHILIPPINES and LING NA LAU,
Respondents.
DECISION
PERALTA, J.:

SO ORDERED.

The antecedent facts are as follows:

Respondent Ling Na Lau, doing business under the name and style
Worldwide Pharmacy,5 is the sole distributor and registered trademark
owner of TOP GEL T.G. & DEVICE OF A LEAF papaya whitening
soap as shown by Certificate of Registration 4-2000-009881 issued to
her by the Intellectual Property Office (IPO) for a period of ten years
from August 24, 2003.6 On November 7, 2005, her representative,
Ping Na Lau, (Ping) wrote a letter7 addressed to National Bureau of
Investigation (NBI) Director Reynaldo Wycoco, through Atty. Jose
Justo Yap and Agent Joseph G. Furing (Agent Furing), requesting
assistance for an investigation on several drugstores which were
selling counterfeit whitening papaya soaps bearing the general
appearance of their products.

27

Agent Furing was assigned to the case and he executed an affidavit8

stating that: he conducted his own investigation, and on November 9
and 10, 2005, he, together with Junayd Esmael (Esmael), were able to
buy whitening soaps bearing the trademark "TOP-GEL", "T.G." &
"DEVICE OF A LEAF" with corresponding receipts from a list of
drugstores which included herein petitioners Century Chinese
Medicine Co., Min Seng Chinese Drugstore, Xiang Jiang Chinese
Drug Store, Tek San Chinese Drug Store, Sim Sim Chinese Drug
Store, Ban Shiong Tay Drugstore, Shuang Ying Chinese Drugstore,
and Baclaran Chinese Drug Store; while conducting the investigation
and test buys, he was able to confirm Ping's complaint to be true as he
personally saw commercial quantities of whitening soap bearing the
said trademarks being displayed and offered for sale at the said
drugstores; he and Esmael took the purchased items to the NBI, and
Ping, as the authorized representative and expert of Worldwide
Pharmacy in determining counterfeit and unauthorized reproductions
of its products, personally examined the purchased samples, and issued
a Certification9 dated November 18, 2005 wherein he confirmed that,
indeed, the whitening soaps bearing the trademarks "TOP-GEL",
"T.G." & "DEVICE OF A LEAF" from the subject drugstores were
counterfeit.
Esmael also executed an affidavit10 corroborating Agent Furing's
statement. Ping's affidavit11 stated that upon his personal examination
of the whitening soaps purchased from petitioners bearing the subject
trademark, he found that the whitening soaps were different from the
genuine quality of their original whitening soaps with the trademarks
"TOP-GEL", "T.G." & "DEVICE OF A LEAF" and certified that they
were all counterfeit.
On November 21, 2005, Agent Furing applied for the issuance of
search warrants before the Regional Trial Court (RTC), Branch 143,

Makati City, against petitioners and other establishments for violations

of Sections 168 and 155, both in relation to Section 170 of Republic
Act (RA) No. 8293, otherwise known as the Intellectual Property Code
of the Philippines. Section 168, in relation to Section 170, penalizes
unfair competition; while Section 155, in relation to Section 170,
punishes trademark infringement.
On November 23, 2005, after conducting searching questions upon
Agent Furing and his witnesses, the RTC granted the applications and
issued Search Warrants Nos. 05-030, 05-033, and 05-038 for unfair
competition and Search Warrants Nos. 05-022, 05-023, 05-025, 05-042
and 05-043 for trademark infringement against petitioners.
On December 5, 2005, Agent Furing filed his Consolidated Return of
Search Warrants.12
On December 8, 2005, petitioners collectively filed their Motion to
Quash13 the Search Warrants contending that their issuances violated
the rule against forum shopping; that Benjamin Yu (Yu) is the sole
owner and distributor of the product known as "TOP-GEL"; and there
was a prejudicial question posed in Civil Case No. 05-54747 entitled
Zenna Chemical Industry v. Ling Na Lau, et al., pending in Branch 93
of the RTC of Quezon City, which is a case filed by Yu against
respondent for damages due to infringement of trademark/tradename,
unfair competition with prayer for the immediate issuance of a
temporary restraining order and/or preliminary prohibitory injunction.
On January 9, 2006, respondent filed her Comment/Opposition14
thereto arguing the non-existence of forum shopping; that Yu is not a
party- respondent in these cases and the pendency of the civil case
filed by him is immaterial and irrelevant; and that Yu cannot be
considered the sole owner and distributor of "TOP GEL T.G. &
DEVICE OF A LEAF." The motion was then submitted for resolution
28

in an Order dated January 30, 2006. During the pendency of the case,
respondent, on April 20, 2006, filed a Submission15 in relation to the
Motion to Quash attaching an Order16 dated March 21, 2006 of the
IPO in IPV Case No. 10-2005-00001 filed by respondent against Yu,
doing business under the name and style of MCA Manufacturing and
Heidi S. Cua, proprietor of South Ocean Chinese Drug Stores for
trademark infringement and/or unfair competition and damages with
prayer for preliminary injunction. The Order approved therein the
parties' Joint Motion To Approve Compromise Agreement filed on
March 8, 2006. We quote in its entirety the Order as follows:
The Compromise Agreement between the herein complainant and
respondents provides as follows:
1. Respondents acknowledge the exclusive right of
Complainant over the trademark TOP GEL T.G. & DEVICE
OF A LEAF for use on papaya whitening soap as registered
under Registration No. 4-2000-009881 issued on August 24,
2003.
2. Respondents acknowledge the appointment by Zenna
Chemical Industry Co., Ltd. of Complainant as the exclusive
Philippine distributor of its products under the tradename and
trademark TOP GEL MCA & MCA DEVICE (A SQUARE
DEVICE CONSISTING OF A STYLIZED
REPRESENTATION OF A LETTER "M" ISSUED " OVER
THE LETTER "CA") as registered under Registration No. 41996-109957 issued on November 17, 2000, as well as the
assignment by Zenna Chemical Industry Co., Ltd. to
Complainant of said mark for use on papaya whitening soap.
3. Respondents admit having used the tradename and
trademark aforesaid but after having realized that Complainant

is the legitimate assignee of TOP GEL MCA & MCA DEVICE

and the registered owner of TOP GEL T.G. & DEVICE OF A
LEAF, now undertake to voluntarily cease and desist from
using the aforesaid tradename and trademark and further
undertake not to manufacture, sell, distribute, and otherwise
compete with Complainant, now and at anytime in the future,
any papaya whitening soap using or bearing a mark or name
identical or confusingly similar to, or constituting a colorable
imitation of, the tradename and trademark TOP GEL MCA &
MCA DEVICE and/or TOP GEL T.G. & DEVICE OF A LEAF
as registered and described above.
4. Respondents further undertake to withdraw and/or dismiss
their counterclaim and petition to cancel and/or revoke
Registration No. 4-2000-009881 issued to Complainant.
Respondents also further undertake to pull out within 45 days
from approval of the Compromise Agreement all their products
bearing a mark or name identical or confusingly similar to, or
constituting a colorable imitation of, the tradename and
trademark TOP GEL MCA & MCA DEVICE and/or TOP GEL
T.G. & DEVICE OF A LEAF, from the market nationwide.
5. Respondents finally agree and undertake to pay Complainant
liquidated damages in the amount of FIVE HUNDRED
THOUSAND (Php500,000.00) PESOS for every breach or
violation of any of the foregoing undertakings which
complainant may enforce by securing a writ of execution from
this Office, under this case.
6. Complainant, on the other hand, agrees to waive all her
claim for damages against Respondents as alleged in her
complaint filed in the Intellectual Property Office only.
29

7. The Parties hereby agree to submit this Compromise

Agreement for Approval of this Office and pray for issuance of
a decision on the basis thereof.
Finding the Compromise Agreement to have been duly executed and
signed by the parties and/or their representatives/counsels and the
terms and conditions thereof to be in conformity with the law, morals,
good customs, public order and public policy, the same is hereby
APPROVED. Accordingly, the above-entitled case is DISMISSED as
all issues raised concerning herein parties have been rendered MOOT
AND ACADEMIC.
SO ORDERED.17
On September 25, 2006, the RTC issued its Order18 sustaining the
Motion to Quash the Search Warrants, the dispositive portion of which
reads as follows:
WHEREFORE, finding that the issuance of the questioned search
warrants were not supported by probable cause, the Motion to Quash is
GRANTED. Search warrants nos. 05-030, 05-033, 05-038, 05-022, 05023, 05-025, 05-042, 05-043 are ordered lifted and recalled.
The NBI Officers who effected the search warrants are hereby ordered
to return the seized items to herein respondents within ten (10) days
from receipt of this Order.
So Ordered.19
In quashing the search warrants, the RTC applied the Rules on Search
and Seizure for Civil Action in Infringement of Intellectual Property
Rights.20 It found the existence of a prejudicial question which was
pending before Branch 93 of RTC Quezon City, docketed as Civil

Case No. 05-54747, on the determination as to who between

respondent and Yu is the rightful holder of the intellectual property
right over the trademark TOP GEL T.G. & DEVICE OF A LEAF; and
there was also a case for trademark infringement and/or unfair
competition filed by respondent against Yu before the IPO which was
pending at the time of the application for the search warrants. It is
clear, therefore, that at the time of the filing of the application for the
search warrants, there is yet no determination of the alleged right of
respondent over the subject trademark/tradename. Also, the RTC found
that petitioners relied heavily on Yu's representation that he is the sole
owner/distributor of the Top Gel whitening soap, as the latter even
presented Registration No. 4-1996-109957 from the IPO for a term of
20 years from November 17, 2000 covering the same product. There
too was the notarized certification from Zenna Chemical Industry of
Taiwan, owner of Top Gel MCA, with the caveat that the sale,
production or representation of any imitated products under its
trademark and tradename shall be dealt with appropriate legal action.
The RTC further said that in the determination of probable cause, the
court must necessarily resolve whether or not an offense exists to
justify the issuance of a search warrant or the quashal of the one
already issued. In this case, respondent failed to prove the existence of
probable cause, which warranted the quashal of the questioned search
warrants.
On November 13, 2006, respondent filed an Urgent Motion to Hold in
Abeyance the Release of Seized Evidence.21
Respondent filed a motion for reconsideration, which the RTC denied
in its Order22 dated March 7, 2007.

30

Respondent then filed her appeal with the CA. After respondent filed
her appellant's brief and petitioners their appellee's brief, the case was
submitted for decision.
On March 31, 2009, the CA rendered its assailed Decision, the
dispositive portion of which reads:
WHEREFORE, in view of the foregoing premises, judgment is hereby
rendered by us GRANTING the appeal filed in this case and
SETTING ASIDE the Order dated March 7, 2007 issued by Branch
143 of the Regional Trial Court of the National Capital Judicial Region
stationed in Makati City in the case involving Search Warrants Nos.
05-030, 05-033, 05-038, 05-022, 05-023, 05-025, 05-042, 05-043.23
In reversing the RTC's quashal of the search warrants, the CA found
that the search warrants were applied for and issued for violations of
Sections 155 and 168, in relation to Section 170, of the Intellectual
Property Code and that the applications for the search warrants were in
anticipation of criminal actions which are to be instituted against
petitioners; thus, Rule 126 of the Rules of Criminal Procedure was
applicable. It also ruled that the basis for the applications for issuance
of the search warrants on grounds of trademarks infringement and
unfair competition was the trademark TOP GEL T.G. & DEVICE OF
A LEAF; that respondent was the registered owner of the said
trademark, which gave her the right to enforce and protect her
intellectual property rights over it by seeking assistance from the NBI.

The CA did not agree with the RTC that there existed a prejudicial
question, since Civil Case No. 05-54747 was already dismissed on
June 10, 2005, i.e., long before the search warrants subject of this
appeal were applied for; and that Yu's motion for reconsideration was
denied on September 15, 2005 with no appeal having been filed
thereon as evidenced by the Certificate of Finality issued by the said
court.
Petitioners' motion for reconsideration was denied by the CA in a
Resolution dated July 2, 2009. Hence, this petition filed by petitioners
raising the issue that:
(A) THE COURT OF APPEALS ERRED AND GRAVELY
ABUSED ITS DISCRETION IN REVERSING THE
FINDINGS OF THE REGIONAL TRIAL COURT AND
HELD THAT THE LATTER APPLIED THE RULES ON
SEARCH AND SEIZURE IN CIVIL ACTIONS FOR
INFRINGEMENT OF INTELLECTUAL PROPERTY
RIGHTS.24
(B) THE COURT OF APPEALS ERRED AND GRAVELY
ABUSED ITS DISCRETION WHEN IT BASED ITS
RULING ON THE ARGUMENT WHICH WAS BROUGHT
UP FOR THE FIRST TIME IN RESPONDENT LING NA
LAU'S APPELLANT'S BRIEF.25
Petitioners contend that the products seized from their respective
stores cannot be the subject of the search warrants and seizure as those
Top Gel products are not fruits of any crime, infringed product nor
intended to be used in any crime; that they are legitimate distributors
who are authorized to sell the same, since those genuine top gel
products bore the original trademark/tradename of TOP GEL MCA,
owned and distributed by Yu. Petitioners also claim that despite the
31

RTC's order to release the seized TOP GEL products, not one had been
returned; that one or two samples from each petitioners' drugstore
would have sufficed in case there is a need to present them in a
criminal prosecution, and that confiscation of thousands of these
products was an overkill.

While

Petitioners also argue that the issue that the RTC erred in applying the
rules on search and seizure in anticipation of a civil action was never
raised in the RTC.

168.3. In particular, and without in any way limiting the scope of

protection against unfair competition, the following shall be deemed
guilty of unfair competition:

The issue for resolution is whether or not the CA erred in reversing the
RTC's quashal of the assailed search warrants.

(a) Any person, who is selling his goods and gives 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;

We find no merit in the petition.

The applications for the issuance of the assailed search warrants were
for violations of Sections 155 and 168, both in relation to Section 170
of Republic Act (RA) No. 8293, otherwise known as the Intellectual
Property Code of the Philippines. Section 155, in relation to Section
170, punishes trademark infringement; while Section 168, in relation
to Section 170, penalizes unfair competition, to wit:
Sec 155. Remedies; Infringement. Any person who shall, without the
consent of the owner of the registered mark:
155.1 Use in commerce any reproduction, counterfeit, copy or
colorable imitation of a registered mark or the same container or a
dominant feature thereof in connection with the sale, offering for sale,
distribution, advertising of any goods or services including other
preparatory steps necessary to carry out the sale of any goods or
services on or in connection with which such use is likely to cause
confusion, or to cause mistake, or to deceive; or

Sec. 168. Unfair Competition, Rights, Regulation and Remedies.

xxxx

And
SEC. 170. Penalties. - Independent of the civil and administrative
sanctions imposed by law, a criminal penalty of imprisonment from
two (2) years to five (5) years and a fine ranging from Fifty thousand
pesos (P50,000.00) to Two hundred thousand pesos (P200,000.00)
shall be imposed on any person who is found guilty of committing any
of the acts mentioned in Section 155 [Infringement], Section 168
[Unfair Competition] and Subsection 169.1 [False Designation of
Origin and False Description or Representation].
32

Thus, we agree with the CA that A.M. No. 02-1-06-SC, which

provides for the Rules on the Issuance of the Search and Seizure in
Civil Actions for Infringement of Intellectual Property Rights, is not
applicable in this case as the search warrants were not applied based
thereon, but in anticipation of criminal actions for violation of
intellectual property rights under RA 8293. It was established that
respondent had asked the NBI for assistance to conduct investigation
and search warrant implementation for possible apprehension of
several drugstore owners selling imitation or counterfeit TOP GEL
T.G. & DEVICE OF A LEAF papaya whitening soap. Also, in his
affidavit to support his application for the issuance of the search
warrants, NBI Agent Furing stated that "the items to be seized will be
used as relevant evidence in the criminal actions that are likely to be
instituted." Hence, Rule 126 of the Rules of Criminal Procedure
applies.
Rule 126 of the Revised Rules of Court, which governs the issuance of
the assailed Search Warrants, provides, to wit:
SEC. 3. Personal property to be seized. - A search warrant may be
issued for the search and seizure of personal property:
(a) Subject of the offense;
(b) Stolen or embezzled and other proceeds or fruits of the
offense; or
(c) Used or intended to be used as the means of committing an
offense.
SEC. 4. Requisites for issuing search warrant. - A search warrant shall
not issue except upon probable cause in connection with one specific
offense to be determined personally by the judge after examination

under oath or affirmation of the complainant and the witnesses he may

produce, and particularly describing the place to be searched and the
things to be seized which may be anywhere in the Philippines.
SEC. 5. Examination of complainant; record. - The judge must, before
issuing the warrant, personally examine in the form of searching
questions and answers, in writing and under oath, the complainant and
the witnesses he may produce on facts personally known to them and
attach to the record their sworn statements together with the affidavits
submitted.
A core requisite before a warrant shall validly issue is the existence of
a probable cause, meaning "the existence of such facts and
circumstances which would lead a reasonably discreet and prudent
man to believe that an offense has been committed and that the objects
sought in connection with the offense are in the place to be
searched."26 And when the law speaks of facts, the reference is to
facts, data or information personally known to the applicant and the
witnesses he may present. Absent the element of personal knowledge
by the applicant or his witnesses of the facts upon which the issuance
of a search warrant may be justified, the warrant is deemed not based
on probable cause and is a nullity, its issuance being, in legal
contemplation, arbitrary.27 The determination of probable cause does
not call for the application of rules and standards of proof that a
judgment of conviction requires after trial on the merits.28 As implied
by the words themselves, "probable cause" is concerned with
probability, not absolute or even moral certainty. The prosecution need
not present at this stage proof beyond reasonable doubt. The standards
of judgment are those of a reasonably prudent man,29 not the exacting
calibrations of a judge after a full-blown trial.30

33

The RTC quashed the search warrants, saying that (1) there exists a
prejudicial question pending before Branch 93 of the RTC of Quezon
City, docketed as Civil Case No. 05-54747, i.e., the determination as to
who between respondent and Yu is the rightful holder of the
intellectual property right over the trademark TOP GEL T.G. &
DEVICE OF A LEAF; and there was also a case for trademark
infringement and/or unfair competition filed by respondent against Yu
pending before the IPO, docketed as IPV Case No. 10-2005-00001;
and (2) Yu's representation that he is the sole distributor of the Top Gel
whitening soap, as the latter even presented Registration No. 4-1996109957 issued by the IPO to Zenna Chemical Industry as the
registered owner of the trademark TOP GEL MCA & DEVICE MCA
for a term of 20 years from November 17, 2000 covering the same
product.
We do not agree. We affirm the CA's reversal of the RTC Order
quashing the search warrants.
The affidavits of NBI Agent Furing and his witnesses, Esmael and
Ling, clearly showed that they are seeking protection for the trademark
"TOP GEL T.G. and DEVICE OF A LEAF" registered to respondent
under Certificate of Registration 4-2000-009881 issued by the IPO on
August 24, 2003, and no other. While petitioners claim that the product
they are distributing was owned by Yu with the trademark TOP GEL
MCA and MCA DEVISE under Certificate of Registration 4-1996109957, it was different from the trademark TOP GEL T.G. and
DEVICE OF A LEAF subject of the application. We agree with the
CA's finding in this wise:
x x x It bears stressing that the basis for the applications for issuances
of the search warrants on grounds of trademark infringement and
unfair competition is the trademark TOP GEL T.G. & DEVICE OF A

LEAF. Private complainant-appellant was issued a Certificate of

Registration No. 4-2000-009881 of said trademark on August 24, 2003
by the Intellectual Property Office, and is thus considered the lawful
holder of the said trademark. Being the registrant and the holder of the
same, private complainant-appellant had the authority to enforce and
protect her intellectual property rights over it. This prompted her to
request for assistance from the agents of the NBI, who thereafter
conducted a series of investigation, test buys and inspection regarding
the alleged trademark infringement by herein respondents-appellees.
Subsequently, Ping Na Lau, private complainant-appellants
representative, issued a certification with the finding that the examined
goods were counterfeit. This prompted the NBI agents to apply for the
issuances of search warrants against the respondents-appellees. Said
applications for the search warrants were granted after by Judge
Laguilles after examining under oath the applicant Agent Furing of the
NBI and his witnesses Ping Na Lau and Junayd R. Ismael.
Based on the foregoing, it is clear that the requisites for the issuance of
the search warrants had been complied with and that there is probable
cause to believe that an offense had been committed and that the
objects sought in connection with the offense were in the places to be
searched. The offense pertains to the alleged violations committed by
respondents-appellees upon the intellectual property rights of herein
private complainant-appellant, as holder of the trademark TOP GEL
T.G. & DEVICE OF A LEAF under Certificate of Registration No. 42000-009881, issued on August 24, 2003 by the Intellectual Property
Office.31
Notably, at the time the applications for the issuance of the search
warrants were filed on November 21, 2005, as the CA correctly found,
Civil Case No. Q-05-54747, which the RTC found to be where a
prejudicial question was raised, was already dismissed on June 10,
34

2005,32 because of the pendency of a case involving the same issues

and parties before the IPO. Yu's motion for reconsideration was denied
in an Order33 dated September 15, 2005. In fact, a Certificate of
Finality34 was issued by the RTC on January 4, 2007.
Moreover, the IPO case for trademark infringement and unfair
competition and damages with prayer for preliminary injunction filed
by respondent against Yu and Heidi Cua, docketed as IPV Case No.
10-2005-00001, would not also be a basis for quashing the
warrants.1avvphi1 In fact, prior to the applications for the issuance of
the assailed search warrants on November 21, 2005, the IPO had
issued an Order35 dated October 20, 2005 granting a writ of
preliminary injunction against Yu and Cua, the dispositive portion of
which reads:
WHEREFORE, the WRIT OF PRELIMINARY INJUNCTION is
hereby issued against Respondent, Benjamin Yu, doing business under
the name and style of MCA Manufacturing and Heidi S. Cua,
Proprietor of South Ocean Chinese Drug Store, and their agents,
representatives, dealers and distributors and all persons acting in their
behalf, to cease and desist using the trademark "TOP GEL T.G. &
DEVICE OF A LEAF" or any colorable imitation thereof on Papaya
whitening soaps they manufacture, sell, and/or offer for sale, and
otherwise, from packing their Papaya Whitening Soaps in boxes with
the same general appearance as those of complainant's boxes within a
period of NINETY (90) DAYS, effective upon the receipt of
respondent of the copy of the COMPLIANCE filed with this Office by
the Complainant stating that it has posted a CASH BOND in the
amount of ONE HUNDRED THOUSAND PESOS (Php100,000.00)
together with the corresponding Official Receipt Number and date
thereof. Consequently, complainant is directed to inform this Office of

actual date of receipt by Respondent of the aforementioned

COMPLIANCE.36
To inform the public of the issuance of the writ of preliminary
injunction, respondent's counsel had the dispositive portion of the
Order published in The Philippine Star newspaper on October 30,
2005.37 Thus, it was clearly stated that Yu, doing business under the
name and style of MCA Manufacturing, his agents, representatives,
dealers and distributors and all persons acting in his behalf, were to
cease and desist from using the trademark "TOP GEL & DEVICE OF
A LEAF" or any colorable imitation thereof on Papaya Whitening
soaps they manufacture, sell and/or offer for sale. Petitioners, who
admitted having derived their TOP GEL products from Yu, are,
therefore, notified of such injunction and were enjoined from selling
the same.
Notwithstanding, at the time of the application of the search warrants
on November 21, 2005, and while the injunction was in effect,
petitioners were still selling the alleged counterfeit products bearing
the trademark TOP GEL T.G. & DEVICE OF A LEAF. There exists a
probable cause for violation of respondent's intellectual property
rights, which entitles her as the registered owner of the trademark TOP
GEL and DEVICE OF A LEAF to be protected by the issuance of the
search warrants.
More importantly, during the pendency of petitioners' motion to quash
in the RTC, respondent submitted the Order dated March 8, 2006 of
the IPO in IPV Case No. 10-2005-00001, where the writ of
preliminary injunction was earlier issued, approving the compromise
agreement entered into by respondent with Yu and Cua where it was
stated, among others, that:

35

1. Respondents acknowledge the exclusive right of

Complainant over the trademark TOP GEL T.G. & DEVICE
OF A LEAF for use on papaya whitening soap as registered
under Registration No. 4-2000-009881 issued on August 24,
2003.
2. Respondents acknowledge the appointment by Zenna
Chemical Industry Co., Ltd. of Complainant as the exclusive
Philippine distributor of its products under the tradename and
trademark TOP GEL MCA & MCA DEVICE (A SQUARE
DEVICE CONSISTING OF A STYLIZED
REPRESENTATION OF A LETTER "M" OVER THE
LETTER "CA") as registered under Registration No 4-1996109957 issued on November 17, 2000, as well as the
assignment by Zenna Chemical Industry Co., Ltd. to
Complainant of said mark for use on papaya whitening soap.
3. Respondents admit having used the tradename and
trademark aforesaid, but after having realized that Complainant
is the legitimate assignee of TOP GEL MCA & MCA DEVICE
and the registered owner of TOP GEL T.G. & DEVICE OF A
LEAF, now undertake to voluntarily cease and desist from
using the aforesaid tradename and trademark, and further
undertake not to manufacture, sell and distribute and otherwise
compete with complainant, now and at anytime in the future,
any papaya whitening soap using or bearing a mark or name
identical or confusingly similar to, or constituting a colorable
imitation of the tradename and trademark TOP GEL MCA &
MCA DEVICE and/or TOP GEL T.G. & DEVICE OF A LEAF
as registered and described above.38

Hence, it appears that there is no more controversy as to who is the

rightful holder of the trademark TOP GEL T.G. & DEVICE OF A
LEAF. Therefore, respondent, as owner of such registered trademark
has the right to the issuance of the search warrants.
Anent petitioners' claim that one or two samples of the Top Gel
products from each of them, instead of confiscating thousands of the
products, would have sufficed for the purpose of an anticipated
criminal action, citing our ruling in Summerville General
Merchandising Co. v. Court of Appeals,39 is not meritorious.
We do not agree.
The factual milieu of the two cases are different. In Summerville, the
object of the violation of Summerville's intellectual property rights, as
assignee of Royal playing cards and Royal brand playing cards case,
was limited to the design of Summerville's Royal plastic container
case which encased and wrapped the Crown brand playing cards. In
the application for the search warrant which the RTC subsequently
issued, one of the items to be seized were the Crown brand playing
cards using the copyright plastic and Joker of Royal brand. Thus,
numerous boxes containing Crown playing cards were seized and upon
the RTC's instruction were turned over to Summerville, subject to the
condition that the key to the said warehouse be turned over to the court
sheriff. Respondents moved for the quashal of the search warrant and
for the return of the seized properties. The RTC partially granted the
motion by ordering the release of the seized Crown brand playing
cards and the printing machines; thus, only the Royal plastic container
cases of the playing cards were left in the custody of Summerville. The
CA sustained the RTC order. On petition with us, we affirmed the CA.
We found therein that the Crown brand playing cards are not the
subject of the offense as they are genuine and the Crown trademark
36

was registered to therein respondents names; that it was the design of

the plastic container/case that is alleged to have been utilized by
respondents to deceive the public into believing that the Crown brand
playing cards are the same as those manufactured by Summerville. We
then said that assuming that the Crown playing cards could be
considered subject of the offense, a sample or two are more than
enough to retain should there have been a need to examine them along
with the plastic container/case; and that there was no need to hold the
hundreds of articles seized. We said so in the context that since what
was in dispute was the design of the Royal plastic cases/containers of
playing cards and not the playing card per se, a small number of
Crown brand playing cards would suffice to examine them with the
Royal plastic cases/containers. And the return of the playing cards
would better serve the purposes of justice and expediency. However, in
this case, the object of the violation of respondent's intellectual
property right is the alleged counterfeit TOP GEL T.G. & DEVICE OF
A LEAF papaya whitening soap being sold by petitioners, so there is a
need to confiscate all these articles to protect respondent's right as the
registered owner of such trademark.
Petitioners next contend that the CA's ruling on the applicability of
Rule 126 of the Rules of Court that the search warrants were issued in
anticipation of a criminal action was only based on respondent's claim
which was only brought for the first time in her appellant's brief.
We are not persuaded.
We find worth quoting respondent's argument addressing this issue in
its Comment, thus:
In the assailed Decision, the Court of Appeals found that the Rule
correctly applicable to the subject search warrants was Rule 126 of the
Rules of Court. Petitioners fault the appellate court for ruling that the

Regional Trial Court incorrectly applied the Rules on Search and

Seizure in Civil Actions for Infringement of Intellectual Property
Rights on the basis of an argument that private respondent brought up
for the first time in her Appellant's Brief.
A cursory perusal of the Appellant's Brief shows that the following
issues/errors were raised, that: (1) the Honorable Trial Court erred in
holding that the "Rules on Search and Seizure for Infringement of
Intellectual Property Rights" apply to the search warrants at bar; (2) x
x x.
It must be remembered that there was no trial on the merits to speak of
in the trial court, and the matter of the application of the wrong set of
Rules only arose in the Order dated 25th September 2006 which
sustained the Motion to Quash. A thorough examination of the
Appellee's Brief filed by petitioners (respondents-appellees in the
Court of Appeals) reveals, however, that petitioners NEVER assailed
the first issue/error on the ground that the same was raised for the first
time on appeal. It is only now, after the appellate court rendered a
Decision and Resolution unfavorable to them, that petitioners
questioned the alleged procedural error. Petitioners should now be
considered in estoppel to question the same.40
Indeed, perusing the appellee's (herein petitioners) brief filed with the
CA, the matter of the non-applicability of the rules on search and
seizure in civil action for infringement of intellectual property rights
was never objected as being raised for the first time. On the contrary,
petitioners had squarely faced respondent's argument in this wise:
Appellant (herein respondent) contends that the rule (SC Adm. Memo
1-06, No. 02-1-06, Rule on Search and Seizure in Civil Actions for
Infringement of Intellectual Property Rights) does [not] apply to the
search warrants in the [case] at bar, for the reason that the search
37

warrants themselves reveal that the same were applied for and issued
for violations of "Section 155 in relation to Section 170 of RA 8293"
and violations of "Section 168 in relation to Section 170 of RA 8293,"
and that a perusal of the records would show that there is no mention
of a civil action or anticipation thereof, upon which the search
warrants are applied for.
Appellees (herein petitioners) cannot agree with the contention of the
appellant.1wphi1 Complainant NBI Agent Joseph G. Furing, who
applied for the search warrants, violated the very rule on search and
seizure for infringement of Intellectual Property Rights. The search
warrants applied for by the complainants cannot be considered a
criminal action. There was no criminal case yet to speak of when
complainants applied for issuance of the search warrants. There is
distinction here because the search applied for is civil in nature and no

criminal case had been filed. The complaint is an afterthought after the
respondents-appellees filed their Motion to Quash Search Warrant
before the Regional Trial Court of Manila, Branch 24. The grounds
enumerated in the rule must be complied with in order to protect the
constitutional mandate that "no person shall be deprived of life liberty
or property without due process of law nor shall any person be denied
the equal protection of the law." Clearly, the application of the search
warrants for violation of unfair competition and infringement is in the
nature of a civil action.41
WHEREFORE, the petition for review is DENIED. The Decision
dated March 31, 2009 and the Resolution dated July 2, 2009 of the
Court of Appeals, in CA-G.R. CV No. 88952, are hereby AFFIRMED.
SO ORDERED.

THIRD DIVISION
G.R. No. 171482, March 12, 2014
ASHMOR M. TESORO, PEDRO ANG AND GREGORIO
SHARP, Petitioners, v. METRO MANILA RETREADERS, INC.
(BANDAG) AND/OR NORTHERN LUZON RETREADERS,
INC. (BANDAG) AND/OR POWER TIRE AND RUBBER CORP.
(BANDAG), Respondents.
DECISION
ABAD, J.:
This case concerns the effect on the status of employment of
employees who entered into a Service Franchise Agreement with their
employer.
The Facts and the Case

On various dates between 1991 and 1998, petitioners Ashmor M.

Tesoro, Pedro Ang, and Gregorio Sharp used to work as salesmen for
respondents Metro Manila Retreaders, Inc., Northern Luzon
Retreaders, Inc., or Power Tire and Rubber Corporation, apparently
sister companies, collectively called Bandag. Bandag offered repair
and retread services for used tires. In 1998, however, Bandag
developed a franchising scheme that would enable others to operate
tire and retreading businesses using its trade name and service system.
Petitioners quit their jobs as salesmen and entered into separate
Service Franchise Agreements (SFAs) with Bandag for the operation
of their respective franchises. Under the SFAs, Bandag would provide
funding support to the petitioners subject to a regular or periodic
liquidation of their revolving funds. The expenses out of these funds
would be deducted from petitioners sales to determine their incomes.
At first, petitioners managed and operated their respective franchises
without any problem. After a length of time, however, they began to
38

default on their obligations to submit periodic liquidations of their

operational expenses in relation to the revolving funds Bandag
provided them. Consequently, Bandag terminated their respective SFA.
Aggrieved, petitioners filed a complaint for constructive dismissal,
nonpayment of wages, incentive pay, 13th month pay and damages
against Bandag with the National Labor Relations Commission
(NLRC). Petitioners contend that, notwithstanding the execution of the
SFAs, they remained to be Bandags employees, the SFAs being but a
circumvention of their status as regular employees.
For its part, Bandag pointed out that petitioners freely resigned from
their employment and decided to avail themselves of the opportunity
to be independent entrepreneurs under the franchise scheme that
Bandag had. Thus, no employeremployee relationship existed
between petitioners and Bandag.
On March 14, 2003 the Labor Arbiter rendered a Decision, dismissing
the complaint on the ground that no employeremployee relationship
existed between Bandag and petitioners. Upon petitioners appeal to
the NLRC the latter affirmed on June 30, 2003 the Labor Arbiters
Decision. It also denied petitioners motion for reconsideration.
Undaunted, petitioners filed a petition for certiorari under Rule 65
with the Court of Appeals (CA) ascribing grave abuse of discretion.
On July 29, 2005 the CA rendered a Decision,1 dismissing the petition
for lack of merit. It also denied their motion for reconsideration on
February 7, 2006.
Issue of the Case
The only issue presented in this case is whether or not petitioners
remained to be Bandags salesmen under the franchise scheme it
entered into with them.
Ruling of the Court
Franchising is a business method of expansion that allows an

individual or group of individuals to market a product or a service and

to use of the patent, trademark, trade name and the systems prescribed
by the owner.2 In this case, Bandags SFAs created on their faces an
arrangement that gave petitioners the privilege to operate and maintain
Bandag branches in the way of franchises, providing tire repair and
retreading services, with petitioners earning profits based on the
performance of their branches.
The question is: did petitioners remain to be Bandags employees after
they began operating those branches? The tests for determining
employeremployee relationship are: (a) the selection and engagement
of the employee; (b) the payment of wages; (c) the power of dismissal;
and (d) the employers power to control the employee with respect to
the means and methods by which the work is to be accomplished. The
last is called the control test, the most important element.3
When petitioners agreed to operate Bandags franchise branches in
different parts of the country, they knew that this substantially changed
their former relationships. They were to cease working as Bandags
salesmen, the positions they occupied before they ventured into
running separate Bandag branches. They were to cease receiving
salaries or commissions. Their incomes were to depend on the profits
they made. Yet, petitioners did not then complain of constructive
dismissal. They took their chances, ran their branches, Gregorio Sharp
in La Union for several months and Ashmor Tesoro in Baguio and
Pedro Ang in Pangasinan for over a year. Clearly, their belated claim
of constructive dismissal is quite hollow.
It is pointed out that Bandag continued, like an employer, to exercise
control over petitioners work. It points out that Bandag: (a) retained
the right to adjust the price rates of products and services; (b) imposed
minimum processed tire requirement (MPR); (c) reviewed and
regulated credit applications; and (d) retained the power to suspend
petitioners services for failure to meet service standards.
But uniformity in prices, quality of services, and good business
practices are the essence of all franchises. A franchisee will damage
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the franchisors business if he sells at different prices, renders different

or inferior services, or engages in bad business practices. These
business constraints are needed to maintain collective responsibility
for faultless and reliable service to the same class of customers for the
same prices.
This is not the control contemplated in employeremployee
relationships. Control in such relationships addresses the details of day
to day work like assigning the particular task that has to be done,
monitoring the way tasks are done and their results, and determining
the time during which the employee must report for work or
accomplish his assigned task.
Franchising involves the use of an established business expertise,
trademark, knowledge, and training. As such, the franchisee is required
to follow a certain established system. Accordingly, the franchisors
may impose guidelines that somehow restrict the petitioners conduct
which do not necessarily indicate control. The important factor to
consider is still the element of control over how the work itself is done,
not just its end result.4
The Court held, in Tongko v. The Manufacturers Life Insurance Co.
(Phils.), Inc.,5 that, resultswise, the insurance company, as principal,
can impose production quotas upon its independent agents and
determine how many individual agents, with specific territories, such
independent agents ought to employ to achieve the companys
objectives. These are management policy decisions that the labor law
element of control cannot reach. Petitioners commitment to abide by
Bandags policy decisions and implementing rules, as franchisees does

not make them its employees.

Petitioners cannot use the revolving funds feature of the SFAs as
evidence of their employeremployee relationship with Bandag. These
funds do not represent wages. They are more in the nature of capital
advances for operations that Bandag conceptualized to attract
prospective franchisees. Petitioners incomes depended on the profits
they make, controlled by their individual abilities to increase sales and
reduce operating costs.
The Labor Arbiter, the NLRC, and the CA, are unanimous that
petitioners were no longer route salesmen, bringing previously
ordered supplies and goods to dealers, taking back returned items,
collecting payments, remitting them, etc. They were themselves then
the dealers, getting their own supply and bringing these to their own
customers and subdealers, if any.
The rule in labor cases is that the findings of fact of quasijudicial
bodies, like the NLRC, are to be accorded with respect, even finality, if
supported by substantial evidence. This is particularly true when
passed upon and upheld by the CA.6
WHEREFORE, the instant petition is DENIED. The Decision dated
July 29, 2005 and Resolution dated February 7, 2006 of the Court of
Appeals in CAG.R. SP 82447 are AFFIRMED.
SO ORDERED.
Velasco, Jr., (Chairperson), Peralta, Perez,* and Leonen, JJ., concur.

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