VICTOR BOROVSKY, petitioner,
vs.
THE COMMISSIONER OF IMMIGRATION and THE DIRECTOR OF
PRISONS, respondents.
Victor Borovsky in his own behalf.
First Assistant Solicitor General Roberto Gianzon and Solicitor Florencio Villamor for respondents.
TUASON, J.:
This is a second petition for habeas corpus filed by the petitioner with this Court, first
having been denied in a decision promulgated on June 30, 1949.
Victor A. Borovsky, the petitioner, claims to be a stateless citizen, born in Shanghai,
China, of Russian parentage. He came to the Philippines in 1936 and had resided therein
ever since, if the period of his detention be included.
On June 24, 1946, by order of the Commissioner of immigration of the Philippines the
petitioner was arrested for investigation as to his past activities. Following his arrest, a
warrant for deportation was issued by the Deportation Board, which is said to have
been found him an undesirable alien, a vagrant and habitual drunkard. The petitioner
protests that he was not given a hearing, nor informed of the charges preferred against
him. This point however is unimportant in this proceeding.
In May, 1947, the petitioner was put on board a ship which took him to Shanghai, but
he was not allowed to land there because he was not a national of China and was not
provided with an entry visa. He was therefore brought back to Manila and was confined
to the new Bilibid Prison in Muntinlupa until December 8, 1947, when he was granted
provisional release by the President through Secretary of Justice for a period of six
months. Before the expiration of that period, namely, on March 20, 1948, the
Commissioner of Immigration caused his rearrest and he has been in confinement in
the above-mentioned prison ever since.
In his return to the writ, the Solicitor General in behalf of the respondents alleges that
the Commissioner of Immigration "has availed of every opportunity presented to carry
out the deportation order as shown by the fact that when the petitioner was enjoying his
provisional release after the unsuccessful attempt to deport him to Shanghai, China, he
was again re-arrested and flown to Cebu for the purpose of placing him on board a
Russian vessel which he has called at the port, with a view to carrying out the
deportation order issued against him, but said deportation was not carried out for the
reason that the captain of the said boat refused to take on board the herein petitioner on
the ground that he had no permission from the Russian government to take on board
the petitioner."
It is further alleged that "the immigration officials have taken steps regarding the
disposition of those foreigners subject to deportation while awaiting availability of
transportation or arrangements to the place where they may be sent."
In this Court's majority decision on the first application it was observed that the
applicant's detention was temporary, and it was held that "temporary detention is a
necessary step in the process of exclusion or expulsion of undesirable aliens and that
pending arrangements for his deportation, the Government has the right to hold the
undesirable alien under for a reasonable length of time."
It took note of that "this Government desires to expel the alien, and does not relish
keeping him at the people's expense . . . making efforts to carry out the decree of
exclusion by the highest officer of the land."
No period was fixed within which the immigration authorities were to carry out the
contemplated deportation beyond the statement that "The meaning of `reasonable time'
depends upon the circumstances, specially the difficulties of obtaining a passport, the
availability of transportation, the diplomatic arrangements with the governments
concerned and the efforts displayed to send the deportee away," but the Court warned
that "under established precedents, too long a issuance of a writ of habeas corpus."
Mr. Justice Paras, now Chief Justice, Mr. Justice Feria, Mr. Justice Perfecto, and the
writer of this decision dissented. Mr. Justice Feria and Mr. Justice Perfecto voted for
outright discharge of the prisoner from custody. Mr. Justice Paras qualified his dissent
by stating that he might agree "to a further detention of the herein petitioner, provided
that he be released if after six months, the Government is still unable to deport him."
This writer joined in the latter dissent but thought that two months constituted
reasonable time.
Over two years having elapsed since the decision aforesaid was promulgated, the
Government has not found ways and means of removing the petitioner out of the
country, and none are insight, although, it should be in justice to the deportation
authorities, it was through no fault of theirs that no ship or country would take the
petitioner.
Aliens illegally staying in the Philippines have no right of asylum therein
(Soewapadji vs. Wixon, Sept. 13, 1946, 157 F. ed., 289, 290), even if they are "stateless,"
which the petitioner claims to be. It is no less true however, as impliedly stated in this
court's decision, supra, and numerous American decisions, that foreign nationals, not
enemy, against whom no criminal charges have been formally made or judicial order
issued, may not indefinitely be kept in detention. The protection against deprivation of
liberty, without due process of law and except for crimes committed against the laws of
the land is not limited to Philippine citizens but extends to all residents, except enemy
aliens, regardless of nationality. Whether an alien who entered the country in violation
of its immigration laws may be detained for as long as the Government is unable to
deport him, is beside the point and we need not decide. There is no allegation that the
petitioner's entry into the Philippines was not lawful; on the contrary, the inference
from the pleadings and the Deportation Board's findings is that he came to and lived in
this country under legal permit.
Moreover, by its Constitution (Art. II, sec. 3) the Philippines "adopts the generally
accepted principles of international law as part of the law of Nation." And in a
resolution entitled "Universal Declaration of Human Rights" and approved by the
General Assembly of the United Nations of which the Philippines is a member, at its
plenary meeting on December 10, 1948, the right to life and liberty and all other
fundamental rights as applied to all human beings were proclaimed. lt was there resolved
that "All human beings are born free and equal in degree and rights" (Art. 1); that
"Everyone is entitled to all the rights and freedom set forth in this Declaration, without
distinction of any kind, such as race, colour, sex, language, religion, political or other
opinion, nationality or social origin, property, birth, or other status (Art. 2) ; that
"Everyone has the right to an effective remedy by the competent national tribunals for
acts violating the fundamental rights granted him by the Constitution or by law" (Art.
8); that "No one shall be subjected to arbitrary arrest, detention or exile" (Art. 9) etc.
In U. S. vs. Nichols, 47 Fed. Supp., 201, it was said that the court "has the power to
release from custody an alien who has been detained an unreasonably long period of
time by the Department of justice after it has become apparent that although a warrant
for his deportation has been issued, the warrant cannot be effectuated;" that "the theory
on which the court is given the power to act is that the warrant of deportation, not
having been able to be executed, is functus officio and the alien is being held without any
authority of law." The decision cited several cases which, it said, settled the matter
definitely in that jurisdiction, adding that the same result had been reached in
innumerable case elsewhere. The cases referred to were United States ex rel.
Ross vs. Wallis, 2 Cir. 279 F. 401, 404; Caranica vs. Nagle, 9 Cir., 28 F. 2d 955;
Saksagansky vs. Weedin, 9 Cir., 53 F. 13, 16 last paragraph; Ex parte Matthews,
D.C.W.D. Wash., 277 F. 857; Moraitis vs. Delany, D.C. Md. Aug. 28, 1942, 46 F. Supp.
425.
The most recent case, as far as we have been able to find, was that of
Staniszewski vs. Watkins (1948) 80 Fed. Supp. 132, which is nearly foursquare with the
case at hand. In that case a stateless person, formerly a Polish national, resident in the
United States since 1911 and many times serving as a seaman on American vessels both
in peace and in war, was ordered excluded from the United States and detained at Ellis
Island at the expense of the steamship company, when he returned from a voyage on
which he shipped from New York for one or more European ports and return to the
United States. The grounds for his exclusion were that he had no passport or
immigration visa, and that in 1937 had been convicted of perjury because in certain
document's he represented himself to be an American citizen. Upon his application for
release on habeas corpus, the Court released him upon his own recognizance. Judge
Leibell, of the United States District, Court for the Southern District of New York, said
in part:
When the return to the writ of habeas corpus came before this court, I suggest that all
interested parties . . . make an effort to arrange to have the petitioner ship out some
country that would receive him a a resident. He is a native-born Pole but the Polish
Consul has advises him in writing that he is no longer a Polish subject. This
Government does not claim that he is a Polish citizen. His attorney says he is stateless.
The Government is willing that he go back to the ship, but if he were sent back aboard
ship and sailed to the port (Cherbourg, France) from which he last sailed to the United
States he would probably be denied permission to land. There is no other country that
would take him, without proper documents.
It seems to me that this to me this is a genuine hardship case and that the petitioner
should be released from custody on proper terms . . .
What is to be done with the petitioner? the government has had him in custody almost
seven months and practically admits it has no place to send him out of this country. The
steamship company, which employed him as one of group sent to the ship by Union,
with proper seaman's papers issued by the United States Coast Guard, is paying $3.00 a
day for petitioner's board at Ellis Island. It is no fault of the steamship company that
petitioner is an inadmissible alien as the immigration officials describe him. . . .
I intend to sustain the writ of habeas corpus and order the release of the petitioner on
his own recognizance. he will be required to inform the immigration officials at Ellis
Island by mail on the mail. If the government does succeed in arranging for petitioner's
deportation to a country that will be ready to receive him as a resident, it may then
advise the petitioner to that effect and arrange for his deportation in the manner
provided by law.
Although not binding upon this court as a precedent, the case aforecited offered a
happy solution to the quandary in which the parties here find themselves, solution
which we think is sensible, sound and compatible with law and the Constitution. For
this reason, and since the Philippine law on immigration was patterned after or copied
from the American law and practice, we choose to follow and adopt the reasoning and
conclusion in the Staniszewski decision with some modifications which, it is believed,
are in consonance with the prevailing conditions of peace and order in the Philippines.
It was said or insinuated at the hearing of the petition at bar, but not alleged in the
return, that the petitioner was engaged in subversive activities, and fear was expressed
that he might join or aid the disloyal elements if, allowed to be at large. Bearing in mind
the Government's allegation in its answer that "the herein petitioner was brought to the
Philippines by the Japanese forces," and the fact that Japan is no longer at war with the
United States or the Philippines nor identified with the countries allied against those
nations, the possibility of the petitioner's entertaining or committing hostile acts
prejudicial to the interest and security of this country seems remote.
If we grant, for the sake of argument, that such a possibility exists, still the petitioner's
unduly prolonged detention would be unwarranted by law and the Constitution, if the
only purpose of the detention be to eliminate a danger that is by no means, actual,
present, or uncontrollable. After all, the Government is not impotent to deal with or
prevent any threat by such measure as that just outlined. The thought eloquently
expressed by Mr. Justice Jackson of the United States Supreme Court in connection
with the application for bail of ten Communists convicted by a lower of advocacy of
violent overthrow of the United States Government is, in principle pertinent and may
be availed of at this juncture. Said the learned Jurist:
The Government's alternative contention is that defendants, by misbehavior after
conviction, have forfeited their claim to bail. Grave public danger is said to result from
what they may be expected to do, in addition to what they have done since their
conviction. If I assume that defendants are disposed to commit every opportune
disloyal act helpful to Communist countries, it is still difficult to reconcile with
traditional American law the jailing of persons by the courts because of anticipated but
as yet uncommitted crimes. Imprisonment to protect society from predicted but
unconsummated offenses is so unprecedented in this country and so fraught with
danger of excesses and injustice that I am loath to resort to it, even as a discretionary
judicial technique to supplement conviction of such offenses as those of which
defendants stand convicted.
xxx xxx x x x1wphl.nt
right to be enlarged before formal charges are instituted is absolute. As already noted,
not only are there no charges pending against the petitioner, but the prospects of
bringing any against him are slim and remote.
Premises considered, the writ will issue commanding the respondents to release the
petitioner from custody upon these terms: The petitioner shall be placed under the
surveillance of the immigration authorities of their agents in such form and manner as
my be deemed adequate to insure that he keep peace and be available when the
Government is ready to deport him. The surveillance shall be reasonable and the
question of reasonableness shall be submitted to this Court or to the Court of First
Instance of Manila for decision in case of abuse. He shall also put up a bond for the
above purpose in the amount of P5,000.00 with sufficient surety or sureties, which bond
the Commissioner of Immigration is authorized to exact by Section 40 of
Commonwealth Act No. 613. No costs will be charged.

But the right of every American to equal treatment before the law is wrapped up in the
same constitutional bundle with those of these Communists. If an anger or disgust with
these defendants we throw out the bundle, we also cast aside protection for the liberties
of more worthy critics who may be in opposition to the government of some future day.

xxx xxx xxx

If, however, I were to be wrong on an of these abstract or theoretical matters of

principle, there is a very practical aspect of this application which must not be
overlooked or underestimated-that is the disastrous effect on the reputation of
American justice if I should now send these men to jail and the full Court later decide
that their conviction is invalid. All experiences with litigation teaches that existence of a
substantial question about a conviction implies a more than negligible risk of reversal.
Indeed this experience lies back of our rule permitting and practice of allowing bail
where such questions exist, to avoid the hazard of unjustifiably imprisoning persons
with consequent reproach to our system of justice. If that is prudent judicial practice in
the ordinary case, how much more important to avoid every chance of handing to the
Communist world such an ideological weapon as it would have if this country should
imprison this handful of Communist leaders on a conviction that our own highest Court
would confess to be illegal. Risks, of course, are involved in either granting or refusing
bail. I am not naive enough to underestimate the trouble making propensities of the
defendants. But, with the Department of Justice alert to the dangers, the worst they can
accomplish in the short time it will take to end the litigation is preferable to the
possibility of national embarassment from a celebrated case of unjustified imprisonment
of Communist leaders. Under no circumstances must we permit their symbolization of
an evil force in the world to be hallowed and glorified by any semblance of martyrdom.
The way to avoid that risk is not to jail those men until it is finally decided that they
should stay jailed.
If that case is not comparable with ours on the issues presented, its underlying principle
is of universal application. In fact, its ratio decidendi applies with greater force to the
present petition, since the right of accused to bail pending appeal of his case, as in the
case of the ten Communists, depends upon the discretion of the court, whereas the
PHILIP MORRIS, INC., BENSON & HEDGES (CANADA), INC., AND
FABRIQUES OF TABAC REUNIES, S.A., petitioners
vs.
THE COURT OF APPEALS AND FORTUNE TOBACCO
CORPORATION, respondents.
Quasha, Asperilla, Ancheta, Pea & Nolasco Law Office for petitioners.
Teresita Gandionco-Oledan for private respondent.
MELO, J.:
In the petition before us, petitioners Philip Morris, Inc., Benson and Hedges (Canada),
Inc., and Fabriques of Tabac Reunies, S.A., are ascribing whimsical exercise of the
faculty conferred upon magistrates by Section 6, Rule 58 of the Revised Rules of Court
when respondent Court of Appeals lifted the writ of preliminary injunction it earlier had
issued against Fortune Tobacco Corporation, herein private respondent, from
manufacturing and selling "MARK" cigarettes in the local market.
Banking on the thesis that petitioners' respective symbols "MARK VII", "MARK
TEN", and "LARK", also for cigarettes, must be protected against unauthorized
appropriation, petitioners twice solicited the ancillary writ in the course the main suit for
infringement but the court of origin was unpersuaded.
Before we proceed to the generative facts of the case at bar, it must be emphasized that
resolution of the issue on the propriety of lifting the writ of preliminary injunction
should not be construed as a prejudgment of the suit below. Aware of the fact that the
discussion we are about to enter into involves a mere interlocutory order, a discourse on
the aspect infringement must thus be avoided. With these caveat, we shall now shift our
attention to the events which spawned the controversy.
As averred in the initial pleading, Philip Morris, Incorporated is a corporation organized
under the laws of the State of Virginia, United States of America, and does business at
100 Park Avenue, New York, New York, United States of America. The two other
plaintiff foreign corporations, which are wholly-owned subsidiaries of Philip Morris,
Inc., are similarly not doing business in the Philippines but are suing on an isolated
transaction. As registered owners "MARK VII", "MARK TEN", and "LARK" per
certificates of registration issued by the Philippine Patent Office on April 26, 1973, May
28, 1964, and March 25, 1964, plaintiffs-petitioners asserted that defendant Fortune
Tobacco Corporation has no right to manufacture and sell cigarettes bearing the
allegedly identical or confusingly similar trademark "MARK" in contravention of
Section 22 of the Trademark Law, and should, therefore, be precluded during the
pendency of the case from performing the acts complained of via a preliminary
injunction (p. 75, Court of Appeals Rollo in AC-G.R. SP No. 13132).
For its part, Fortune Tobacco Corporation admitted petitioners' certificates of
registration with the Philippine Patent Office subject to the affirmative and special
defense on misjoinder of party plaintiffs. Private respondent alleged further that it has
been authorized by the Bureau of Internal Revenue to manufacture and sell cigarettes
bearing the trademark "MARK", and that "MARK" is a common word which cannot be
exclusively appropriated (p.158, Court of Appeals Rollo in A.C.-G.R. SP No. 13132). On
March 28, 1983, petitioners' prayer for preliminary injunction was denied by the
Presiding Judge of Branch 166 of the Regional Trial Court of the National Capital
Judicial Region stationed at Pasig, premised upon the following propositions:
Plaintiffs admit in paragraph 2 of the complaint that ". . . they are
not doing business in the Philippines and are suing on an isolated transaction . . .". This
simply means that they are not engaged in the sale, manufacture, importation,
expor[t]ation and advertisement of their cigarette products in the Philippines. With this
admission, defendant asks: ". . . how could defendant's "MARK" cigarettes cause the
former "irreparable damage" within the territorial limits of the Philippines?" Plaintiffs
maintain that since their trademarks are entitled to protection by treaty obligation under
Article 2 of the Paris Convention of which the Philippines is a member and ratified by
Resolution No. 69 of the Senate of the Philippines and as such, have the force and
effect of law under Section 12, Article XVII of our Constitution and since this is an
action for a violation or infringement of a trademark or trade name by defendant, such
mere allegation is sufficient even in the absence of proof to support it. To the mind of
the Court, precisely, this is the issue in the main case to determine whether or not there
has been an invasion of plaintiffs' right of property to such trademark or trade name.
This claim of plaintiffs is disputed by defendant in paragraphs 6 and 7 of the Answer;
hence, this cannot be made a basis for the issuance of a writ of preliminary injunction.
There is no dispute that the First Plaintiff is the registered owner of trademar[k]
"MARK VII" with Certificate of Registration No. 18723, dated April 26,1973 while the
Second Plaintiff is likewise the registered owner of trademark "MARK TEN" under
Certificate of Registration No. 11147, dated May 28, 1963 and the Third Plaintiff is a
registrant of trademark "LARK" as shown by Certificate of Registration No. 10953
dated March 23, 1964, in addition to a pending application for registration of trademark
"MARK VII" filed on November 21, 1980 under Application Serial No. 43243, all in
the Philippine Patent Office. In same the manner, defendant has a pending application
for registration of the trademark "LARK" cigarettes with the Philippine Patent Office
under Application Serial No. 44008. Defendant contends that since plaintiffs are "not
doing business in the Philippines" coupled the fact that the Director of Patents has not
denied their pending application for registration of its trademark "MARK", the grant of
a writ of preliminary injunction is premature. Plaintiffs contend that this act(s) of
defendant is but a subterfuge to give semblance of good faith intended to deceive the
public and patronizers into buying the products and create the impression that
defendant's goods are identical with or come from the same source as plaintiffs'
products or that the defendant is a licensee of plaintiffs when in truth and in fact the
former is not. But the fact remains that with its pending application, defendant has
embarked in the manufacturing, selling, distributing and advertising of "MARK"
cigarettes. The question of good faith or bad faith on the part of defendant are matters
which are evidentiary in character which have to be proven during the hearing on the
merits; hence, until and unless the Director of Patents has denied defendant's
application, the Court is of the opinion and so holds that issuance a writ of preliminary
injunction would not lie.
There is no question that defendant has been authorized by the Bureau of Internal
Revenue to manufacture cigarettes bearing the trademark "MARK" (Letter of Ruben B.
Ancheta, Acting Commissioner addressed to Fortune Tobacco Corporation dated April
3, 1981, marked as Annex "A", defendant's "OPPOSITION, etc." dated September 24,
1982). However, this authority is qualified . . . that the said brands have been accepted
and registered by the Patent Office not later than six (6) months after you have been
manufacturing the cigarettes and placed the same in the market." However, this grant ".
. . does not give you protection against any person or entity whose rights may be
prejudiced by infringement or unfair competition in relation to your indicated
trademarks/brands". As aforestated, the registration of defendant's application is still
pending in the Philippine Patent Office.
It has been repeatedly held in this jurisdiction as well as in the United States that the
right or title of the applicant for injunction remedy must be clear and free from doubt.
Because of the disastrous and painful effects of an injunction, Courts should be
extremely careful, cautious and conscionable in the exercise of its discretion consistent
with justice, equity and fair play.
There is no power the exercise of which is more delicate which requires greater caution,
deliberation, and sound discretion, or (which is) more dangerous in a doubtful case than
the issuing of an injunction; it is the strong arm of equity that never ought to be
extended unless to cases of great injury, where courts of law cannot afford an adequate
or commensurate remedy in damages. The right must be clear, the injury impending or
threatened, so as to be averted only by the protecting preventive process of injunction.
(Bonaparte v. Camden, etc. N. Co., 3 F. Cas. No. 1, 617, Baldw. 205, 217.)
Courts of equity constantly decline to lay down any rule which injunction shall be
granted or withheld. There is wisdom in this course, for it is impossible to foresee all
exigencies of society which may require their aid to protect rights and restrain wrongs.
(Merced M. Go v. Freemont, 7 Gal. 317, 321; 68 Am. Dec. 262.)
It is the strong arm of the court; and to render its operation begin and useful, it must be
exercised with great discretion, and when necessary requires it. (Attorney-General v.
Utica Inc. Co., P. John Ch. (N.Y.) 371.)
Having taken a panoramic view of the position[s] of both parties as viewed from their
pleadings, the picture reduced to its minimum size would be this: At the crossroads are
the two (2) contending parties, plaintiffs vigorously asserting the rights granted by law,
treaty and jurisprudence to restrain defendant in its activities of manufacturing, selling,
distributing and advertising its "MARK" cigarettes and now comes defendant who
countered and refused to be restrained claiming that it has been authorized temporarily
by the Bureau of Internal Revenue under certain conditions to do so as aforestated
coupled by its pending application for registration of trademark "MARK" in the
Philippine Patent Office. This circumstance in itself has created a dispute between the
parties which to the mind of the Court does not warrant the issuance of a writ of
preliminary injunction.
It is well-settled principle that courts of equity will refuse an application for the
injunctive remedy where the principle of law on which the right to preliminary
injunction rests is disputed and will admit of doubt, without a decision of the court of
law establishing such principle although satisfied as to what is a correct conclusion of
law upon the facts. The fact, however, that there is no such dispute or conflict does not
in itself constitute a justifiable ground for the court to refuse an application for the
injunctive relief. (Hackensack Impr. Commn. v. New Jersey Midland P. Co., 22 N.J. Eg.
94.)
Hence, the status quo existing between the parties prior to the filing of this case should
be maintained. For after all, an injunction, without reference to the parties, should be
violent, vicious nor even vindictive. (pp. 338-341, Rollo in G.R. No. 91332.)
In the process of denying petitioners' subsequent motion for reconsideration of the
order denying issuance of the requested writ, the court of origin took cognizance of the
certification executed on January 30, 1984 by the Philippine Patent Office attesting to
the fact that private respondent's application for registration is still pending appropriate
action. Apart from this communication, what prompted the trial court judge to entertain
the idea of prematurity and untimeliness of petitioners' application for a writ of
preliminary injunction was the letter from the Bureau of Internal Revenue date February
2, 1984 which reads:
MRS. TERESITA GANDIONGCO OLEDAN
Legal Counsel
Fortune Tobacco Corporation
Madam:
In connection with your letter dated January 25, 1984, reiterating your query as to
whether your label approval automatically expires or becomes null and void after six (6)
months if the brand is not accepted and by the patent office, please be informed that no
provision in the Tax Code or revenue regulation that requires an applicant to comply
with the aforementioned condition order that his label approved will remain valid and
existing.
Based on the document you presented, it shows that registration of this particular label
still pending resolution by the Patent Office. These being so , you may therefore
continue with the production said brand of cigarette until this Office is officially
notified that the question of ownership of "MARK" brand is finally resolved.
Very truly yours,
TEODORO D. PAREO
Chief, Manufactured Tobacco
Tax Division
TAN-P6531-D2830-A-6
(p. 348, Rollo.)
It appears from the testimony of Atty. Enrique Madarang, Chief of the Trademark
Division of the then Philippine Patent Office that Fortune's application for its
trademark is still pending before said office (p. 311, Rollo).
Petitioners thereafter cited supervening events which supposedly transpired since March
28, 1983, when the trial court first declined issuing a writ of preliminary injunction, that
could alter the results of the case in that Fortune's application had been rejected, nay,
barred by the Philippine Patent Office, and that the application had been forfeited by
abandonment, but the trial court nonetheless denied the second motion for issuance of
the injunctive writ on April 22, 1987, thus:
For all the prolixity of their pleadings and testimonial evidence, the plaintiffs-movants
have fallen far short of the legal requisites that would justify the grant of the writ of
preliminary injunction prayed for. For one, they did not even bother to establish by
competent evidence that the products supposedly affected adversely by defendant's
trademark now subject of an application for registration with the Philippine Patents
Office, are in actual use in the Philippines. For another, they concentrated their fire on
the alleged abandonment and forfeiture by defendant of said application for registration.
The Court cannot help but take note of the fact that in their complaint plaintiffs
included a prayer for issuance preliminary injunction. The petition was duly heard, and
thereafter matter was assiduously discussed lengthily and resolved against plaintiffs in a
15-page Order issued by the undersigned's predecessor on March 28, 1983. Plaintiffs'
motion for reconsideration was denied in another well-argued 8 page Order issued on
April 5, 1984,, and the matter was made to rest.
However, on the strength of supposed changes in the material facts of this case,
plaintiffs came up with the present motion citing therein the said changes which are:
that defendant's application had been rejected and barred by the Philippine Patents
Office, and that said application has been deemed abandoned and forfeited. But
defendant has refiled the same.
Plaintiffs' arguments in support of the present motion appear to be a mere rehash of
their stand in the first above-mentioned petition which has already been ruled upon
adversely against them. Granting that the alleged changes in the material facts are
sufficient grounds for a motion seeking a favorable grant of what has already been
denied, this motion just the same cannot prosper.
In the first place there is no proof whatsoever that any of plaintiffs' products which they
seek to protect from any adverse effect of the trademark applied for by defendant, is in
actual use and available for commercial purposes anywhere in the Philippines. Secondly
as shown by plaintiffs' own evidence furnished by no less than the chief of Trademarks
Division of the Philippine Patent Office, Atty. Enrique Madarang, the abandonment of
an application is of no moment, for the same can always be refiled. He said there is no
specific provision in the rules prohibiting such refiling (TSN, November 21, 1986, pp.
60 & 64, Raviera). In fact, according to Madarang, the refiled application of defendant is
now pending before the Patents Office. Hence, it appears that the motion has no leg to
stand on. (pp. 350-351, Rolloin G. R. No. 91332.)
Confronted with this rebuff, petitioners filed a previous petition for certiorari before the
Court, docketed as G.R. No. 78141, but the petition was referred to the Court of
Appeals.
The Court of Appeals initially issued a resolution which set aside the court of origin's
order dated April 22, 1987, and granted the issuance of a writ of preliminary injunction
enjoining Fortune, its agents, employees, and representatives, from manufacturing,
selling, and advertising "MARK" cigarettes. The late Justice Cacdac, speaking for the
First Division of the Court of Appeals in CA-G.R. SP No. 13132, remarked:
There is no dispute that petitioners are the registered owners of the trademarks for
cigarettes "MARK VII", "MARK TEN", and "LARK".(Annexes B, C and D, petition).
As found and reiterated by the Philippine Patent Office in two (2) official
communications dated April 6, 1983 and January 24, 1984, the trademark "MARK" is
"confusingly similar" to the trademarks of petitioners, hence registration was barred
under Sec. 4 (d) of Rep. Act. No. 166, as amended (pp. 106, 139, SCA rollo). In a third
official communication dated April 8, 1986, the trademark application of private
respondent for the "MARK" under Serial No. 44008 filed on February 13, 1981 which
was declared abandoned as of February 16, 1986, is now deemed forfeited, there being
no revival made pursuant to Rule 98 of the Revised Rules of Practitioners in Trademark
Cases." (p. 107, CA rollo). The foregoing documents or communications mentioned by
petitioners as "the changes in material facts which occurred after March 28, 1983", are
not also questioned by respondents.
Pitted against the petitioners' documentary evidence, respondents pointed to (1) the
letter dated January 30, 1979 (p. 137, CA rollo) of Conrado P. Diaz, then Acting
Commissioner of Internal Revenue, temporarily granting the request of private
respondent for a permit to manufacture two (2) new brands of cigarettes one of which
is brand "MARK" filter-type blend, and (2) the certification dated September 26, 1986
of Cesar G. Sandico, Director of Patents (p. 138, CA rollo) issued upon the written
request of private respondents' counsel dated September 17, 1986 attesting that the
records of his office would show that the "trademark MARK" for cigarettes is now the
subject of a pending application under Serial No. 59872 filed on September 16, 1986.
Private respondent's documentary evidence provides the reasons neutralizing or
weakening their probative values. The penultimate paragraph of Commissioner Diaz'
letter of authority reads:
Please be informed further that the authority herein granted does not give you
protection against any person or entity whose rights may be prejudiced by infringement
or unfair competition in relation to your above-named brands/trademark.
while Director Sandico's certification contained similar conditions as follows:
This Certification, however, does not give protection as against any person or entity
whose right may be prejudiced by infringement or unfair competition in relation to the
aforesaid trademark nor the right to register if contrary to the provisions of the
Trademark Law, Rep. Act No. 166 as amended and the Revised Rules of Practice in
Trademark Cases.
The temporary permit to manufacture under the trademark "MARK" for cigarettes and
the acceptance of the second application filed by private respondent in the height of
their dispute in the main case were evidently made subject to the outcome of the said
main case or Civil Case No. 47374 of the respondent Court. Thus, the Court has not
missed to note the absence of a mention in the Sandico letter of September 26, 1986 of
any reference to the pendency of the instant action filed on August 18, 1982. We believe
and hold that petitioners have shown a prima facie case for the issuance of the writ of
prohibitory injunction for the purposes stated in their complaint and subsequent
motions for the issuance of the prohibitory writ. (Buayan Cattle Co. vs. Quintillan, 125
SCRA 276)
The requisites for the granting of preliminary injunction are the existence of the right
protected and the facts against which the injunction is to be directed as violative of said
right. (Buayan Cattle Co. vs. Quintillan, supra; Ortigas & Co. vs. Ruiz, 148 SCRA 326). It
is a writ framed according to the circumstances of the case commanding an act which
the Court regards as essential to justice and restraining an act it deems contrary to equity
and good conscience (Rosauro vs. Cuneta, 151 SCRA 570). If it is not issued, the
defendant may, before final judgment, do or continue the doing of the act which the
plaintiff asks the court to restrain, and thus make ineffectual the final judgment
rendered afterwards granting the relief sought by the plaintiff (Calo vs. Roldan, 76 Phil.
445). Generally, its grant or denial rests upon the sound discretion of the Court except
on a clear case of abuse (Belish Investment & Finance Co. vs. State House, 151 SCRA
636). Petitioners' right of exclusivity to their registered trademarks being clear and
beyond question, the respondent court's denial of the prohibitive writ constituted excess
of jurisdiction and grave abuse discretion. If the lower court does not grant preliminary
injunction, the appellate court may grant the same. (Service Specialists, Inc. vs. Sheriff
of Manila, 145 SCRA 139). (pp. 165-167, Rollo in G.R. No. 91332.)
After private respondent Fortune's motion for reconsideration was rejected, a motion to
dissolve the disputed writ of preliminary injunction with offer to post a counterbond
was submitted which was favorably acted upon by the Court of Appeals, premised on
the filing of a sufficient counterbond to answer for whatever perjuicio petitioners may
suffer as a result thereof, to wit:
The private respondent seeks to dissolve the preliminary injunction previously granted
by this Court with an offer to file a counterbond. It was pointed out in its supplemental
motion that lots of workers employed will be laid off as a consequence of the injunction
and that the government will stand to lose the amount of specific taxes being paid by
the
private respondent. The specific taxes being paid is the sum total of P120,120, 295.98
from January to July 1989.
The petitioners argued in their comment that the damages caused by the infringement
of their trademark as well as the goodwill it generates are incapable of pecuniary
estimation and monetary evaluation and not even the counterbond could adequately
compensate for the damages it will incur as a result of the dissolution of the bond. In
addition, the petitioner further argued that doing business in the Philippines is not
relevant as the injunction pertains to an infringement of a trademark right.
After a thorough re-examination of the issues involved and the arguments advanced by
both parties in the offer to file a counterbond and the opposition thereto, WE believe
that there are sound and cogent reasons for US to grant the dissolution of the writ of
preliminary injunction by the offer of the private respondent to put up a counterbond
to answer for whatever damages the petitioner may suffer as a consequence of the
dissolution of the preliminary injunction.
The petitioner will not be prejudiced nor stand to suffer irreparably as a consequence of
the lifting of the preliminary injunction considering that they are not actually engaged in
the manufacture of the cigarettes with the trademark in question and the filing of the
counterbond will amply answer for such damages.
While the rule is that an offer of a counterbond does not operate to dissolve an
injunction previously granted, nevertheless, it is equally true that an injunction could be
dissolved only upon good and valid grounds subject to the sound discretion of the
court. As WE have maintained the view that there are sound and good reasons to lift
the preliminary injunction, the motion to file a counterbond is granted. (pp. 53-
54, Rollo in G.R. No. 91332.)
Petitioners, in turn, filed their own motion for re-examination geared towards
reimposition of the writ of preliminary injunction but to no avail (p. 55, Rollo in G.R.
No. 91332).
Hence, the instant petition casting three aspersions that respondent court gravely
abused its discretion tantamount to excess of jurisdiction when:
I. . . . it required, contrary to law and jurisprudence, that in order that petitioners may
suffer irreparable injury due to the lifting of the injunction, petitioners should be using
actually their registered trademarks in commerce in the Philippines;
II. . . . it lifted the injunction in violation of section 6 of Rule 58 of the Rules of Court;
and
III. . . . after having found that the trial court had committed grave abuse of discretion
and exceeded its jurisdiction for having refused to issue the writ of injunction to restrain
private respondent's acts that are contrary to equity and good conscience, it made a
complete about face for legally insufficient grounds and authorized the private
respondent to continue performing the very same acts that it had considered contrary to
equity and good conscience, thereby ignoring not only the mandates of the Trademark
Law, the international commitments of the Philippines, the judicial admission of private
respondent that it will have no more right to use the trademark "MARK" after the
Director of Patents shall have rejected the application to register it, and the admonitions
of the Supreme Court. (pp. 24-25, Petition; pp. 25-26, Rollo.)
To sustain a successful prosecution of their suit for infringement, petitioners, as foreign
corporations not engaged in local commerce, rely on section 21-A of the Trademark
Law reading as follows:
Sec. 21-A. Any foreign corporation or juristic person to which a mark or trade-name has
been registered or assigned under this act may bring an action hereunder for
infringement, for unfair competition, or false designation of origin and false description,
whether or not it has been licensed to do business in the Philippines under Act
Numbered Fourteen hundred and fifty-nine, as amended, otherwise known as the
Corporation Law, at the time it brings complaint: Provided, That the country of which
the said foreign corporation or juristic person is a citizen or in which it is domiciled, by
treaty, convention or law, grants a similar privilege to corporate or juristic persons of
the Philippines. (As inserted by Sec. 7 of Republic Act No. 638.)
to drive home the point that they are not precluded from initiating a cause of action in
the Philippines on account of the principal perception that another entity is pirating
their symbol without any lawful authority to do so. Judging from a perusal of the
aforequoted Section 21-A, the conclusion reached by petitioners is certainly correct for
the proposition in support thereof is embedded in the Philippine legal jurisprudence.
Indeed, it was stressed in General Garments Corporation vs. Director of Patents (41 SCRA 50
[1971]) by then Justice (later Chief Justice) Makalintal that:
Parenthetically, it may be stated that the ruling in the Mentholatum case was
subsequently derogated when Congress, purposely to "counteract the effects" of said
case, enacted Republic Act No. 638, inserting Section 21-A in the Trademark Law,
which allows a foreign corporation or juristic person to bring an action in Philippine
courts for infringement of a mark or tradename, for unfair competition, or false
designation of origin and false description, "whether or not it has been licensed to do
business in the Philippines under Act Numbered Fourteen hundred and fifty-nine, as
amended, otherwise known as the Corporation Law, at the time it brings complaint."
Petitioner argues that Section 21-A militates against respondent's capacity to maintain a
suit for cancellation, since it requires, before a foreign corporation may bring an action,
that its trademark or tradename has been registered under the Trademark Law. The
argument misses the essential point in the said provision, which is that the foreign
corporation is allowed thereunder to sue "whether or not it has been licensed to do
business in the Philippines" pursuant to the Corporation Law (precisely to counteract
the effects of the decision in the Mentholatum case). (at p. 57.)
However, on May, 21, 1984, Section 21-A, the provision under consideration, was
qualified by this Court in La Chemise Lacoste S.A. vs. Fernandez (129 SCRA 373 [1984]), to
the effect that a foreign corporation not doing business in the Philippines may have the
right to sue before Philippine Courts, but existing adjective axioms require that
qualifying circumstances necessary for the assertion of such right should first be
affirmatively pleaded (2 Agbayani Commercial Laws of the Philippines, 1991 Ed., p.
598; 4 Martin, Philippine Commercial Laws, Rev. Ed., 1986, p. 381). Indeed, it is not
sufficient for a foreign corporation suing under Section 21-A to simply allege its alien
origin. Rather, it must additionally allege its personality to sue. Relative to this condition
precedent, it may be observed that petitioners were not remiss in averring their
personality to lodge a complaint for infringement (p. 75, Rollo in AC-G.R. SP No.
13132) especially so when they asserted that the main action for infringement is
anchored on an isolated transaction (p. 75, Rollo in AC-G.R. SP No. 13132; Atlantic
Mutual Ins. Co. vs. Cebu Stevedoring Co., Inc., 17 SCRA 1037 (1966), 1 Regalado,
Remedial Law Compendium, Fifth Rev. Ed., 1988, p. 103).
Another point which petitioners considered to be of significant interest, and which they
desire to impress upon us is the protection they enjoy under the Paris Convention of
1965 to which the Philippines is a signatory. Yet, insofar as this discourse is concerned,
there is no necessity to treat the matter with an extensive response because adherence of
the Philippines to the 1965 international covenant due to pact sunt servanda had been
acknowledged in La Chemise (supra at page 390).
Given these confluence of existing laws amidst the cases involving trademarks, there
can be no disagreement to the guiding principle in commercial law that foreign
corporations not engaged in business in the Philippines may maintain a cause of action
for infringement primarily because of Section 21-A of the Trademark Law when the
legal standing to sue is alleged, which petitioners have done in the case at hand.
In assailing the justification arrived at by respondent court when it recalled the writ of
preliminary injunction, petitioners are of the impression that actual use of their
trademarks in Philippine commercial dealings is not an indispensable element under
Article 2 of the Paris Convention in that:
(2) . . . . no condition as to the possession of a domicile or
establishment in the country where protection is claimed may be
required of persons entitled to the benefits of the Union for the
enjoyment of any industrial property of any industrial property
rights. (p. 28, Petition; p. 29, Rollo in G.R. No. 91332.)
Yet petitioners' perception along this line is nonetheless resolved by Sections 2 and 2-A
of the Trademark Law which speak loudly, about necessity of actual commercial use of
the trademark in the local forum:
Sec. 2. What are registrable. Trademarks, tradenames and service marks owned by
persons, corporations, partnerships or associations domiciled in the Philippines and by
persons, corporations, partnerships or associations domiciled in any foreign country
may be registered in accordance with the provisions of this Act; Provided, That said
trademarks, tradenames, or service marks are actually in use in commerce and services not less than
two months in the Philippines before the time the applications for registration are filed;
And provided, further, That the country of which the applicant for registration is a
citizen grants by law substantially similar privileges to citizens of the Philippines, and
such fact is officially certified, with a certified true copy of the foreign law translated
into the English language, by the government of the foreign country to the Government
of the Republic of the Philippines. (As amended by R.A. No. 865).
Sec. 2-A. Ownership of trademarks, tradenames and service marks; how acquired.
Anyone who lawfully produces or deals in merchandise of any kind or who engages in
any lawful business, or who renders any lawful service in commerce, by actual use thereof in
manufacture or trade, in business,and in the service rendered, may appropriate to his
exclusive use a trademark, a tradename, or a service mark not so appropriated by
another, to distinguish his merchandise, business or service from the merchandise,
business or service of others. The ownership or possession of a trademark, tradename,
service mark, heretofore or hereafter appropriated, as in this section provided, shall be
recognized and protected in the same manner and to the same extent as are other
property rights known to the law. (As amended by R.A. No. 638). (Kabushi Kaisha
Isetan vs. Intermediate Appellate Court, 203 SCRA 583 [1991], at pp. 589-590; emphasis
supplied.)
Following universal acquiescence and comity, our municipal law on trademarks
regarding the requirement of actual use in the Philippines must subordinate an
international agreement inasmuch as the apparent clash is being decided by a municipal
tribunal (Mortensen vs. Peters, Great Britain, High Court of Judiciary of Scotland, 1906,
8 Sessions 93; Paras, International Law and World Organization, 1971 Ed., p. 20).
Withal, the fact that international law has been made part of the law of the land does
not by any means imply the primacy of international law over national law in the
municipal sphere. Under the doctrine of incorporation as applied in most countries,
rules of international law are given a standing equal, not superior, to national legislative
enactments (Salonga and Yap, Public International Law, Fourth ed., 1974, p. 16).
The aforequoted basic provisions of our Trademark Law, according to Justice
Gutierrez, Jr., in Kabushi Kaisha Isetan vs. Intermediate Appellate Court (203 SCRA 583
[1991]), have been construed in this manner:
A fundamental principle of Philippine Trademark Law is that actual use in commerce in
the Philippines is a pre-requisite to the acquisition of ownership over a trademark or a
tradename.
xxx xxx xxx
These provisions have been interpreted in Sterling Products International, Inc. v.
Farbenfabriken Bayer Actiengesellschaft (27 SCRA 1214 [1969]) in this way:
A rule widely accepted and firmly entrenched because it has come down through the
years is that actual use in commerce or business is a prerequisite to the acquisition of the
right of ownership over a trademark.
xxx xxx xxx
. . . Adoption alone of a trademark would not give exclusive right thereto. Such right
grows out of their actual use. Adoption is not use. One may make advertisements, issue
circulars, give out price lists on certain goods; but these alone would not give exclusive
right of use. For trademark is a creation of use. The underlying reason for all these is
that purchasers have come to understand the mark as indicating the origin of the wares.
Flowing from this is the trader's right to protection in the trade he has built up and the
goodwill he has accumulated from use of the trademark. . . .
In fact, a prior registrant cannot claim exclusive use of the trademark unless it uses it in
commerce.
We rule[d] in Pagasa Industrial Corporation v. Court of Appeals (118 SCRA 526 [1982]):
3. The Trademark law is very clear. It requires actual commercial use of the mark prior to its
registration. There is no dispute that respondent corporation was the first registrant, yet it
failed to fully substantiate its claim that it used in trade or business in the Philippines the
subject mark; it did not present proof to invest it with exclusive, continuous adoption of
the trademark which should consist among others, of considerable sales since its first
use. The invoices (Exhibits 7, 7-a, and 8-b) submitted by respondent which were dated
way back in 1957 show that the zippers sent to the Philippines were to be used as
"samples" and "of no commercial value". The evidence for respondent must be clear,
definite and free from inconsistencies. (Sy Ching v. Gaw Lui, 44 SCRA 148-149)
"Samples" are not for sale and therefore, the fact of exporting them to the Philippines
cannot be considered to be equivalent to the "use" contemplated by the law.
Respondent did not expect income from such "samples". There were no receipts to
establish sale, and no proof were presented to show that they were subsequently sold in
the Philippines. (Pagasa Industrial Corp. v. Court of Appeals, 118 SCRA 526 [1982];
Emphasis Supplied)
The records show that the petitioner has never conducted any business in the
Philippines. It has never promoted its tradename or trademark in the Philippines. It is
unknown to Filipino except the very few who may have noticed it while travelling
abroad. It has never paid a single centavo of tax to the Philippine government. Under
the law, it has no right to the remedy it seeks. (at pp. 589-591.)
In other words, petitioners may have the capacity to sue for infringement irrespective of
lack of business activity in the Philippines on account of Section 21-A of the Trademark
Law but the question whether they have an exclusive right over their symbol as to
justify issuance of the controversial writ will depend on actual use of their trademarks in
the Philippines in line with Sections 2 and 2-A of the same law. It is thus incongruous
for petitioners to claim that when a foreign corporation not licensed to do business in
Philippines files a complaint for infringement, the entity need not be actually using its
trademark in commerce in the Philippines. Such a foreign corporation may have the
personality to file a suit for infringement but it may not necessarily be entitled to
protection due to absence of actual use of the emblem in the local market.
Going back to the first assigned error, we can not help but notice the manner the
ascription was framed which carries with it the implied but unwarranted assumption of
the existence of petitioners' right to relief. It must be emphasized that this aspect of
exclusive dominion to the trademarks, together with the corollary allegation of
irreparable injury, has yet to be established by petitioners by the requisite quantum of
evidence in civil cases. It cannot be denied that our reluctance to issue a writ of
preliminary injunction is due to judicial deference to the lower courts, involved as there
is mere interlocutory order (Villarosa vs. Teodoro, Sr., 100 Phil. 25 [1956]). In point of
adjective law, the petition has its roots on a remedial measure which is but ancillary to
the main action for infringement still pending factual determination before the court of
origin. It is virtually needless to stress the obvious reality that critical facts in an
infringement case are not before us more so when even Justice Feliciano's opinion
observes that "the evidence is scanty" and that petitioners "have yet to submit copies or
photographs of their registered marks as used in cigarettes" while private respondent
has not, for its part, "submitted the actual labels or packaging materials used in selling its
"Mark" cigarettes." Petitioners therefore, may not be permitted to presume a given state
of facts on their so called right to the trademarks which could be subjected to
irreparable injury and in the process, suggest the fact of infringement. Such a ploy would
practically place the cart ahead of the horse. To our mind, what appears to be the
insurmountable barrier to petitioners' portrayal of whimsical exercise of discretion by
the Court of Appeals is the well-taken remark of said court that:
The petitioner[s] will not be prejudiced nor stand to suffer irreparably as a consequence
of the lifting of the preliminary injunction considering that they are not actually engaged
in the manufacture of the cigarettes with the trademark in question and the filing of the
counterbond will amply answer for such damages. (p. 54. Rollo in G.R. No. 91332.)
More telling are the allegations of petitioners in their complaint (p. 319, Rollo G.R. No.
91332) as well as in the very petition filed with this Court (p. 2, Rollo in G.R. No. 91332)
indicating that they are not doing business in the Philippines, for these frank
representations are inconsistent and incongruent with any pretense of a right which can
breached (Article 1431, New Civil Code; Section 4, Rule 129; Section 3, Rule 58,
Revised Rules of Court). Indeed, to be entitled to an injunctive writ, petitioner must
show that there exists a right to be protected and that the facts against which injunction
is directed are violative of said right (Searth Commodities Corporation vs. Court of
Appeals, 207 SCRA 622 [1992]). It may be added in this connection that albeit
petitioners are holders of certificate of registration in the Philippines of their symbols as
admitted by private respondent, the fact of exclusive ownership cannot be made to rest
solely on these documents since dominion over trademarks is not acquired by the mere
fact of registration alone and does not perfect a trademark right (Unno Commercial
Enterprises, Inc. vs. General Milling Corporation, 120 SCRA 804 [1983]).
Even if we disregard the candid statements of petitioners anent the absence of business
activity here and rely on the remaining statements of the complaint below, still, when
these averments are juxtaposed with the denials and propositions of the answer
submitted by private respondent, the supposed right of petitioners to the symbol have
thereby been controverted. This is not to say, however, that the manner the complaint
was traversed by the answer is sufficient to tilt the scales of justice in favor of private
respondent. Far from it. What we are simply conveying is another basic tenet in
remedial law that before injunctive relief may properly issue, complainant's right or title
must be undisputed and demonstrated on the strength of one's own title to such a
degree as to unquestionably exclude dark clouds of doubt, rather than on the weakness
of the adversary's evidence, inasmuch as the possibility of irreparable damage, without
prior proof of transgression of an actual existing right, is no ground for injunction being
mere damnum absque injuria (Talisay-Silay Milling Co., Inc. vs. CFI of Negros Occidental,
42 SCRA 577 [1971]; Francisco, Rules of Court, Second ed., 1985, p. 225; 3 Martin,
Rules of Court, 1986 ed., p. 82).
On the economic repercussion of this case, we are extremely bothered by the thought
of having to participate in throwing into the streets Filipino workers engaged in the
manufacture and sale of private respondent's "MARK" cigarettes who might be
retrenched and forced to join the ranks of the many unemployed and unproductive as a
result of the issuance of a simple writ of preliminary injunction and this, during the
pendency of the case before the trial court, not to mention the diminution of tax
revenues represented to be close to a quarter million pesos annually. On the other hand,
if the status quo is maintained, there will be no damage that would be suffered by
petitioners inasmuch as they are not doing business in the Philippines.
With reference to the second and third issues raised by petitioners on the lifting of the
writ of preliminary injunction, it cannot be gainsaid that respondent court acted well
within its prerogatives under Section 6, Rule 58 of the Revised Rules of Court:
Sec. 6. Grounds for objection to, or for motion of dissolution of injunction. The injunction may
be refused or, if granted ex parte, may be dissolved, upon the insufficiency of the
complaint as shown by the complaint itself, with or without notice to the adverse party.
It may also be refused or dissolved on other grounds upon affidavits on the part of the
defendants which may be opposed by the plaintiff also by affidavits. It may further be
refused or, if granted, may be dissolved, if it appears after hearing that although the
plaintiff is entitled to the injunction, the issuance or continuance thereof, as the case
may be, would cause great damage to the defendant while the plaintiff can be fully
compensated for such damages as he may suffer, and the defendant files a bond in an
amount fixed by the judge conditioned that he will pay all damages which the plaintiff
may suffer by the refusal or the dissolution of the injunction. If it appears that the
extent of the preliminary injunction granted is too great, it must be modified.
Under the foregoing rule, injunction may be refused, or, if granted, may be dissolved, on
the following instances:
(1) If there is insufficiency of the complaint as shown by the allegations therein. Refusal or
dissolution may be granted in this case with or without notice to the adverse party.
(2) If it appears after hearing that although the plaintiff is entitled to the injunction, the
issuance or continuance thereof would cause great damage to the defendant, while the
plaintiff can be fully compensated for such damages as he may suffer. The defendant, in
this case, must file a bond in an amount fixed by the judge conditioned that he will pay
all damages which plaintiff may suffer by the refusal or the dissolution of the injunction.
(3) On the other grounds upon affidavits on the part of the defendant which may be
opposed by the plaintiff also affidavits.
Modification of the injunction may also be ordered by the court if it appears that the
extent of the preliminary injunction granted is too great. (3 Martin, Rules of Court, 1986
ed., p. 99; Francisco, supra, at p. 268.)
In view of the explicit representation of petitioners in the complaint that they are not
engaged in business in the Philippines, it inevitably follows that no conceivable damage
can be suffered by them not to mention the foremost consideration heretofore
discussed on the absence of their "right" to be protected. At any rate, and assuming in
gratia argumenti that respondent court erroneously lifted the writ it previously issued, the
same may be cured by appeal and not in the form of a petition for certiorari (Clark vs.
Philippine Ready Mix Concrete Co., 88 Phil. 460 [1951]). Verily, and mindful of the rule
that a writ of preliminary injunction is an interlocutory order which is always under the
control of the court before final judgment, petitioners' criticism must fall flat on the
ground, so to speak, more so when extinction of the previously issued writ can even be
made without previous notice to the adverse party and without a hearing (Caluya vs.
Ramos, 79 Phil. 640 [1974]; 3 Moran, Rules of Court, 1970 ed., p. 81).
WHEREFORE, the petition is hereby DISMISSED and the Resolutions of the Court
of Appeals dated September 14, 1989 and November 29, 1989 are hereby AFFIRMED.
SO ORDERED.
Bidin, J., concurs.
Davide, Jr., concurs in the result.
Romero, J. took no part.
Separate Opinions
FELICIANO, J., dissenting:
I find myself unable to join in the opinion prepared by my distinguished brother,
Melo, J.
It seems to me that the issues involved in this case are rather more complex than what
has been assumed to be the case by the majority opinion. For this and related reasons,
there is set out below a statement of the relevant facts (as I see them) that is more
extensive than what is ordinarily found in dissenting opinions.
Petitioner Philip Morris, Inc. is a corporation organized and existing under the law of
Virginia, U.S.A. Petitioners Benson & Hedges (Canada), Inc. and Fabriques de Tabac
Reunies, S.A., both wholly owned subsidiaries of Philip Morris, Inc., are organized and
existing under the law of Canada and Switzerland, respectively.
3. that the Court of Appeals gravely abused its discretion amounting to excess of
jurisdiction when, after having found that the trial court had committed grave abuse of
discretion and exceeded its jurisdiction for having refused to issue the writ of injunction
to restrain respondent's acts that are contrary to equity and good conscience, it made a
complete about face for legally insufficient grounds and authorized private respondent
to continue performing the very same acts that it had considered contrary to equity and
good conscience, thereby ignoring not only the mandates of the trademark law, the
international commitments of the Philippines, the judicial admission of private
respondent that it will have no more right to use the trademark "MARK" after the
Director of Patents shall have rejected the application to register it, and the admonitions
of the Supreme Court. 11
The Court required private respondent to file a comment. The comment reiterated the
basic arguments made by private respondent before the Court of Appeals:
a. the petitioners are not suffering any irreparable damage by the lifting of the
preliminary injunction by the Court of appeals. Whatever damages they might suffer are "based
purely on speculation, since by judicial admission, petitioners are not doing business in the
Philippines. Private respondent stressed that petitioners "are not manufacturing, importing or
selling "MARK TEN," "MARK VII" or "LARK" in this country," notwithstanding "false
allegation" that petitioners have been "using" the said trademarks "in commerce and
trade" in the Philippines since 1963 up to the present.
b. that whatever damage petitioners may be suffering is negligible when compared to the taxes that
would have to be foregone by the Government considering that private respondent "paid an
annual specific tax of P240 Million only on the manufacture and sale of "MARK
cigarettes." Private respondent claims that, in contrast, petitioners which are foreign
corporations "based in three different countries" have not contributed anything to
Government tax revenues.
c. that the Court of Appeals lifted the writ of preliminary injunction it had earlier issued
upon the submission of a counter bond in double the amount of the bond submitted by
petitioners, under Section 6, Rule 58 of the Rules of Court, which act was within the sound
discretion of the Court of Appeals. Private respondent also stresses that the right of
petitioners to the injunction was still being litigated before the trial court.
Reformulating the issues raised by the petitioners here, we think the principal issues may
be reduced to the following: firstly, is there a clear legal right to the relief asked by
petitioners in the form of a preliminary injunction to restrain private respondent from
manufacturing, selling and distributing cigarettes under the trademark "MARK"? The
second question is: are private respondent's acts complained of by petitioners causing
irreparable injury to petitioners' rights in the premises? These two (2) basic issues are
obviously related and need to be addressed together.
I In contrast, private respondent filed an application for registration of its mark "MARK"
The first point that needs to be stressed is that petitioners have Philippine Certificates
of Registration for their trademarks "MARK TEN", "MARK VII," and "LARK" in the
Principal Register.
Upon the other hand, private respondent's trademark "MARK" is not registered in the
Principal Register in the Office of the Director of Patents; private respondents is simply
an applicant for registration of a mark, the status of which application may be noted
later.
It is important to stress the legal effects of registration of a trademark in the Principal
Register in the Office of the Director of Patents. Section 20 of R.A. No. 166, as
amended, sets out the principal legal effects of such registration:
Sec. 20. Certificate of registration prima facie evidence of validity. A certificate of registration,
of a mark or a trade name shall be prima facie evidence of the validity of the
registration, the registrant's ownership of the mark or trade name, and of the registrant's
exclusive right to use the same in connection with the goods, business or services
specified in the certificate, subject to any conditions and limitations stated therein.
(Emphasis supplied)
In Lorenzana v. Macagba, 12 the Court distinguished between the effects of registration in
the Principal Register and registration in the Supplemental Register in the following
manner:
(1) Registration in the Principal Register gives rise to a presumption of the validity of the registration,
the registrant's ownership of the mark, and his right to the exclusive use thereof. There is no such
presumption in registrations in the Supplemental Register.
(2) Registration in the Principal Register is limited to the actual owner of the trademark (Unno
Commercial Enterprises v. Gen. Milling Corp., 120 SCRA 804 [1983]) and proceedings
therein pass on the issue of ownership, which may be contested through opposition or
interference proceedings, or after registration, in a petition for cancellation.
Registration in the Principal Register is constructive notice of the registrant's claims of ownership, while
registration in the Supplemental Register is merely proof of actual use of the trademark
and notice that the registrant has used or appropriated it. (Le Chemise Lacoste, S.A. v.
Fernandez, 129 SCRA 373 [1984]: "Registration in the Supplemental Register . . . serves
as notice that the registrant is using or has appropriated the trademark.") It is not
subject to opposition although it may be cancelled after its issuance.
Corollarilly, registration in the Principal Register is a basis for an action for infringement, while
registration in the Supplemental Register is not.
(3) In application for registration in the Principal Register, publication of the application
is necessary. This is not so in applications for registration in the Supplemental Register.
Certificates of registration under both Registers are also different from each other.
(4) Proof of registration in the Principal Register may be filed with the Bureau of Customs
to exclude foreign goods bearing infringing marks while it does not hold true for registrations in
the Supplemental Register. 13 (Emphasis supplied)
When taken with the companion presumption of regularity of performance of official
duty, it will be seen that issuance of a Certificate of Registration of a trademark in the
Principal Register also gives rise to the presumption that
all requirements of Philippine law necessary for a valid registration (including prior use in
commerce in the Philippines for at least two [2] months) were complied with and satisfied.
for cigarettes with the Director of Patents soon after it commenced manufacturing and
selling cigarettes trademark with "MARK." This application was abandoned or
"forfeited", 14 for failure of private respondent to file a necessary Paper with the
Director of Patent. It also appears, however, that private respondent later re-filed or
reinstated its application for registration of "MARK" 15 and that, so far as the record
here before us is concerned, this application remains merely an application and has not been
granted and a Certificate of Registration in the Principal Register issued. 16 While final
action does not appear as yet to have been taken by the Director of Patents on private
respondent's application, there was at least a preliminary determination of the trademark
examiners that the trademark "MARK" was "confusingly similar" with petitioners' marks "MARK
VII," "MARK TEN" and "LARK" and that accordingly, registration was barred under Section
4 (d) of R.A. No. 166, as amended. 17
In the trial court, both Judge Reyes and Judge Galing took the position that until the
Director of Patents shall have finally acted on private respondent's application for
registration of "MARK," petitioners cannot be granted the relief of preliminary
injunction. It is respectfully submitted that this position is both erroneous and
unfortunate. In reliance upon that position, private respondent has kept its application
for registration alive and pending. The Director of Patents in turn may well have
refrained from taking final action on that application, even in the absence of a
restraining order from the courts, out of deference to the courts. The pendency of the
application before the Director of Patents is not in itself a reason for denying preliminary
injunction. Our courts have jurisdiction and authority to determine whether or not
"MARK" is an infringement on petitioners' registered trademarks. Under our case law,
the issuance of a Certificate of Registration of a trademark in the Principal Register by
the Director of Patents would not prevent a court from ruling on whether or not the
trademark so granted registration is confusingly similar with a previously registered
trademark, where such issue is essential for resolution of a case properly before the
court. A fortiori, a mere application for registration cannot be a sufficient reason for
denying injunctive relief, whether preliminary or definitive. In the case at bar,
petitioners' suit for injunction and for damages for infringement, and their application
for a preliminary injunction against private respondent, cannot be resolved without
resolving the issue of claimed confusing similarity.
In the case at bar, the evidence of record is scanty. Petitioners have not submitted actual
copies or photographs of their registered marks as used in cigarettes. Private respondent
has not, for its part, submitted the actual labels or packaging material used in selling its
"MARK" cigarettes. Petitioners have appended to their Petition a photocopy of an
advertisement of "MARK" cigarettes. Private respondent has not included in the record
a copy of its application for registration of "MARK" for cigarettes, which would include
a facsimile of the trademark being applied for. It should be noted that "MARK" and
"LARK," when read or pronounced orally, constitute idem sonans in striking degree.
Further, "MARK" has taken over the dominant word in "MARK VII" and "MARK
TEN." These circumstances, coupled with private respondent's failure to explain how
or why it chose, out of all the words in the English language, the word "mark" to refer
to its cigarettes, lead me to the submission that there is a prima facie basis for holding, as
the Patent Office has held and as the Court of Appeals did hold originally, that private
respondent's "MARK" infringes upon petitioners' registered trademarks.
II
There is thus no question as to the legal rights of petitioners as holders of trademarks
registered in the Philippines. Private respondent, however, resists and assails petitioners'
effort to enforce their legal rights by heavily underscoring the fact that petitioners are
not registered to do business in the Philippines and are not in fact doing business in the
Philippines. It is thus necessary to determine what consequences, if any, flow from this
circumstance so far as enforcement of petitioners' rights as holders of registered
Philippine trademarks is concerned.
It should be stressed at the outset that circumstance has no legal impact upon the right
of petitioners to own and register their trademarks in the Philippines. Section 2 of R.A.
No. 166 as amended expressly recognizes as registrable, under this statute, marks which
are owned by corporations domiciled in any foreign country:
Sec. 2. What are registrable. Trademarks, trade names and service marks owned
by persons, corporations, partnerships or associations domiciled in the Philippines and
by persons, corporations, partnerships or associations domiciled in any foreign country may be
registered in accordance with the provisions of this Act; Provided, That said trade marks,
trade names or service marks are actually in use in commerce and services not less than
two months in the Philippines before the time the applications for registration are filed:
And provided further, That the country of which the applicant for registration is a citizen grants by law
substantially similar privileges to citizens of the Philippines, and such fact is officially certified,
with a certified true copy of the foreign law translated into the English language, by the
government of the foreign country to the Government of the Republic of the
Philippines. (Emphasis suppplied)
It is also entirely clear that foreign corporations and corporations domiciled in a foreign
country are not disabled from bringing suit in Philippine courts to protect their rights as
holders of trademarks registered in the Philippines. Under Section 21-A of R.A. No.
166, as amended, any foreign corporation which is a holder of a trademark registered
under Philippine law may bring an action for infringement of such mark or for unfair
competition or false designation of origin and false description "whether or not it has been
licensed to do business in the Philippines under the [Corporation Law] at the time it brings complaint,
subject to the proviso that:
. . . that the country of which the said foreign corporation or juristic person is a citizen
or in which it is domiciled by treaty, convention or law, grants similar privilege to corporate or
juristic persons of the Philippines. (Emphasis supplied)
The rule thus embodied in Section 21-A of R.A. No. 166 as amended is also set out in
Article 2 of the Paris Convention for the Protection of Industrial Property ("Paris
Convention"), to which the Philippines, the United States, Canada and Switzerland are
all parties. 18 Article 2 of the Paris Convention provides in relevant part:
Article 2
(1) Nationals of any country of the Union shall, as regards the protection of industrial
property, enjoy in all the other countries of the Union the advantages that their
respective laws now grant, or may hereafter grant, to nationals; all without prejudice to
the rights specially provided for by this Convention. Consequently, they shall have the
same protection as the latter, and the same legal remedy against any infringement of
their rights, provided that the conditions and formalities imposed upon national are
complied with.
(2) However, no requirement as to domicile or establishment in the country where
protection is claimed may be imposed upon nationals of countries of the Union for the
enjoyment of any industrial property rights.
xxx xxx xxx
(Emphasis supplied)
Article 2, paragraph 1 of the Paris Convention embodies the principle of "national
treatment" or "assimilation with nationals," one of the basic rules of the
Convention. 19 Under Article 2, paragraph 1 of the Paris Convention, nationals of
Canada, Switzerland and the United States who are all countries of the Paris Union are
entitled to enjoy in the Philippines, also a country of the Union, the advantages and
protections which Philippine law grants to Philippine nationals. Article 2 paragraph 2 of
the Paris Convention restrains the Philippines from imposing a requirement of local
incorporation or establishment of a local domicile as a pre-requisite for granting to
foreign nationals the protection which nationals of the Philippines are entitled to under
Philippine law in respect of their industrial property rights. It should be noted that
Article 2, paragraph 2 also constitutes proof of compliance with the requirement of
reciprocity between, on the one hand, the Philippines and, on the other hand, Canada,
Switzerland and the United States required under Section 21-A of R.A. No. 166 as
amended.
The net effect of the statutory and treaty provisions above referred to is that a corporate
national of a member country of the Paris Union is entitled to bring in Philippine courts
an action for infringement of trademarks, or for unfair competition, without necessity
for obtaining registration or a license to do business in the Philippines. Article 2 as
quoted above is in effect with respect to all four (4) countries.
Such has been the rule in our jurisdiction even before the enactment of R.A. No. 166
and before the Philippines became a party to the Paris Convention. In Western Equipment
and Supplies Company, et al. v. Reyes, etc., et al., 20 petitioner Western Electrical Company, a
U.S. manufacturer of electrical and telephone equipment and supplies not doing business in
the Philippines, commenced action in a Philippine court to protect its corporate name
from unauthorized use thereof by certain Philippine residents. The Philippine residents
sought to organize a Philippine corporation to be known as "Western Electrical
Company" for the purpose of manufacturing and selling electrical and telephone
equipment in the Philippines. The local residents resisted the suit by contending, inter
alia, that the petitioner Western Electrical Company had never transacted business in
the Philippines and that registration of private respondent's articles of incorporation
could not in any way injure petitioner. The Supreme Court, in rejecting this argument,
stated that:
. . . a foreign corporation which has never done business in the Philippines but is widely and
favorably known in the Philippines through the use therein of its products bearing its
corporate name and tradename has a legal right to maintain an action in the [Philippines]. The
purpose of such a suit is to protect its reputation, corporate name and goodwill which has
been established through the natural development of its trade for a long period of years in the doing
of which it does not seek to enforce any legal or contract rights arising from or closing
out of any business which it has transacted in the Philippines. . . .21 (Emphasis supplied)
Similarly, in Asari Yoko v. Kee Boc,22 a Japanese corporation, also not engaged in any business
in the Philippines, successfully opposed an application for registration of its trademark
"Race Brand" on shirts and undershirts by a local businessman, even though the Japanese
company had not previously registered its own mark "Race Brand" in the Philippines.
Again, in General Garments Corporation v. Director of Patents and Puritan Sportswear
Corporation,23 Puritan Sportswear Corporation, an entity organized in Pennsylvania
U.S.A. and not doing business in the Philippines, filed a petition for cancellation of the
mark "Puritan" which was registered in the name of petitioner General Garments
Corporation for assorted men's wear, undershirts, briefs, shirts, sweaters and jackets.
Puritan Sportswear alleged ownership and prior use of the trademark "Puritan" in the
Philippines. Petitioner General Garments, on the other hand, contended that Puritan
Sportswear, being a foreign corporation not licensed to do, and not doing, business in the Philippines,
could not maintain an action for cancellation of a trademark. The Court, in upholding
the Director of Patents' cancellation of the registration of the mark "Puritan" in the
name of General Garments, said:
. . . .such mark should not have been registered in the first place (and consequently may be cancelled if so
required) if it consists of
or comprises a mark or tradename which so resembles 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 goods, business or services of the applicant, to cause confusion or mistake or
to deceive purchasers. 24 (Emphasis supplied)
In Converse Rubber Corporation v. Universal Rubber Products, Inc., 25 petitioner Converse
Rubber Corporation was an American manufacturer of rubber shoes, not doing business on
its own in the Philippines and not licensed to do business in the Philippines, opposed the
application for registration of the trademark "Universal Converse and Device" to be
used also in rubber shoes and rubber slippers by private respondent Universal Rubber
Products, Inc. ("Universal"). In reversing the Director of Patents and holding that
Universal's application must be rejected, the Supreme Court said:
The sales of 12 to 20 pairs a month of petitioner's rubber shoes cannot be considered
insignificant, considering that they appear to be of high expensive quality, which not too
many basketball players can afford to buy. Any sale made by a legitimate trader from his store is
a commercial act establishing trademark rights since such sales are made in due course of business to the
general public, not only to limited individuals. It is a matter of public knowledge that all
brands of goods filter into the market, indiscriminately sold by jobbers, dealers and
merchants not necessarily with the knowledge or consent of the manufacturer. Such
actual sale of goods in the local market establishes trademark use which serves as the basis for any
action aimed at trademark pre-emption. It is a corollary logical deduction that while Converse
Rubber Corporation is not licensed to do business in the country and is not actually doing business here,
it does not mean that its goods are not being sold here or that it has not earned a reputation or goodwill
as regards its products. The Director of Patents was, therefore, remiss in ruling that the
proofs sales presented "was made by a single witness who had never dealt with nor had
never known opposer {petitioner} . . . without Opposer having a direct or indirect hand
in the transaction to be the basis of trademark pre-exemption. 26 (Emphasis supplied)
Three (3) other cases may be noted. The first is La Chemise Lacoste, S.A. v. Fernandez 27 La
Chemise Lacoste, S.A. although a foreign corporation not engaged in and not licensed to do
business in the Philippines, was accorded protection for its trademarks "Lacoste", "Chemise
Lacoste," and "Crocodile Device" for clothing and sporting apparel. The Court
recognized that those marks were "world famous trademarks which the Philippines, as a
party to the Paris Union, is bound to protect." Similarly, in Del Monte Corporation, et al. v.
Court of Appeals, et al., 28petitioner Del Monte Corporation was a company organized
under the laws of the United States and not engaged in business in the Philippines. Because
both the Philippines and the United States are signatories to the Convention of Paris,
which grants to nationals of the parties the rights and advantages which their own
nationals enjoy for the repression of acts of infringement and unfair competition, the
Court, having found that private respondent's label was an infringement of Del Monte's
trademark, held Del Monte entitled to recover damages.
In Puma Sportschuhfabriken Rudolf Dassler, K.G. v. Intermediate appellate Court, et
al, 29 petitioner Puma was a foreign corporation existing under the laws of the Federal
Republic of Germany not registered to do business and not doing business in the Philippines, filed a
complaint for infringement of trademark and for issuance of a writ of preliminary
injunction against a local manufacturing company. Reversing the Court of Appeals, this
Court held that Puma had legal capacity to bring the suit in the Philippines under
Section 21-A of R.A. No. 166 as amended and under the provisions of the Paris
Convention to which both the Philippines and the Federal Republic of Germany are
parties. The Court also noted that "Puma" is an internationally known brandname.
The relevancy of the doctrines set out in the cases above cited are conceded by my
distinguished brother Melo, J. in the majority opinion. The majority opinion, however,
goes on to say:
In other words, petitioners may have the capacity to sue for infringement irrespective of
lack of business activity in the Philippines on account of Section 21-A of the Trademark
Law but the question of whether they have an exclusive right over their symbols as to
justify issuance of the controversial writ will depend on actual use of their trademarks in
the Philippines in line with Sections 2 and 2-A of the same law. It is thus incongruous for
petitioners to claim that when a foreign corporation not licensed to do business in the Philippines files a
complaint for infringement, the entity need not be actually using its trademark in commerce in the
Philippines. Such a foreign corporation may have the personality to file a suit for infringement but it
may not necessarily be entitled to protection due to absence of actual use of the emblem in the local
market.
With great respect, certain essential qualifications must be made respecting the above
paragraph. Firstly, of the petitioners' three (3) marks here involved, two (2) of them
i.e., "MARK TEN" and "LARK" were registered in the Philippines on the basis of
actual use in the Philippines, precisely in accordance with the requirements of Section 2-
A and Section 5 (A) of R.A. No. 166 as amended. The pre-registration use in commerce
and trade in the Philippines for at least two (2) months as required by the statute, is
explicitly stated in the Certificates of Registration. The very fact that the appropriate
Philippine Government office issued the Certificates of Registration necessarily gave
rise to the presumption that such pre-registration use had in fact been shown to the
satisfaction of the Philippine Patent Office (now the Bureau of Patents, Trademark and
Technology Transfer ["BPTTT"]). It is important to note that respondent Fortune has
not purported to attack the validity of the trademarks "Mark Ten" and "Lark" by
pretending that no pre-registration use in commerce in the Philippines had been
shown. 30
The third mark of petitioners "MARK VII" was registered in the Philippines on
the basis of Section 37 of R.A. No. 166 as amended, i.e., on the basis of registration in
the country of origin and under the Paris Convention. In such registration, by the
express provisions of Section 37 (b) of R.A. No. 166 as amended, prior (pre-
registration) use in commerce in the Philippines need not be alleged.
Whether the Philippine trademark was based on actual use in the Philippines (under
Section 2-A) or on registration in a foreign country of origin (under Section 37), the
statute appears to require that trademarks (at least trademarks not shown to be
internationally "well-known") must continue to be used in trade and commerce in the
Philippines. It is, however, essential to point out that such continued use, as a
requirement for the continued right to the exclusive use of the registered trademark, is
presumed so long as the Certificate of Registration remains outstanding and so long as
the registered trademark owner complies with the requirements of Section 12 of R.A.
No. 166 as amended of filing affidavits with the BPTTT on the 5th, 10th and 15th
anniversaries of the date of issuance of the Certificate of Registration, showing that the
trademark is still in use or showing that its non-use is not due to any intention to
abandon the same. In the case at bar, again, respondent Fortune has not explicitly
pretended that the petitioners' trademarks have been abandoned by non-use in trade
and commerce in the Philippines although it appears to insinuate such non-use and
abandonment by stressing that petitioners are not doing business in the Philippines.
That petitioners are not doing business and are not licensed to do business in the
Philippines, does not by any means mean either that petitioners have not complied with
the requirements of Section 12 of R.A. No. 166 relating to affidavits of continued use,
or that petitioners' trademarks are not in fact used in trade and commerce in the
Philippines. In the Converse case, as earlier noted, the Court held that the circumstance that
the foreign owner of a Philippine trademark is not licensed to do business and is not doing business in
the Philippines, does not mean that petitioner's goods (that is, goods bearing petitioner's trademark) are
not sold in the Philippines. For cigarettes bearing petitioners' trademarks may in fact be imported into
and be available for sale in the Philippines through the acts of importers or distributors. Petitioners
have stated that their "Mark VII," "Mark Ten" and "Lark" cigarettes are in fact brought
into the country and available for sale here in, e.g., duty-free shops, though not
imported into or sold in the Philippines by petitioners themselves. There is no legal
requirement that the foreign registrant itself manufacture and sell its products here. All
the statute requires is the use in trade and commerce in the Philippines, and that can be
carried out by third party manufacturers operating under license granted by the foreign registrant or
by the importation and distribution of finished products by independent importers or traders. The
"use" of the trademark in such instances by the independent third parties constitutes use
of the foreign registrant's trademarks to the benefit of the foreign registrant. 31
III
We turn to petitioners' claim that they are suffering irreparable damage by reason of the
manufacture and sale of cigarettes under the trademark "MARK." Here again, a basic
argument of private respondent was that petitioners had not shown any damages
because they are not doing business in the Philippines. I respectfully maintain that this
argument is specious and without merit.
That petitioners are not doing business and are not licensed to do business in the
Philippines, does not necessarily mean that petitioners are not in a position to sustain,
and do not in fact sustain, damage through trademark infringement on the part of a
local enterprise. 32 Such trademark infringement by a local company may, for one thing,
affect the volume of importation into the Philippines of cigarettes bearing petitioners'
trademarks by independent or third party traders.
The damage which the petitioners claim they are sustaining by reason of the acts of
private respondents, are not limited to impact upon the volume of actual imports into
the Philippines of petitioners' cigarettes. Petitioners urge that private respondent's use of
its confusingly similar trademark "MARK" is invasive and destructive of petitioners
property right in their registered trademarks because.
a) Plaintiffs' undeniable right to the exclusive use of their registered trademarks is
effectively effaced by defendant's use of a confusingly similar trademark;
b) Plaintiffs would lose control of the reputation of their products as their reputation
will depend on defendant's commercial activities and the quality of defendant's
products;
c) The market in the Philippines for plaintiffs' products will be pre-empted;
d) Purchasers will think that defendant's goods are approved or sponsored by plaintiff;
e) Defendant will be allowed to benefit from the reputation of the plaintiffs' goods and
trademarks;
f) Defendant will be effectively authorized to continually invade plaintiffs' property
rights, for which invasion no fair and reasonable redness can be had in a court of law;
and
g) Plaintiffs will lose their goodwill and trade and the value of their registered
trademarks will irreparably diluted and the damages to be suffered by plaintiffs cannot
be redressed fairly in terms of money. 33
Modern authorities on trademark law view trademarks as symbols which perform three
(3) distinct functions: first, they indicate origin or ownership of the articles to which
they are attached; second, they guarantee that those articles come up to a certain
standard of quality; third, they advertise the articles they symbolize. 34
The first two (2) functions have long been recognized in trademark law which
characterizes the goodwill or business reputation symbolized by a trademark as a
property right protected by law. Thus, the owner of a trademark is held entitled to
exclude others from the use of the same, or of a confusingly similar, mark where
confusion results in diversion of trade or financial injury. At the same time, trademarks
warn against the imitation or faking of products and prevent the imposition of fraud
upon the public. The first two (2) functions of trademarks were aptly stressed in e.g.,
the La Chemise Lacoste case where the objectives of trademark protection were described
in the following terms:
. . . to stem the tide of fake and counterfeit consumer items flooding the Philippine
market or exported abroad from our country. The greater victim is not so much the
manufacturer whose product is being faked but
the Filipino consuming public and in the case of exportations, our image abroad . . . .
We buy a kitchen appliance, a household tool, perfume, a face powder, other toilet
articles, watches, brandy or whisky, and items of clothing like jeans, T-shirts, neckties,
etc. the list is quite lengthy and pay good money relying on the brand name as
guarantee of its quality and genuine nature only to explode in bitter frustration and
helpless anger because the purchased item turns out to be a shoddy imitation, albeit a
clever looking counterfeit, of the quality product . . . . 35
The third or advertisement function of trademark has become of especial importance
given the modern technology of communication and transportation and the growth of
international trade. 36 Through advertisement in the broadcast and print media, the
owner of the trademark is able to establish a nexus between its trademark products and
the public in regions where the owner does not itself manufacture or sell its own
products. 37 Through advertisement, a well-established and well-earned reputation may
be gained in countries where the trademark owner has itself no established business
connection. 38 Goodwill may thus be seen to be much less closely confined territorially
than, say, a hundred or fifty years ago. 39 It is no longer true that "a trademark of itself
cannot travel to markets where there is no article to wear the badge and no trader to
offer the article." 40 Advertisement of trademarks is geared towards the promotion of
use of the marked article and the attraction of potential buyers and users; 41 by fixing the
identity of the marked article in the public mind, it prepares the way for growth in such
commerce whether the commerce be handled by the trademark owner itself or by its licensees or
independent traders.
That a registered trademark has value in itself apart from the trade physically
accompanying its use, has been recognized by our Court. In Ang v. Teodoro,42 the Court
was called upon the determine whether there was infringement in the use of the same
trademark on articles which do not belong to the same class of goods which the lawful
trademark owner manufactures and sells. In holding that there was infringing use in
such case, the Court said:
. . . . such unfair trading can cause injury or damage to the first user of a given trade-
mark, first, by prevention of the natural expansion of his business and, second, by having his business
reputation confused with and put at the mercy of the second user. When noncompetitive products
are sold under the same mark, the gradual whittling away or dispersion of the identity and hold
upon the public mind of the mark created by its first user, inevitably result. The original owner is
entitled to the preservation of the valuable link between him and the public that has been created
by his ingenuity and the merit of his wares or services. Experience has demonstrated that when a
well-known trade-mark is adopted by another even for a totally different class of goods,
it is done to get the benefit of the reputation and advertisements of the originator of
said mark, to convey to the public a false impression of some supposed connection
between the manufacturer of the article sold under the original mark and the new
articles being tendered to the public under the same or similar mark . . . The owner of a
trademark or tradename has a property right in which he is entitled to protection,
since there is damage to him in the form of confusion of reputation or goodwill in the mind of the
public as well as from confusion of goods. (Emphasis supplied)
In Sta. Ana v. Maliwat,43 the Court, through J.B.L. Reyes, J., in holding that the use of
the name "Flormen" with respect to shoes was infringement of the mark "Flormann"
used in the men's wear such as shirts, polo shirts and pants, said:
Modern law recognizes that the protection to which the owner of a trade-mark is
entitled is not limited to guarding his goods or business from actual market competition
with identical or similar products of the parties, but extends to all cases in which the use
by a junior appropriator of a trade-mark or trade-name is likely to lead to a confusing of
source, as where prospective purchasers would be misled into thinking that the complaining party has
extended his business into the field (see 148 ALR 56 et seq; 52 Am. Jur. 576) or is in any way
connected with the activities of the infringer; or when it forestalls the normal potential expansion of his
business (v. 148 ALR, 77, 84; 52 Am. Jur. 576, 577). . . . . 44 (Emphasis supplied)
Petitioners did not try to put a peso figure on their claimed damage arising from the
erosion and possible eventual destruction of the symbolic value of their trademark. Such
damage, while not easily quantifiable, is nonetheless real and effective. I submit, with
respect, that such continuing damage falls clearly within the concept of irreparable
damage or injury described in Social Security Commission v. Bayona 45 in the following
terms:
Damages are irreparable within the meaning of the rule relative to the issuance of
injunction where there is no standard by which their amount can be measured with reasonable
accuracy (Crouc v. Central Labor Council, 83 ALR, 193). "An irreparable injury which a
court of equity will enjoin includes that degree of wrong of a repeated and continuing kind
which produce hurt, inconvenience, or damage that can be estimated only by conjecture, and not by any
accurate standard of measurement" (Phipps v. Rogue River Valley Canal Co., 7 ALR, 741).
An irreparable injury to authorize an injunction consists of a serious charge of, or is
destructive to, the property if affects, either physically or in the character in which it has
been held and enjoined, or when the property has some peculiar quality or use, so that its pecuniary
value will not fairly recompense the owner of the loss thereof' (Dunker v. Field and Tub Club, 92
P., 502).
Respondent corporations made a lengthy discourse on the matter of irreparable injury
they may suffer if the injunction were not issued, but the array of figures they have laid
out merely succeeded in proving that the damage, if any they may suffer, is susceptible of
mathematical computation. It is not then irreparable. As already stated, this term has a definite
meaning in law. It does not have reference to the amount of damages that may be caused but rather to
the difficulty of measuring the damages inflicted. If full compensation can be obtained by way of damages,
equity will not apply the remedy of injunction(28 Am. Jur., 244; 43 C.J.S., 427, 446). 46
I next turn to private respondent's claim that issuance of an injunction would impose
heavy damage upon itself and upon Government. As noted, private respondent stated
that it had paid many millions of pesos as ad valorem and VAT taxes to the Government
in 1988 and 1989 in connection with its "MARK" cigarettes. 47 Presumably, the total
volume of its business associated with the manufacture and sale of cigarettes
trademarked "MARK" would be even larger. In addition, private respondent suggests,
albeit indirectly only, that hundreds if not thousands of its employees would find
themselves unemployed if it were restrained from the manufacture and sale of "MARK"
cigarettes.
Private respondent's claims concerning alleged damages both to itself and to the
Government, which obviously loomed very large in the mind of the majority here, and
of the Court of Appeals when it lifted the injunction it had issued, appear to me to be
extravagant indeed. Petitioners cannot claim to be entitled to an injunction which could
restrain private respondent from manufacturing and selling cigarettes completely; petitioner
do not pretend to be so entitled to such a comprehensive injunction. Petitioners seek
only the reinstatement of the original injunction issued by the Court of Appeals, i.e., one
that restrains private respondent from using the trademark "MARK" on its cigarettes. There is
nothing to prevent private respondent from continuing to manufacture and sell
cigarettes under any of its already existing and registered trademarks, of which it has
several, or under some new and specially created trademark(s). Realistically, private
respondent, if enjoined, would lose only the value of the packaging material imprinted
with the same trademark (which cigarettes and material may well be amenable to re-
cycling) and the cost of past advertisements of "MARK" in media, if any. Thus, the
apprehension on the part of the majority which private respondent tried diligently to
foment that the Government would lose many millions of pesos in tax revenues and
that many employees would lose their jobs, if an injunction is issued is more
apparent than real. The damages private respondent would sustain from reinstatement
of the preliminary injunction are clearly quantifiable in pesos.
Besides, as pointed out by petitioners, to pay heed to private respondent's creative
economic argument would ultimately mean that the greater the volume of sales and the
profits of the infringer, the greater would be the infringer's claim to be entitled to
continue infringement. I respectfully submit that the law should not countenance such a
cynical result.
My conclusion is that private respondent's claims concerning damage which it would
sustain if the petitioners were granted the injunction they seek, did not constitute a
sufficient basis for overturning the original decision of the Court of Appeals. The
Resolution of the Court of Appeals granting private respondent's Motion to Dissolve, in
effect disregarded everything that Court had set out in its original Decision. The mere
offer and filing of a counterbond does not, by itself, provide a sufficient basis for lifting
the preliminary injunction earlier granted. For all the elements which supported the
original issuance of a preliminary injunction continued to exist. Private respondent's
hyperbolic claims concerning the damages that it and the Government would sustain by
reason of an injunction, had been made earlier both before the trial court and the Court
of Appeals. Finally, it is not enough to say as private respondent says, that the Court of
Appeals in granting its Motion to Dissolve the preliminary injunction was merely
exercising its discretion; for the Court of Appeals obviously was also exercising its
discretion when it rendered its original Decision granting the preliminary injunction.
I vote to grant due course to the petition for Certiorari, to set aside the Resolution of the
respondent Court of Appeals dated 14 September 1989 in C.A.-G.R. SP No. 13132 and
to reinstate the Decision of that same Court dated 5 May 1989.
# Separate Opinions
FELICIANO, J., dissenting:
I find myself unable to join in the opinion prepared by my distinguished brother,
Melo, J.
It seems to me that the issues involved in this case are rather more complex than what
has been assumed to be the case by the majority opinion. For this and related reasons,
there is set out below a statement of the relevant facts (as I see them) that is more
extensive than what is ordinarily found in dissenting opinions.
Petitioner Philip Morris, Inc. is a corporation organized and existing under the law of
Virginia, U.S.A. Petitioners Benson & Hedges (Canada), Inc. and Fabriques de Tabac
Reunies, S.A., both wholly owned subsidiaries of Philip Morris, Inc., are organized and
existing under the law of Canada and Switzerland, respectively.
Philip Morris, Inc. is registered owner of the trademark "MARK VII" for cigarettes. Its
ownership thereof is evidenced by Philippine Patent Office Trademark Certificate of
Registration No. 18723, dated 26 April 1973. The statement attached to the Certificate
of Registration states that the trademark "MARK VII" had been registered in the United
States Patent Office, on the Principal Register, under Certificate of Registration No.
888,931 issued on 7 April 1970. The statement also requested that the trademark be
registered in the Philippine Patent Office on the Principal Register in accordance with
Section 37 of R.A. No. 166, as amended.
Benson & Hedges (Canada), Inc. is the registered owner of the trademark "MARK
TEN" also for cigarettes, as evidenced by Philippine Patent Office Trademark
Certificate of Registration No. 11147, dated 28 May 1964, on the Principal Register.
This Trademark Certificate of Registration was originally issued in the name of
Canadian Tabacofina Ltd. and later assigned to Benson & Hedges (Canada), Inc.
Petitioners alleged that the name Canadian Tabacofina Ltd. was later changed to Benson
& Hedges (Canada) Ltd. This trademark Certificate of Registration was renewed on 28
May 1984. The statement attached thereto stated that the "date of first use of the trademark
'MARK TEN' in trade in or with the Philippines is April 15, 1963," and that trademark had
"been in actual use in commerce over the Philippines continuously for two months."
Fabriques de Tabac Reunies, S.A. is registered owner of the trademark "LARK" also for
cigarettes, as evidenced by Philippine Patent Office Trademark Certificate of
Registration No. 10953, dated 25 March 1964. This Trademark Certificate of
Registration was originally issued in the name of Ligget and Myres Tobacco Company
was later assigned to Fabriques de Tabac Reunies, S.A. Petitioners alleged that the name
of Liggett and Myres Tobacco Company was changed later to Fabriques de Tabac
Reunies, S.A. The statement attached to this Certificate of Registration states that the
trademark "LARK" was first used by Ligget and Myres Tobacco Company on 31 May
1920, and first used by it "in commerce in or with the Philippines on February 6, 1963" and has
been continuously used by it "in trade in or with the Philippines since February 6, 1963."
Sometime before 17 October 1981, private respondent Fortune Tobacco Corporation
("Fortune") commenced manufacturing and selling in the Philippines cigarettes under
the brandname "MARK." Fortune also filed on 13 February 1981 with the Philippine
Patent Office an application for registration of "MARK" as a trademark for cigarettes.
By a letter dated 17 October 1981, petitioner through their lawyers wrote to Fortune
stating that the manufacturing, selling and advertising of "MARK" cigarettes by Fortune
constituted an "infringement or an act of unfair competition with" petitioners' "well-
known international trademarks used on cigarettes and tobacco products which were
registered worldwide and with the Philippine Patent Office." Petitioners listed their
Philippine Certificates of Registration for the trademarks "MARK VII," "MARK TEN,"
and "LARK." Petitioners then asked Fortune "to cease and desist from further
manufacturing; selling or advertising 'MARK' cigarettes," otherwise appropriate court
actions would be filed without further notice.
On 18 August 1982, petitioners commenced action before the Court of First Instance
of Pasig, Metro Manila (Civil Case No. 47374). In their complaint, petitioners alleged
that they were not doing business in the Philippines but had nonetheless the right and
the capacity to bring the instant suit; that they were owners of Philippine Patent Office
Trademark Certificates of Registration which were in full force and effect, covering
"MARK VII," "MARK TEN," and "LARK," all for cigarettes (except the last which
also covered chewing and smoking tobacco); that they had registered those trademarks
in their respective countries of origin and in other countries the world and that by virtue
of their "long and extensive use [had] gained international fame and acceptance;" that
they had their respective real and effective industrial or commercial establishments in
the United States, Canada and Switzerland, which countries were, like the Philippines,
members of the Convention of Paris for the Protection of Industrial Property; that
under that Convention each member-country undertakes to prohibit the use of a
trademark which constitutes a reproduction, imitation or translation of a mark already
belonging to a person entitled to the benefits of the Convention and use for identical or
similar goods; that petitioner Fabriques de Tabac Reunies, S.A. had long been using
trademark "LARK" throughout the world, including the Philippines where its products
bearing the trademark "LARK" had been sold in the duty-free market, and advertised
and marketted in the Philippines at least since 1964 and have continued to be so to
present; that Fortune had without previous consent, authority or license from
petitioners, with knowledge of the popularity of petitioners' marks and their Philippine
registrations, manufactured, advertised and sold cigarettes bearing the identical or
confusingly similar trademark "MARK" which unauthorized use constituted an act of
infringement under Section 22 of R.A. No. 166, as amended; that thereby the public and
the patronizers of petitioners' products were being deceived into buying Fortune's
cigarettes under the impression and mistaken belief that Fortune's cigarettes were
identical with, or came from the same source as, petitioners' products or that Fortune
was licensee of petitioners, which it was not; that the infringement by Fortune of
petitioners' trademarks have inflicted damages upon petitioners; that the continued
unauthorized and unlicensed manufacture and sale by Fortune of its infringing products
during the litigation would work injustice and cause irreparable injury to petitioners in
violation of their property rights and moreover tend to render the judgment which the
court might render ineffectual. Petitioners accordingly asked for a writ of preliminary
injunction to restrain Fortune from manufacturing or selling "MARK" cigarettes, and
after trial, to make such preliminary injunction permanent and to order Fortune's
infringing materials to be destroyed, and for damages.
Fortune filed an Opposition to petitioners' prayer for preliminary injunction. On 28
March 1983, the trial court1 issued an Order denying petitioners' motion for preliminary
injunction. In rendering that order, the trial court, while noting that petitioners were
holders of Philippine Certificates of Trademark Registration, relied heavily on three (3)
factors:
Firstly, that petitioners were foreign corporations not doing business in the Philippines;
Secondly, that Fortune's application for a registration as trademark of the word
"MARK" for cigarettes was then pending before the Philippine Patent Office; and
Thirdly, that Fortune was the "only party authorized" by the Bureau of Internal
Revenue ("BIR") to manufacture cigarettes bearing the mark "MARK" in the
Philippines.
In respect of the first point, the trial court was obviously heavily influenced by Fortune's
argument that because petitioners were not doing business in the Philippines, which
meant that "they [were] not engaged in the sale, manufacture, importation, exportation
and advertisement of their cigarette products in the Philippines," Fortune's manufacture
and sale of its "MARK" cigarettes could not be said to be causing petitioners
"irreparable damage" within the Philippines. In respect to the second point, the trial
judge felt that because the Director of Patents had not, at that point, denied Fortune's
pending application for registration of its trademark "MARK," the grant of a
preliminary injunction was premature. With regard to the third point, the judge noted a
letter dated 30 January 1979 2 of the then Acting Commissioner of Internal Revenue Mr.
Conrado P. Diaz, temporarily granting the request of Fortune for a permit to
manufacture two (2) new brands of cigarettes, one of which was "MARK." The trial
judge also noted that the BIR letter contained the following paragraph:
Please be informed further that this authority herein granted does not give you
protection against any person or entity whose rights may be prejudiced by infringement
or unfair competition in relation to your above named brands/trademarks. 3
The trial judge, however, apparently gave no weight at all to this caveat.
Petitioners sought, on 15 April 1983, reconsideration of Judge Reyes' Order denying
preliminary injunction. After Fortune had filed an Opposition to petitioners' Motion for
Reconsideration, and petitioners had filed their Reply and Fortune a Rejoinder, and after
an offer of exhibits by the parties respectively, Judge Reyes issued on 5 April 1984
another Order denying the Motion for Reconsideration. In his second order, the trial
judge laid great stress on the fact that Fortune's application for registration of its
trademark "MARK" for cigarettes remained subsisting. On the basis, Judge Reyes
denied petitioners' motion for reconsideration.
More than two (2) years later, petitioners filed a "Second Motion for Issuance of
Preliminary Injunction" dated 1 September 1986. In their Second Motion, petitioners
invited attention to Paper No. 3, dated 6 April 1983, relating to Fortune's application for
registration of its brandname "MARK." This Paper No. 3 reproduced a letter to
Fortune's counsel by Bienvenido A. Palisoc, Senior Trademark Examiner, and Wilfredo
T. Jaramillo, Trademark Examiner, stating that:
This application [for registration of "Mark"] has been examined.
Caption mark of the application must tally with the drawing on file.
Subject mark is confusingly similar with the following marks on file:
a. "Mark" with Reg. No. SR-2659 for cigarettes.
b. "Mark VII" with Reg. No. 18723 for cigarettes.
c. "Mark Ten" with Reg. No. 11147 for cigarettes.
d. "Lark" with Reg. No. 10953 for cigarettes.
Hence, registration is barred under Sec. 4 (d) of Rep. Act No. 166 as amended.
Subject mark has no trademark significance and can not serve its purpose as to indicate
the source and origin of goods.
Furthermore, the word "Mark" is generic and therefore incapable of exclusive appropriation.
Makati, Metro Manila, April 6, 1983." 4 (Emphasis supplied)
Petitioners also invited attention to a certification dated 8 August 1986 issued by Mr.
Luis M. Daca, Jr., Assistant Director, Philippine Patent Office, to the effect that
Fortune's application for the mark "MARK" for cigarettes was declared abandoned as
of 16 February 1986 and was now deemed forfeited. In addition, petitioners explained
in some detail how Fortune's use of its mark "MARK" was "destructive of [petitioners']
property right to [their] registered trademarks." 5 Further, petitioners assailed Fortune's
argument that issuance of preliminary injunction would cause "loss of revenue and taxes
to the Government" and that more damages would be sustained by Fortune than by
petitioners since the petitioners do not market their cigarettes in the Philippines.
After Fortune had filed an Opposition to petitioners' Second Motion, the trial court,
this time presided over by Judge Nicolas Galing, issued an Order dated 22 April 1987
denying once more the motion for issuance of a writ of preliminary injunction. In this
order, Judge Galing relied on two (2) points: firstly, according to the trial judge,
petitioners had not shown that the products they sought to protect from Fortune's
"MARK" cigarettes were "in actual use and available for commercial purposes anywhere
in the Philippines;" and secondly, it appeared that while Fortune's original application
had been abandoned, it could be refiled and was in fact re-filed. Thus, Judge Galing in
effect reiterated Judge Reyes's position that until the Director of Patents had definitely
acted upon Fortune's application for registration of "MARK," petitioners' prayer for
preliminary injunction could not be granted.
Petitioners then filed a Petition for Review with the Supreme Court, which Petition was
docketed as G.R. No. 78141. The Court ordered respondents to file their Comments on
the Petition and on 30 September 1987, the Court referred the Petition to the Court of
Appeals.
In due course of time, the Court of Appeals, through Cacdac, Jr., J.,6 rendered a decision
on 5 May 1989 setting aside the 22 April 1987 order of the trial court and ordering
issuance of a writ of preliminary injunction upon filing of a bond by petitioners in the
sum of P200,000.00 to be approved by the appellate court, "enjoining the private
respondents, its agents, employees and representatives from manufacturing, selling
and/or advertising "MARK" cigarettes until further orders." The Court of Appeals said
in pertinent part:
There is no dispute that petitioners are the registered owners of the trademarks for cigarettes
"MARK VII," "MARK TEN," and "LARK". (Annexes B, C and D, Petition). As found
and reiterated by the Philippine Patent Office in two (2) official communications dated April 6,
1983 and January 24, 1984, the trademark "MARK" is "confusingly similar" to the trademarks
of petitioners, hence, registration was barred under Sec. 4(d) of Rep. Act No. 166, as amended (pp.
106, 139 SCA rollo). In a third official communication dated April 8, 1986, the trademark
application of private respondent for the mark "MARK" under Serial No. 44008 filed
on February 13, 1981 which was declared abandoned as of February 16, 1986, is now
deemed forfeited, there being no revival made pursuant to Rule 98 of the Revised Rules
of Practitioners in Trademark Cases. (p. 107, CA rollo). The foregoing documents or
communications mentioned by petitioners as "the changes in material facts which
occurred after March 28, 1983", are not also questioned by respondents. 7 (Emphasis
supplied)
The Court of Appeals also noted the BIR letter of 30 January 1979 temporarily granting
Fortune's request for a permit to manufacture two (2) new brands of cigarettes,
including one branded "MARK," and the caveat (earlier noted)8 that the BIR's
authorization would not give Fortune any protection against any person or entity whose
rights may be prejudiced by infringement or unfair competition on the part of Fortune.
The Court of Appeals also referred to the certificate dated 26 September 1986 of Mr.
Cesar G. Sandico, then Director of Patents, issued upon request of Fortune's counsel
stating that there was a pending application for registration of the trademark "MARK" for
cigarettes under Serial No. 59872, filed on 16 September 1986, noting at the same time,
that Director Sandico's certification contained the following caveat or qualification:
This certification, however, does not give protection as against any person or entity whose right
may be prejudiced by infringement or unfair competition in relation to the aforesaid trademark nor
the right to register as contrary to the provisions of the Trademark Law, Republic Act No. 166 as
amended and the Revised Rules of Practice in Trademark Cases. (Emphasis supplied)
The Court of Appeals then went on to say that:
[We] believe and hold that petitioners have shown a prima facie case for the issuance of the writ of
prohibitory injunction for the purposes stated in their complaint and subsequent motions
for the issuance of the prohibitory writ. (Buayan Cattle Co. v. Quintillan, 125 SCRA
276).
The requisites for the granting of preliminary injunction are the existence of the right
protected and the facts against which the injunction is to be directed as violative of said right. (Buayan
Cattle Co. v. Quintillan, supra; Ortigas & Co. vs. Ruiz, 148 SCRA 326). It is a writ
framed according to the circumstances of the case commanding an act which the Court
regards as essential to justice and restraining an act it deems contrary to equity and good
conscience (Rosauro vs. Cuneta, 151 SCRA 570). If it is not issued, the defendant may, before
final judgment, do or continue the doing of the act which the plaintiff asks the court to restrain, and thus
make ineffectual the final judgment rendered afterwards granting the relief sought by the plaintiff (Calo
vs. Roldan, 76 Phil. 445). Generally, its grant or denial rests upon the sound discretion
of the Court except on a clear case of abuse (Belish Investment & Finance Co. vs.
Statement House, 151 SCRA 636). Petitioners' right of exclusivity to their registered trademarks
being clear and beyond question, the respondent court's denial of the prohibitive writ constituted
excess of jurisdiction and grave abuse of discretion. If the lower court does not grant preliminary
injunction, the appellate court may grant the same (Service Specialists, Inc. v. Sheriff of
Manila. 145 SCRA 139).9 (Emphasis supplied)
Fortune moved for reconsideration of the Decision of the Court of Appeals insisting
that petitioners must first prove their "clear, unmistakable and unquestioned right to the
writ, coupled with the possible damages it would suffer;" that petitioners had not
suffered any "great and irreparable injury to speak of" because "petitioners have never
done business in this country in the past nor in the future;" that, on the other hand,
Fortune had been authorized by the BIR to manufacture "MARK" cigarettes, "thereby
generating much needed funds for the Government;" that Fortune's application for
registration of its brandname "MARK" with the Philippine Patent Office "still pending"
and not "finally rejected" by the Director of Patents. On 12 July 1989, the Court of
Appeals issued a Minute Resolution stating that the issues and arguments in Fortune's
motion for reconsideration had been "fully discussed" in the Decision sought to be
reconsidered, that no new arguments were raised, and accordingly denied the Motion
for Reconsideration.
Fortune then filed a "Motion to Dissolve Writ of Preliminary Injunction with Offer to
File Counterbond" date 25 July 1989, where it reiterated the basic arguments it
previously made.
A "Supplemental Motion to Lift Writ of Preliminary Injunction with Offer of
Counterbond" dated 17 August 1989 was next filed by Fortune. In this "Supplemental
Motion," Fortune averred that it had paid to the BIR for 1988 the amount of
P181,940,177.38 for specific taxes; while for January to July 1989, it had paid the
amount of P120,120,735.28. Fortune also referred to its employees assigned to the
manufacture of "MARK" cigarettes who were apparently apprehensive that their
services would eventually be terminated and that they would join the ranks of the
unemployed.
Petitioners filed an Opposition to the "Motion to Dissolve" and a Comment on the
"Supplemental Motion" of Fortune.
On 14 September 1989, the Court of Appeals once more through Cacdac, Jr., J. issued a
Resolution lifting the preliminary injunction it had earlier granted upon the filing of
counterbond by private respondent in the amount of P400,000.00 to answer for any
damages petitioners may suffer as a consequence of such lifting. In its Resolution, the
Court of Appeals referred to the "lots of workers employed [who] will be laid off as a
consequence of the injunction" and that Government "will stand to lose the amount of
specific taxes being paid by" Fortune. It when went on to say:
After a thorough re-examination of the issues involved and the arguments advanced by
both parties in the offer to file a counterbond and the opposition thereto, WE believe
that there are sound and cogent reasons for Us to grant the dissolution of the writ of
preliminary injunction by the offer of the private respondent to put up a counterbond
to answer for whatever damages the petitioner may suffer as a consequence of the
dissolution of the preliminary injunction.
The petitioner will not be prejudiced nor stand to suffer irreparably as a consequence of the lifting
of the preliminary injunction considering that they are not actually engaged in the manufacture of
the cigarettes with the trademarks in question and the filing of the counterbond will amply answer for
such damages.
While the rule is that an offer of a counterbond does not operate to dissolve an
injunction previously granted, nevertheless, it is equally true that an injunction could be
dissolved only upon good and valid grounds subject to the sound discretion of the
court. As WE have maintained the view that there are sound and good reasons to lift
the preliminary injunction the motion to file a counterbond is granted. 10(Emphasis
supplied)
Petitioners filed a Motion for Reconsideration, without success.
In the instant Petition, petitioners make the following basic submissions:
1. that the Court of Appeals gravely abused its discretion amounting to excess of
jurisdiction when it required, contrary to law and jurisprudence that in order that
petitioners may suffer irreparable injury due to the lifting of the injunction, petitioners
should be using actually their registered trademarks in commerce in the Philippines;
2. that the Court of Appeals gravely abused its discretion amounting to excess of
jurisdiction when it lifted the injunction in violation of Section 6 of Rule 58 of the rules
of Court;
3. that the Court of Appeals gravely abused its discretion amounting to excess of
jurisdiction when, after having found that the trial court had committed grave abuse of
discretion and exceeded its jurisdiction for having refused to issue the writ of injunction
to restrain respondent's acts that are contrary to equity and good conscience, it made a
complete about face for legally insufficient grounds and authorized private respondent
to continue performing the very same acts that it had considered contrary to equity and
good conscience, thereby ignoring not only the mandates of the trademark law, the
international commitments of the Philippines, the judicial admission of private
respondent that it will have no more right to use the trademark "MARK" after the
Director of Patents shall have rejected the application to register it, and the admonitions
of the Supreme Court. 11
The Court required private respondent to file a comment. The comment reiterated the
basic arguments made by private respondent before the Court of Appeals:
a. the petitioners are not suffering any irreparable damage by the lifting of the
preliminary injunction by the Court of appeals. Whatever damages they might suffer are "based
purely on speculation, since by judicial admission, petitioners are not doing business in the
Philippines. Private respondent stressed that petitioners "are not manufacturing, importing or
selling "MARK TEN," "MARK VII" or "LARK" in this country," notwithstanding "false
allegation" that petitioners have been "using" the said trademarks "in commerce and
trade" in the Philippines since 1963 up to the present.
b. that whatever damage petitioners may be suffering is negligible when compared to the taxes that
would have to be foregone by the Government considering that private respondent "paid an
annual specific tax of P240 Million only on the manufacture and sale of "MARK
cigarettes." Private respondent claims that, in contrast, petitioners which are foreign
corporations "based in three different countries" have not contributed anything to
Government tax revenues.
c. that the Court of Appeals lifted the writ of preliminary injunction it had earlier issued
upon the submission of a counter bond in double the amount of the bond submitted by
petitioners, under Section 6, Rule 58 of the Rules of Court, which act was within the sound
discretion of the Court of Appeals. Private respondent also stresses that the right of
petitioners to the injunction was still being litigated before the trial court.
Reformulating the issues raised by the petitioners here, we think the principal issues may
be reduced to the following: firstly, is there a clear legal right to the relief asked by
petitioners in the form of a preliminary injunction to restrain private respondent from
manufacturing, selling and distributing cigarettes under the trademark "MARK"? The
second question is: are private respondent's acts complained of by petitioners causing
irreparable injury to petitioners' rights in the premises? These two (2) basic issues are
obviously related and need to be addressed together.
I In contrast, private respondent filed an application for registration of its mark "MARK"
The first point that needs to be stressed is that petitioners have Philippine Certificates
of Registration for their trademarks "MARK TEN", "MARK VII," and "LARK" in the
Principal Register.
Upon the other hand, private respondent's trademark "MARK" is not registered in the
Principal Register in the Office of the Director of Patents; private respondents is simply
an applicant for registration of a mark, the status of which application may be noted
later.
It is important to stress the legal effects of registration of a trademark in the Principal
Register in the Office of the Director of Patents. Section 20 of R.A. No. 166, as
amended, sets out the principal legal effects of such registration:
Sec. 20. Certificate of registration prima facie evidence of validity. A certificate of
registration, of a mark or a trade name shall be prima facie evidence of the validity of
the registration, the registrant's ownership of the mark or trade name, and of the
registrant's exclusive right to use the same in connection with the goods, business or
services specified in the certificate, subject to any conditions and limitations stated
therein. (Emphasis supplied)
In Lorenzana v. Macagba, 12 the Court distinguished between the effects of registration in
the Principal Register and registration in the Supplemental Register in the following
manner:
(1) Registration in the Principal Register gives rise to a presumption of the validity of the registration,
the registrant's ownership of the mark, and his right to the exclusive use thereof. There is no such
presumption in registrations in the Supplemental Register.
(2) Registration in the Principal Register is limited to the actual owner of the trademark (Unno
Commercial Enterprises v. Gen. Milling Corp., 120 SCRA 804 [1983]) and proceedings
therein pass on the issue of ownership, which may be contested through opposition or
interference proceedings, or after registration, in a petition for cancellation.
Registration in the Principal Register is constructive notice of the registrant's claims of ownership, while
registration in the Supplemental Register is merely proof of actual use of the trademark
and notice that the registrant has used or appropriated it. (Le Chemise Lacoste, S.A. v.
Fernandez, 129 SCRA 373 [1984]: "Registration in the Supplemental Register . . . serves
as notice that the registrant is using or has appropriated the trademark.") It is not
subject to opposition although it may be cancelled after its issuance.
Corollarilly, registration in the Principal Register is a basis for an action for infringement, while
registration in the Supplemental Register is not.
(3) In application for registration in the Principal Register, publication of the application
is necessary. This is not so in applications for registration in the Supplemental Register.
Certificates of registration under both Registers are also different from each other.
(4) Proof of registration in the Principal Register may be filed with the Bureau of Customs
to exclude foreign goods bearing infringing marks while it does not hold true for registrations in
the Supplemental Register. 13 (Emphasis supplied)
When taken with the companion presumption of regularity of performance of official
duty, it will be seen that issuance of a Certificate of Registration of a trademark in the
Principal Register also gives rise to the presumption that
all requirements of Philippine law necessary for a valid registration (including prior use in
commerce in the Philippines for at least two [2] months) were complied with and satisfied.
for cigarettes with the Director of Patents soon after it commenced manufacturing and
selling cigarettes trademark with "MARK." This application was abandoned or
"forfeited", 14 for failure of private respondent to file a necessary Paper with the
Director of Patent. It also appears, however, that private respondent later re-filed or
reinstated its application for registration of "MARK" 15 and that, so far as the record
here before us is concerned, this application remains merely an application and has not been
granted and a Certificate of Registration in the Principal Register issued. 16 While final
action does not appear as yet to have been taken by the Director of Patents on private
respondent's application, there was at least a preliminary determination of the trademark
examiners that the trademark "MARK" was "confusingly similar" with petitioners' marks "MARK
VII," "MARK TEN" and "LARK" and that accordingly, registration was barred under Section
4 (d) of R.A. No. 166, as amended. 17
In the trial court, both Judge Reyes and Judge Galing took the position that until the
Director of Patents shall have finally acted on private respondent's application for
registration of "MARK," petitioners cannot be granted the relief of preliminary
injunction. It is respectfully submitted that this position is both erroneous and
unfortunate. In reliance upon that position, private respondent has kept its application
for registration alive and pending. The Director of Patents in turn may well have
refrained from taking final action on that application, even in the absence of a
restraining order from the courts, out of deference to the courts. The pendency of the
application before the Director of Patents is not in itself a reason for denying preliminary
injunction. Our courts have jurisdiction and authority to determine whether or not
"MARK" is an infringement on petitioners' registered trademarks. Under our case law,
the issuance of a Certificate of Registration of a trademark in the Principal Register by
the Director of Patents would not prevent a court from ruling on whether or not the
trademark so granted registration is confusingly similar with a previously registered
trademark, where such issue is essential for resolution of a case properly before the
court. A fortiori, a mere application for registration cannot be a sufficient reason for
denying injunctive relief, whether preliminary or definitive. In the case at bar,
petitioners' suit for injunction and for damages for infringement, and their application
for a preliminary injunction against private respondent, cannot be resolved without
resolving the issue of claimed confusing similarity.
In the case at bar, the evidence of record is scanty. Petitioners have not submitted actual
copies or photographs of their registered marks as used in cigarettes. Private respondent
has not, for its part, submitted the actual labels or packaging material used in selling its
"MARK" cigarettes. Petitioners have appended to their Petition a photocopy of an
advertisement of "MARK" cigarettes. Private respondent has not included in the record
a copy of its application for registration of "MARK" for cigarettes, which would include
a facsimile of the trademark being applied for. It should be noted that "MARK" and
"LARK," when read or pronounced orally, constitute idem sonans in striking degree.
Further, "MARK" has taken over the dominant word in "MARK VII" and "MARK
TEN." These circumstances, coupled with private respondent's failure to explain how
or why it chose, out of all the words in the English language, the word "mark" to refer
to its cigarettes, lead me to the submission that there is a prima facie basis for holding, as
the Patent Office has held and as the Court of Appeals did hold originally, that private
respondent's "MARK" infringes upon petitioners' registered trademarks.
II
There is thus no question as to the legal rights of petitioners as holders of trademarks
registered in the Philippines. Private respondent, however, resists and assails petitioners'
effort to enforce their legal rights by heavily underscoring the fact that petitioners are
not registered to do business in the Philippines and are not in fact doing business in the
Philippines. It is thus necessary to determine what consequences, if any, flow from this
circumstance so far as enforcement of petitioners' rights as holders of registered
Philippine trademarks is concerned.
It should be stressed at the outset that circumstance has no legal impact upon the right
of petitioners to own and register their trademarks in the Philippines. Section 2 of R.A.
No. 166 as amended expressly recognizes as registrable, under this statute, marks which
are owned by corporations domiciled in any foreign country:
Sec. 2. What are registrable. Trademarks, trade names and service marks owned
by persons, corporations, partnerships or associations domiciled in the Philippines and
by persons, corporations, partnerships or associations domiciled in any foreign country may be
registered in accordance with the provisions of this Act; Provided, That said trade
marks, trade names or service marks are actually in use in commerce and services not
less than two months in the Philippines before the time the applications for registration
are filed: And provided further, That the country of which the applicant for registration is a citizen
grants by law substantially similar privileges to citizens of the Philippines, and such fact is officially
certified, with a certified true copy of the foreign law translated into the English
language, by the government of the foreign country to the Government of the Republic
of the Philippines. (Emphasis in the original)
It is also entirely clear that foreign corporations and corporations domiciled in a foreign
country are not disabled from bringing suit in Philippine courts to protect their rights as
holders of trademarks registered in the Philippines. Under Section 21-A of R.A. No.
166, as amended, any foreign corporation which is a holder of a trademark registered
under Philippine law may bring an action for infringement of such mark or for unfair
competition or false designation of origin and false description "whether or not it has been
licensed to do business in the Philippines under the [Corporation Law] at the time it brings complaint,
subject to the proviso that:
. . . that the country of which the said foreign corporation or juristic person is a citizen
or in which it is domiciled by treaty, convention or law, grants similar privilege to corporate or
juristic persons of the Philippines. (Emphasis supplied)
The rule thus embodied in Section 21-A of R.A. No. 166 as amended is also set out in
Article 2 of the Paris Convention for the Protection of Industrial Property ("Paris
Convention"), to which the Philippines, the United States, Canada and Switzerland are
all parties. 18 Article 2 of the Paris Convention provides in relevant part:
Article 2
(1) Nationals of any country of the Union shall, as regards the protection of industrial
property, enjoy in all the other countries of the Union the advantages that their
respective laws now grant, or may hereafter grant, to nationals; all without prejudice to
the rights specially provided for by this Convention. Consequently, they shall have the
same protection as the latter, and the same legal remedy against any infringement of
their rights, provided that the conditions and formalities imposed upon national are
complied with.
(2) However, no requirement as to domicile or establishment in the country where
protection is claimed may be imposed upon nationals of countries of the Union for the
enjoyment of any industrial property rights.
xxx xxx xxx
(Emphasis supplied)
Article 2, paragraph 1 of the Paris Convention embodies the principle of "national
treatment" or "assimilation with nationals," one of the basic rules of the
Convention. 19 Under Article 2, paragraph 1 of the Paris Convention, nationals of
Canada, Switzerland and the United States who are all countries of the Paris Union are
entitled to enjoy in the Philippines, also a country of the Union, the advantages and
protections which Philippine law grants to Philippine nationals. Article 2 paragraph 2 of
the Paris Convention restrains the Philippines from imposing a requirement of local
incorporation or establishment of a local domicile as a pre-requisite for granting to
foreign nationals the protection which nationals of the Philippines are entitled to under
Philippine law in respect of their industrial property rights. It should be noted that
Article 2, paragraph 2 also constitutes proof of compliance with the requirement of
reciprocity between, on the one hand, the Philippines and, on the other hand, Canada,
Switzerland and the United States required under Section 21-A of R.A. No. 166 as
amended.
The net effect of the statutory and treaty provisions above referred to is that a corporate
national of a member country of the Paris Union is entitled to bring in Philippine courts
an action for infringement of trademarks, or for unfair competition, without necessity
for obtaining registration or a license to do business in the Philippines. Article 2 as
quoted above is in effect with respect to all four (4) countries.
Such has been the rule in our jurisdiction even before the enactment of R.A. No. 166
and before the Philippines became a party to the Paris Convention. In Western Equipment
and Supplies Company, et al. v. Reyes, etc., et al., 20 petitioner Western Electrical Company, a
U.S. manufacturer of electrical and telephone equipment and supplies not doing business in
the Philippines, commenced action in a Philippine court to protect its corporate name
from unauthorized use thereof by certain Philippine residents. The Philippine residents
sought to organize a Philippine corporation to be known as "Western Electrical
Company" for the purpose of manufacturing and selling electrical and telephone
equipment in the Philippines. The local residents resisted the suit by contending, inter
alia, that the petitioner Western Electrical Company had never transacted business in
the Philippines and that registration of private respondent's articles of incorporation
could not in any way injure petitioner. The Supreme Court, in rejecting this argument,
stated that:
. . . a foreign corporation which has never done business in the Philippines but is widely and
favorably known in the Philippines through the use therein of its products bearing its
corporate name and tradename has a legal right to maintain an action in the [Philippines]. The
purpose of such a suit is to protect its reputation, corporate name and goodwill which has
been established through the natural development of its trade for a long period of years in the doing
of which it does not seek to enforce any legal or contract rights arising from or closing
out of any business which it has transacted in the Philippines. . . . 21 (Emphasis supplied)
Similarly, in Asari Yoko v. Kee Boc,22 a Japanese corporation, also not engaged in any business
in the Philippines, successfully opposed an application for registration of its trademark
"Race Brand" on shirts and undershirts by a local businessman, even though the Japanese
company had not previously registered its own mark "Race Brand" in the Philippines.
Again, in General Garments Corporation v. Director of Patents and Puritan Sportswear
Corporation,23 Puritan Sportswear Corporation, an entity organized in Pennsylvania
U.S.A. and not doing business in the Philippines, filed a petition for cancellation of the
mark "Puritan" which was registered in the name of petitioner General Garments
Corporation for assorted men's wear, undershirts, briefs, shirts, sweaters and jackets.
Puritan Sportswear alleged ownership and prior use of the trademark "Puritan" in the
Philippines. Petitioner General Garments, on the other hand, contended that Puritan
Sportswear, being a foreign corporation not licensed to do, and not doing, business in the Philippines,
could not maintain an action for cancellation of a trademark. The Court, in upholding
the Director of Patents' cancellation of the registration of the mark "Puritan" in the
name of General Garments, said:
. . . .such mark should not have been registered in the first place (and consequently may be cancelled if so
required) if it consists of
or comprises a mark or tradename which so resembles 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 goods, business or services of the applicant, to cause confusion or mistake or
to deceive purchasers. 24 (Emphasis supplied)
In Converse Rubber Corporation v. Universal Rubber Products, Inc., 25 petitioner Converse
Rubber Corporation was an American manufacturer of rubber shoes, not doing business on
its own in the Philippines and not licensed to do business in the Philippines, opposed the
application for registration of the trademark "Universal Converse and Device" to be
used also in rubber shoes and rubber slippers by private respondent Universal Rubber
Products, Inc. ("Universal"). In reversing the Director of Patents and holding that
Universal's application must be rejected, the Supreme Court said:
The sales of 12 to 20 pairs a month of petitioner's rubber shoes cannot be considered
insignificant, considering that they appear to be of high expensive quality, which not too
many basketball players can afford to buy. Any sale made by a legitimate trader from his store is
a commercial act establishing trademark rights since such sales are made in due course of business to the
general public, not only to limited individuals. It is a matter of public knowledge that all
brands of goods filter into the market, indiscriminately sold by jobbers, dealers and
merchants not necessarily with the knowledge or consent of the manufacturer. Such
actual sale of goods in the local market establishes trademark use which serves as the basis for any
action aimed at trademark pre-emption. It is a corollary logical deduction that while Converse
Rubber Corporation is not licensed to do business in the country and is not actually doing business here,
it does not mean that its goods are not being sold here or that it has not earned a reputation or goodwill
as regards its products. The Director of Patents was, therefore, remiss in ruling that the
proofs sales presented "was made by a single witness who had never dealt with nor had
never known opposer (petitioner) . . . without Opposer having a direct or indirect hand
in the transaction to be the basis of trademark pre-exemption. 26 (Emphasis supplied)
Three (3) other cases may be noted. The first is La Chemise Lacoste, S.A. v. Fernandez 27 La
Chemise Lacoste, S.A. although a foreign corporation not engaged in and not licensed to do
business in the Philippines, was accorded protection for its trademarks "Lacoste", "Chemise
Lacoste," and "Crocodile Device" for clothing and sporting apparel. The Court
recognized that those marks were "world famous trademarks which the Philippines, as a
party to the Paris Union, is bound to protect." Similarly, in Del Monte Corporation, et al. v.
Court of Appeals, et al., 28petitioner Del Monte Corporation was a company organized
under the laws of the United States and not engaged in business in the Philippines. Because
both the Philippines and the United States are signatories to the Convention of Paris,
which grants to nationals of the parties the rights and advantages which their own
nationals enjoy for the repression of acts of infringement and unfair competition, the
Court, having found that private respondent's label was an infringement of Del Monte's
trademark, held Del Monte entitled to recover damages.
In Puma Sportschuhfabriken Rudolf Dassler, K.G. v. Intermediate appellate Court, et
al, 29 petitioner Puma was a foreign corporation existing under the laws of the Federal
Republic of Germany not registered to do business and not doing business in the Philippines, filed a
complaint for infringement of trademark and for issuance of a writ of preliminary
injunction against a local manufacturing company. Reversing the Court of Appeals, this
Court held that Puma had legal capacity to bring the suit in the Philippines under
Section 21-A of R.A. No. 166 as amended and under the provisions of the Paris
Convention to which both the Philippines and the Federal Republic of Germany are
parties. The Court also noted that "Puma" is an internationally known brandname.
The relevancy of the doctrines set out in the cases above cited are conceded by my
distinguished brother Melo, J. in the majority opinion. The majority opinion, however,
goes on to say:
In other words, petitioners may have the capacity to sue for infringement irrespective of
lack of business activity in the Philippines on account of Section 21-A of the Trademark
Law but the question of whether they have an exclusive right over their symbols as to
justify issuance of the controversial writ will depend on actual use of their trademarks in
the Philippines in line with Sections 2 and 2-A of the same law. It is thus incongruous for
petitioners to claim that when a foreign corporation not licensed to do business in the Philippines files a
complaint for infringement, the entity need not be actually using its trademark in commerce in the
Philippines. Such a foreign corporation may have the personality to file a suit for infringement but it
may not necessarily be entitled to protection due to absence of actual use of the emblem in the local
market.
With great respect, certain essential qualifications must be made respecting the above
paragraph. Firstly, of the petitioners' three (3) marks here involved, two (2) of them
i.e., "MARK TEN" and "LARK" were registered in the Philippines on the basis of
actual use in the Philippines, precisely in accordance with the requirements of Section 2-
A and Section 5 (A) of R.A. No. 166 as amended. The pre-registration use in commerce
and trade in the Philippines for at least two (2) months as required by the statute, is
explicitly stated in the Certificates of Registration. The very fact that the appropriate
Philippine Government office issued the Certificates of Registration necessarily gave
rise to the presumption that such pre-registration use had in fact been shown to the
satisfaction of the Philippine Patent Office (now the Bureau of Patents, Trademark and
Technology Transfer ["BPTTT"]). It is important to note that respondent Fortune has
not purported to attack the validity of the trademarks "Mark Ten" and "Lark" by
pretending that no pre-registration use in commerce in the Philippines had been
shown. 30
The third mark of petitioners "MARK VII" was registered in the Philippines on
the basis of Section 37 of R.A. No. 166 as amended, i.e., on the basis of registration in
the country of origin and under the Paris Convention. In such registration, by the
express provisions of Section 37 (b) of R.A. No. 166 as amended, prior (pre-
registration) use in commerce in the Philippines need not be alleged.
Whether the Philippine trademark was based on actual use in the Philippines (under
Section 2-A) or on registration in a foreign country of origin (under Section 37), the
statute appears to require that trademarks (at least trademarks not shown to be
internationally "well-known") must continue to be used in trade and commerce in the
Philippines. It is, however, essential to point out that such continued use, as a
requirement for the continued right to the exclusive use of the registered trademark, is
presumed so long as the Certificate of Registration remains outstanding and so long as
the registered trademark owner complies with the requirements of Section 12 of R.A.
No. 166 as amended of filing affidavits with the BPTTT on the 5th, 10th and 15th
anniversaries of the date of issuance of the Certificate of Registration, showing that the
trademark is still in use or showing that its non-use is not due to any intention to
abandon the same. In the case at bar, again, respondent Fortune has not explicitly
pretended that the petitioners' trademarks have been abandoned by non-use in trade
and commerce in the Philippines although it appears to insinuate such non-use and
abandonment by stressing that petitioners are not doing business in the Philippines.
That petitioners are not doing business and are not licensed to do business in the
Philippines, does not by any means mean either that petitioners have not complied with
the requirements of Section 12 of R.A. No. 166 relating to affidavits of continued use,
or that petitioners' trademarks are not in fact used in trade and commerce in the
Philippines. In the Converse case, as earlier noted, the Court held that the circumstance that
the foreign owner of a Philippine trademark is not licensed to do business and is not doing business in
the Philippines, does not mean that petitioner's goods (that is, goods bearing petitioner's trademark) are
not sold in the Philippines. For cigarettes bearing petitioners' trademarks may in fact be imported into
and be available for sale in the Philippines through the acts of importers or distributors. Petitioners
have stated that their "Mark VII," "Mark Ten" and "Lark" cigarettes are in fact brought
into the country and available for sale here in, e.g., duty-free shops, though not
imported into or sold in the Philippines by petitioners themselves. There is no legal
requirement that the foreign registrant itself manufacture and sell its products here. All
the statute requires is the use in trade and commerce in the Philippines, and that can be
carried out by third party manufacturers operating under license granted by the foreign registrant or
by the importation and distribution of finished products by independent importers or traders. The
"use" of the trademark in such instances by the independent third parties constitutes use
of the foreign registrant's trademarks to the benefit of the foreign registrant. 31
III
We turn to petitioners' claim that they are suffering irreparable damage by reason of the
manufacture and sale of cigarettes under the trademark "MARK." Here again, a basic
argument of private respondent was that petitioners had not shown any damages
because they are not doing business in the Philippines. I respectfully maintain that this
argument is specious and without merit.
That petitioners are not doing business and are not licensed to do business in the
Philippines, does not necessarily mean that petitioners are not in a position to sustain,
and do not in fact sustain, damage through trademark infringement on the part of a
local enterprise. 32 Such trademark infringement by a local company may, for one thing,
affect the volume of importation into the Philippines of cigarettes bearing petitioners'
trademarks by independent or third party traders.
The damage which the petitioners claim they are sustaining by reason of the acts of
private respondents, are not limited to impact upon the volume of actual imports into
the Philippines of petitioners' cigarettes. Petitioners urge that private respondent's use of
its confusingly similar trademark "MARK" is invasive and destructive of petitioners
property right in their registered trademarks because.
a) Plaintiffs' undeniable right to the exclusive use of their registered trademarks is
effectively effaced by defendant's use of a confusingly similar trademark;
b) Plaintiffs would lose control of the reputation of their products as their reputation
will depend on defendant's commercial activities and the quality of defendant's
products;
c) The market in the Philippines for plaintiffs' products will be pre-empted;
d) Purchasers will think that defendant's goods are approved or sponsored by plaintiff;
e) Defendant will be allowed to benefit from the reputation of the plaintiffs' goods and
trademarks;
f) Defendant will be effectively authorized to continually invade plaintiffs' property
rights, for which invasion no fair and reasonable redness can be had in a court of law;
and
g) Plaintiffs will lose their goodwill and trade and the value of their registered
trademarks will irreparably diluted and the damages to be suffered by plaintiffs cannot
be redressed fairly in terms of money. 33
Modern authorities on trademark law view trademarks as symbols which perform three
(3) distinct functions: first, they indicate origin or ownership of the articles to which
they are attached; second, they guarantee that those articles come up to a certain
standard of quality; third, they advertise the articles they symbolize. 34
The first two (2) functions have long been recognized in trademark law which
characterizes the goodwill or business reputation symbolized by a trademark as a
property right protected by law. Thus, the owner of a trademark is held entitled to
exclude others from the use of the same, or of a confusingly similar, mark where
confusion results in diversion of trade or financial injury. At the same time, trademarks
warn against the imitation or faking of products and prevent the imposition of fraud
upon the public. The first two (2) functions of trademarks were aptly stressed in e.g.,
the La Chemise Lacoste case where the objectives of trademark protection were described
in the following terms:
. . . to stem the tide of fake and counterfeit consumer items flooding the Philippine
market or exported abroad from our country. The greater victim is not so much the
manufacturer whose product is being faked but
the Filipino consuming public and in the case of exportations, our image abroad . . . .
We buy a kitchen appliance, a household tool, perfume, a face powder, other toilet
articles, watches, brandy or whisky, and items of clothing like jeans, T-shirts, neckties,
etc. the list is quite lengthy and pay good money relying on the brand name as
guarantee of its quality and genuine nature only to explode in bitter frustration and
helpless anger because the purchased item turns out to be a shoddy imitation, albeit a
clever looking counterfeit, of the quality product . . . . 35
The third or advertisement function of trademark has become of especial importance
given the modern technology of communication and transportation and the growth of
international trade. 36 Through advertisement in the broadcast and print media, the
owner of the trademark is able to establish a nexus between its trademark products and
the public in regions where the owner does not itself manufacture or sell its own
products. 37 Through advertisement, a well-established and well-earned reputation may
be gained in countries where the trademark owner has itself no established business
connection. 38 Goodwill may thus be seen to be much less closely confined territorially
than, say, a hundred or fifty years ago. 39 It is no longer true that "a trademark of itself
cannot travel to markets where there is no article to wear the badge and no trader to
offer the article." 40 Advertisement of trademarks is geared towards the promotion of
use of the marked article and the attraction of potential buyers and users; 41 by fixing the
identity of the marked article in the public mind, it prepares the way for growth in such
commerce whether the commerce be handled by the trademark owner itself or by its licensees or
independent traders.
That a registered trademark has value in itself apart from the trade physically
accompanying its use, has been recognized by our Court. In Ang v. Teodoro,42 the Court
was called upon the determine whether there was infringement in the use of the same
trademark on articles which do not belong to the same class of goods which the lawful
trademark owner manufactures and sells. In holding that there was infringing use in
such case, the Court said:
. . . . such unfair trading can cause injury or damage to the first user of a given trade-
mark, first, by prevention of the natural expansion of his business and, second, by having his business
reputation confused with and put at the mercy of the second user. When noncompetitive products
are sold under the same mark, the gradual whittling away or dispersion of the identity and hold
upon the public mind of the mark created by its first user, inevitably result. The original owner is
entitled to the preservation of the valuable link between him and the public that has been created
by his ingenuity and the merit of his wares or services. Experience has demonstrated that when a
well-known trade-mark is adopted by another even for a totally different class of goods,
it is done to get the benefit of the reputation and advertisements of the originator of
said mark, to convey to the public a false impression of some supposed connection
between the manufacturer of the article sold under the original mark and the new
articles being tendered to the public under the same or similar mark . . . The owner of a
trademark or tradename has a property right in which he is entitled to protection,
since there is damage to him in the form of confusion of reputation or goodwill in the mind of the
public as well as from confusion of goods. (Emphasis supplied)
In Sta. Ana v. Maliwat,43 the Court, through J.B.L. Reyes, J., in holding that the use of
the name "Flormen" with respect to shoes was infringement of the mark "Flormann"
used in the men's wear such as shirts, polo shirts and pants, said:
Modern law recognizes that the protection to which the owner of a trade-mark is
entitled is not limited to guarding his goods or business from actual market competition
with identical or similar products of the parties, but extends to all cases in which the use
by a junior appropriator of a trade-mark or trade-name is likely to lead to a confusing of
source, as where prospective purchasers would be misled into thinking that the complaining party has
extended his business into the field (see 148 ALR 56 et seq; 52 Am. Jur. 576) or is in any way
connected with the activities of the infringer; or when it forestalls the normal potential expansion of his
business (v. 148 ALR, 77, 84; 52 Am. Jur. 576, 577). . . .. 44 (Emphasis supplied)
Petitioners did not try to put a peso figure on their claimed damage arising from the
erosion and possible eventual destruction of the symbolic value of their trademark. Such
damage, while not easily quantifiable, is nonetheless real and effective. I submit, with
respect, that such continuing damage falls clearly within the concept of irreparable
damage or injury described in Social Security Commission v. Bayona 45 in the following
terms:
Damages are irreparable within the meaning of the rule relative to the issuance of
injunction where there is no standard by which their amount can be measured with reasonable
accuracy (Crouc v. Central Labor Council, 83 ALR, 193). "An irreparable injury which a
court of equity will enjoin includes that degree of wrong of a repeated and continuing kind
which produce hurt, inconvenience, or damage that can be estimated only by conjecture, and not by any
accurate standard of measurement" (Phipps v. Rogue River Valley Canal Co., 7 ALR, 741).
An irreparable injury to authorize an injunction consists of a serious charge of, or is
destructive to, the property if affects, either physically or in the character in which it has
been held and enjoined, or when the property has some peculiar quality or use, so that its pecuniary
value will not fairly recompense the owner of the loss thereof' (Dunker v. Field and Tub Club, 92
P., 502).
Respondent corporations made a lengthy discourse on the matter of irreparable injury
they may suffer if the injunction were not issued, but the array of figures they have laid
out merely succeeded in proving that the damage, if any they may suffer, is susceptible of
mathematical computation. It is not then irreparable. As already stated, this term has a definite
meaning in law. It does not have reference to the amount of damages that may be caused but rather to
the difficulty of measuring the damages inflicted. If full compensation can be obtained by way of damages,
equity will not apply the remedy of injunction(28 Am. Jur., 244; 43 C.J.S., 427, 446). 46
I next turn to private respondent's claim that issuance of an injunction would impose
heavy damage upon itself and upon Government. As noted, private respondent stated
that it had paid many millions of pesos as ad valorem and VAT taxes to the Government
in 1988 and 1989 in connection with its "MARK" cigarettes. 47 Presumably, the total
volume of its business associated with the manufacture and sale of cigarettes
trademarked "MARK" would be even larger. In addition, private respondent suggests,
albeit indirectly only, that hundreds if not thousands of its employees would find
themselves unemployed if it were restrained from the manufacture and sale of "MARK"
cigarettes.
Private respondent's claims concerning alleged damages both to itself and to the
Government, which obviously loomed very large in the mind of the majority here, and
of the Court of Appeals when it lifted the injunction it had issued, appear to me to be
extravagant indeed. Petitioners cannot claim to be entitled to an injunction which could
restrain private respondent from manufacturing and selling cigarettes completely; petitioner
do not pretend to be so entitled to such a comprehensive injunction. Petitioners seek
only the reinstatement of the original injunction issued by the Court of Appeals, i.e., one
that restrains private respondent from using the trademark "MARK" on its cigarettes. There is
nothing to prevent private respondent from continuing to manufacture and sell
cigarettes under any of its already existing and registered trademarks, of which it has
several, or under some new and specially created trademark(s). Realistically, private
respondent, if enjoined, would lose only the value of the packaging material imprinted
with the same trademark (which cigarettes and material may well be amenable to re-
cycling) and the cost of past advertisements of "MARK" in media, if any. Thus, the
apprehension on the part of the majority which private respondent tried diligently to
foment that the Government would lose many millions of pesos in tax revenues and
that many employees would lose their jobs, if an injunction is issued is more
apparent than real. The damages private respondent would sustain from reinstatement
of the preliminary injunction are clearly quantifiable in pesos.
Besides, as pointed out by petitioners, to pay heed to private respondent's creative
economic argument would ultimately mean that the greater the volume of sales and the
profits of the infringer, the greater would be the infringer's claim to be entitled to
continue infringement. I respectfully submit that the law should not countenance such a
cynical result.
My conclusion is that private respondent's claims concerning damage which it would
sustain if the petitioners were granted the injunction they seek, did not constitute a
sufficient basis for overturning the original decision of the Court of Appeals. The
Resolution of the Court of Appeals granting private respondent's Motion to Dissolve, in
effect disregarded everything that Court had set out in its original Decision. The mere
offer and filing of a counterbond does not, by itself, provide a sufficient basis for lifting
the preliminary injunction earlier granted. For all the elements which supported the
original issuance of a preliminary injunction continued to exist. Private respondent's
hyperbolic claims concerning the damages that it and the Government would sustain by
reason of an injunction, had been made earlier both before the trial court and the Court
of Appeals. Finally, it is not enough to say as private respondent says, that the Court of
Appeals in granting its Motion to Dissolve the preliminary injunction was merely
exercising its discretion; for the Court of Appeals obviously was also exercising its
discretion when it rendered its original Decision granting the preliminary injunction.
I vote to grant due course to the petition for Certiorari, to set aside the Resolution of the
respondent Court of Appeals dated 14 September 1989 in C.A.-G.R. SP No. 13132 and
to reinstate the Decision of that same Court dated 5 May 1989.

Tanada v. Angara
May 2, 1997| Panganiban, J. | Comparison with Police Power and Eminent Domain
Digester: Mercado, Carlo Robert M.
SUMMARY: The WTO Agreement was signed and ratified by the executive branch
and then concurred in by the Senate. A Rule 65 petition was filed assailing the
ratification as being violative of the provisions on national economy and Filipino First
Policy, and the legislative power of Congress, more specifically the power to tax. The SC held
that while said provisions are self-executing thus enforceable without the need for
implementing legislation, ratification of the Agreement does not contravene said
provisions.
DOCTRINE: By their inherent nature, treaties really limit or restrict the absoluteness
of sovereignty. By their voluntary act, nations may surrender some aspects of their state
power in exchange for greater benefits granted by or derived from a convention or pact.
The sovereignty of a state therefore cannot in fact and in reality be considered absolute.
Certain restrictions enter into the picture: (1) limitations imposed by the very nature of
membership in the family of nations and (2) limitations imposed by treaty stipulations.
The Philippines has entered into many other international pactsboth bilateral and
multilateralthat involve limitations on Philippine sovereignty.
In the foregoing treaties, the Philippines has effectively agreed to limit the exercise of its
sovereign powers of taxation, eminent domain and police power.
NOTE: All three (Police Power, Eminent Domain, and Taxation) may be limited by
treaty stipulations. The case did not distinguish in this regard.
FACTS:
April 15, 1994: The World Trade Organization Agreement (Agreement) was signed
by the Philippines by the DTI Secretary and ratified by the President.
December 14, 1994: Through Senate Resolution No. 97, the Senate concurred with
the ratification
December 29, 1994: A Rule 65 petition was filed seeking to assail the Senates
ratification of the WTO Agreement for violating the mandate of the 1987
Constitution to develop a self-reliant and independent national economy
effectively controlled by Filipinos . . . (to) give preference to qualified Filipinos (and
to) promote the preferential use of Filipino labor, domestic materials and locally
produced goods. (Art II, Sec 19 and Art XII, Sec 10 and 12 of the Constitution)
RULING: Petition denied.
Whether the issues at hand are political questions NO.
Art VIII, Sec 1 emphasizes the judicial departments duty and power to strike down
grave abuse of discretion on the part of any branch or instrumentality of
government including Congress.
The Court will only exercise its constitutional duty to determine whether or not
there had been a grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the Senate in ratifying the WTO Agreement and its
three annexes.
o This Court will not review the wisdom of the decision of the
President and the Senate in enlisting the country into the WTO, or
pass upon the merits of trade liberalization as a policy espoused by
said international organization
o Neither will it rule on the propriety of the governments economic
policy of reducing/removing tariffs, taxes, subsidies, quantitative
restrictions, and other import/trade barriers.
Whether the Agreement contravenes Art II, Sec 19 and Art XII, Sec 10 and 12 of
the Constitution NO.
The following provisions are self-executing provisions
It is true that in the recent case of Manila Prince Hotel v. GSIS, this Court held that
Sec. 10, second par., Art. XII of the 1987 Constitution is a mandatory, positive
command which is complete in itself and which needs no further guidelines or
implementing laws or rules for its enforcement . . . It is per se judicially
enforceable.
BUT, ratification of the WTO Agreement does not amount to a violation of such
provisions
However, the issue here is not whether this paragraph of Sec. 10 of Art. XII is self-
executing or not. Rather, the issue is whether, as a rule, there are enough balancing
provisions in the Constitution to allow the Senate to ratify the Philippine
concurrence in the WTO Agreement. And we hold that there are.
o While the Constitution indeed mandates a bias in favor of
Filipino goods, services, labor and enterprises, at the same
time, it recognizes the need for business exchange with the rest
of the world on the bases of equality and reciprocity and limits
protection of Filipino enterprises only against foreign
competition and trade practices that are unfair.
o In other words, the Constitution did not intend to pursue an
isolationist policy. It did not shut out foreign investments, goods and
services in the development of the Philippine economy.
o In fact, it allows an exchange on the basis of equality and reciprocity,
frowning only on foreign competition that is unfair.
The constitutional policy of a selfreliant and independent national economy
does not necessarily rule out the entry of foreign investments, goods and services.
It contemplates neither economic seclusion nor mendicancy
Other reasons why WTO Agreement does not violate said provisions (Alternatively,
why the Agreement is advantageous to RP)
 Unlike in the UN where major states have permanent seats and veto powers in the
Security Council, in the WTO, decisions are made on the basis of sovereign
equality, with each members vote equal in weight
The WTO Agreement grants developing countries a more lenient treatment, giving
their domestic industries some protection from the rush of foreign competition.
GATT itself has provided built-in protection from unfair foreign competition and
trade practices
[TOPIC] Whether the Agreement limits, restricts, or impairs the exercise of
legislative power by Congress, specifically, the power to tax- NO.
The Agreement provides that (e)ach Member shall ensure the conformity of its
laws, regulations and administrative procedures with its obligations as provided in
the annexed Agreements.
o Petitioner claims that this clause unduly limits, restricts and impairs
Philippine sovereignty, specifically the legislative power vested in the
Congress
o More specifically, petitioners claim that said WTO proviso
derogates from the power to tax, which is lodged in the
Congress.
While sovereignty has traditionally been deemed absolute and all-encompassing on
the domestic level, it is however subject to restrictions and limitations voluntarily
agreed to by the Philippines, expressly or impliedly, as a member of the family of
nations. Unquestionably, the Constitution did not envision a hermit-type isolation
o The Constitution adopts the generally accepted principles of
international law as part of the law of the land
o By the doctrine of incorporation, the country is bound by generally
accepted principles of international law, which are considered to be
automatically part of our own laws.
By their inherent nature, treaties really limit or restrict the absoluteness of
sovereignty. By their voluntary act, nations may surrender some aspects of their
state power in exchange for greater benefits granted by or derived from a
convention or pact.
o The sovereignty of a state therefore cannot in fact and in reality
be considered absolute. Certain restrictions enter into the
picture: (1) limitations imposed by the very nature of
membership in the family of nations and (2) limitations
imposed by treaty stipulations1
The Philippines has entered into many other international pactsboth bilateral and
multilateralthat involve limitations on Philippine sovereignty.2
1As aptly put by John F. Kennedy, Today, no nation can build its destiny alone. The
age of self-sufficient nationalism is over. The age of interdependence is here.
o In the foregoing treaties, the Philippines has effectively agreed
to limit the exercise of its sovereign powers of taxation, eminent
domain and police power.
Whether the Agreement unduly impairs or interferes with the exercise of judicial
power by this court in promulgating rules on evidence? - NO
By and large, the arguments adduced in connection with our disposition of the
third issuederogation of legislative powerwill apply to this fourth issue also
o Suffice it to say that the reciprocity clause more than justifies such
intrusion, if any actually exists. Since the Philippines is a signatory to
most international conventions on patents, trademarks and
copyrights, the adjustment in legislation and rules of procedure will
not be substantial
Whether the concurrence of the Senate included the other documents related to
the Agreement is valid - YES
Petitioners allege that the Senate concurrence in the WTO Agreement and its
annexesbut not in the other documents referred to in the Final Act (Ministerial
Declaration and Decisions and the Understanding on Commitments in Financial
Services) is defective and insufficient
o SC rules that concurrence in the Agreement was sufficient
o The Ministerial Declarations and Decisions were deemed adopted
without need for ratification. They were approved by the ministers by
virtue of Article XXV: 1 of GATT
o The Understanding on Commitments in Financial Services also
approved in Marrakesh does not apply to the Philippines.
o Moreover, the Agreement itself expresses what multilateral
agreements are deemed included as its integral parts
Article II states that associated legal isntruments in Annex
4,as well as the GATT are also part of the Agreement
o It should be added that the Senate was well-aware of what it was
concurring in as shown by the members deliberation on August 25,
1994.
NOTES:
Art II, Sec. 19. The State shall develop a self-reliant and independent national economy
effectively controlled by Filipinos.
Art XII, Sec. 10. The Congress shall enact measures that will encourage the formation
and operation of enterprises whose capital is wholly owned by Filipinos.
In the grant of rights, privileges, and concessions covering the national economy and
patrimony, the State shall give preference to qualified Filipinos.
2 A number of agreements were enumerated by the OSG in its Compliance
Art XII, Sec. 12. The State shall promote the preferential use of Filipino labor,
domestic materials and locally produced goods, and adopt measures that help make
them competitive.
ALLISON J. GIBBS, as executor of the will of A. D. Gibbs, deceased, ALLISON
J. GIBBS and FINLEY J. GIBBS, plaintiffs-appellees,
vs.
EULOGIO RODRIGUEZ, SR., LUZON SURETY CO., INC., PHILIPPINE
NATIONAL BANK and MARIANO VILLANUEVA, as Register of
Deeds, defendants-appellants.
Ramon Diokno and Jose W. Diokno for appellants.
Gibbs, Gibbs, Chuidian and Quasha for appellees.
FERIA, J.:
On August 22, 1945, plaintiff filed a complaint alleging, among others, the following:
(4) That on April 18, 1941, pursuant to a preliminary "Agreement of Purchase, Sale and
Mortgage," dated April 11, 1940, Allison J. Gibbs, acting for himself and as attorney-in-
fact for Allison D. Gibbs and Finley J. Gibbs, sold by a document entitled "Deed and
Mortgage" said two parcels of land and the improvement thereon to Raymundo F.
Navarro and R. F. Navarro and Co., for the sum of One hundred twenty-five thousand
dollars ($125,000), United States currency, of which Twelve thousand five hundred
dollars ($12,500), United States currency, was paid in cash; that Raymundo F. Navarro
and R. F. Navarro and Co., in the said "Deed and Mortgage" mortgaged the said two
parcels of land in favor of Allison D. Gibbs and Finley J. Gibbs, to secure the payment
of a balance of the sale price which they agreed to pay to the said mortgages in annual
installments, plus 5 per cent interest on the deferred payments. . . . .
(5) That the first installment of $16,875, United States currency, due on April 11, 1941,
was paid to the said mortgages, but none of the other installments totalling $126,562.50,
United States currency, have been paid and are now due and owing.
(6) That on August 12, 1941, R. F. Navarro, for himself and in his capacity as president
of R. F. Navarro and Co., by document entitled "Deed of Sale with Assumption of
Mortgage," sold said property for the sum of forty-thousand pesos (P40,000), Philippine
currency, to Eulogio Rodriguez, Sr., who in said document assumed and agree to be
bound by the obligation of the mortgage existing thereon in favor of the mortgages,
Allison D. Gibbs, Allison J. Gibbs and Finley J. Gibbs, and all the covenants,
agreements, stipulations and conditions relating thereto, as recited in said "Deed and
Mortgage" Exhibit "A", to which sale and assumption of mortgage the said mortgages
gave their express conformity; . . . .
(7) That on December 16, 1941, Eulogio Rodriguez, Sr., with the consent of the said
mortgages and by a document entitled "Deed of assignment with Assumption of
Mortgage" assigned his rights, title and interest in and to the said property to the
defendant Luzon Surety Co., Inc., for the sum of Forty-two thousand five hundred
fifty-six and 21/100 (P42,556.21) pesos, together with his obligations under the "Deed
of Sale with the Assumption of Mortgage," Exhibit B, which were duly assumed by the
Luzon Surety Co., Inc., with the express stipulation, however, that Eulogio Rodriguez,
Sr., was not relieved of the said obligations and that he, together with the Luzon Surety
Co., Inc., were jointly and severally liable to the said mortgages for the obligations under
the said mortgage, . . . .
(9) That during the Japanese occupation, to writ, in or about July, 1943, the defendant
Eulogio Rodriguez, Sr., and the Luzon Surety Co., Inc., without paying any sum to the
said mortgages, and without the latter's knowledge or consent, unlawfully secured from
the Japanese Military Administration and from the Mariano Villanueva, who was then
purporting to act as Register of Deeds of the City of Manila under the Philippine
Republic, a purported cancellation of the mortgage Exhibit A, which purported
cancellation was on July 30, 1943, unlawfully annotated on the back of said transfer
certificate of title No, 63345 as document No. 709-710/63345, but not on the
mortgagee's copy, and without the prior cancellation or surrender of said mortgagee's
copy of transfer certificate of title No. 63345. (Record on appeal of the defendants, pp.
4-7.)
The defendants admitted in their amended answer the facts alleged in the above quoted
paragraphs 4, 6, 7 of the complaint, and in connection with paragraphs 5 and 9 the
defendants alleged that, during the Japanese occupation, the Department of Enemy
Property established by the Japanese Military Administration in the City of Manila
required the defendants to pay to said department the debt due from them to the
plaintiffs, who were considered as enemy nationals. In view of the fact that one of the
plaintiffs, Allison J. Gibbs, to whom the defendant Luzon Surety Co., communicated
the said demand, answered that they could not do anything to avoid its compliance, the
defendants had to obtain from the Philippine National Bank a loan of P120,000 they
needed to pay, and in fact had paid, to the Department of Enemy Property the sum of
P202,500 which they owed then to the plaintiffs. The Director of the Department of
Enemy Property of the Japanese Military Administration had issued a receipt and a deed
of cancellation of the mortgage credit of the plaintiffs, and the register of deeds on July
30, 1943, cancelled the mortgage annotated on the back of the transfer certificate title of
the property mortgaged.
On September 25, the plaintiff filed a motion to strike the defense set up in the
defendant's answer to the effect that they had paid their obligation to the plaintiff to the
Department of Enemy Property of the Japanese Military Administration, on the ground
that the latter had no authority to demand and accept such payment.
Before the date set for hearing of the motion to strike the defendant's defense on
September 29, 1945, the defendant had filed on September 26, 1945, a motion for
summary judgment under section 2, Rule 36, attaching to the motion in support thereof
an affidavit of the attorney for the Luzon Surety Inc., Atty. Arturo Tolentino, to the
effect that on July 21, 1943, when the department of Enemy Property, Japanese Military
Administration, ordered the Luzon Surety Co., to pay to said Department the
defendant's mortgage debt of P202,500 to the plaintiffs, he went to see the plaintiff
Allison J. Gibbs at the compound of the Holy Ghost College and asked him his advise
"as to what action the company should take on the matter, and Attorney Gibbs told him
that he cannot do anything and that he stated further that in that event the credit will be
considered as a war damage." Attached to the motion for summary judgment was also
an affidavit of defendant Eulogio Rodriguez which stated that, in view of the demand of
payment made by the Department of Enemy Property, Japanese Military
Administration, the defendants had to secure a loan of P120,000 from the Philippines
National Bank and pay to said department on July 31, 1943, the sum of P202,500 due
from them to the plaintiffs.
The motion to strike as well as the motion for summary judgment was not acted on by
the court until the date set for trial of the case on the merits when both parties, without
presenting any evidence, filed their respective memoranda and submitted the case to the
lower court for decision.
The plaintiffs did not serve any disposing affidavit under section 3, Rule 36, to
contradict the affidavit of Eulogio Rodriguez to the effect that payment of the mortgage
debt in question was made to the Japanese Military Administration, attached to and in
support of the motion for summary judgment for the defendants, and they admit, in
paragraph 9 of their complaint, that the defendant register of deeds the purported
cancellation of the mortgage Exhibit A and, consequently, the payment of the mortgage
debt by necessary implication. These facts belie the assertion of the appellees that there
is no basis for the lower court's assumption that such payment was made, and therefore
the lower court was right in stating in its decision the following:
Sin estar resueltas las citadas peticion de descarte y de sentencia summaria, las partes, en
inteligencia con el Juzgado y a fin de terminarse definitivamente con el asunto en esta
instancia, tuvieron a bien que al mismo fuese sometido, en su fondo, previa practica de
sus respectivas pruebas. Se senalo la causa para su vista en el fondo pero en el dia
senalado los demandantes se limitaron a presentar los Exhibit A, B y C, unidos a la
demanda, los cuales fueron admitidos sin oposicion, y los demandados sometieron el
asunto para su fallo sin practicar prueba alguna. De modo que el asunto fue
practicament sometido a una sentencia de acuerdo con los escritos de alegaciones
unicamente. (Record on Appeal of the defendants, p.78.)
El punto principal y decisivo planteado por las alegaciones de las partes es el de si, es o
no, legal y valido el pago hecho por los demandados al custodio Japones. . . .
Trantadose aqui de un credito privado de que se ha incautado el beligerente ocupante
japones durante la pasada guerra, este caso tiene similaridad al de "Hongkong and
Shanghai Banking Corporation contra Luis Perez Samanillo, Inc., et al., causa civil No.
71009" de este Juzgado. En esta ultima causa se ha discutado extensamente la legalidad
o ilegalidad de los actos del invasor al incautarse de un credito y disponer de ello. En la
decision de dicha causa, este Juzgado hizo las consideraciones y conclusiones que a
continuacion se acotan y se hacen parte de esta decision por ser perfectamente
aplicables al punto que se discute:
The lower court declared invalid the payment made by the defendants to the Bureau of
Enemy Property, and null and void the cancellation of the mortgage by the register of
deeds, and sentenced the defendant to pay to the plaintiff, as soon as the moratorium is
lifted, the balance due from the former to the latter, and the defendants appealed from
said judgment to this Court.
The lower court was correct in holding that the question raised in the present case is
similar to that involved in the case of Hongkong and Shanghai Banking Corporation vs. Luis
Perez Samanillo, Inc., et al., (82 Phil., p. 851, and in making the reasons and conclusions set
forth in support of its decision therein as grounds for its decision in the present case. In
Samanillo case, the debt due from the defendant to the plaintiff was paid, by order of
the Japanese Military Administration, to the Bank of Taiwan as Liquidator of local
enemy banks and Bureau of Enemy Property of the enemy bank's properties. In the
present case the defendants, by order of the Japanese Military Administration, paid to
the Bank of Taiwan as Bureau of Enemy Property the debt due from the defendants to
the plaintiffs. The question involved in said Samanillo case was whether or not the
collection of Samanillo's debt to the Hongkong and Shanghai Banking Corporation by
the Bureau of Enemy Property of the Japanese Military Administration, was a
confiscation of the plaintiffs' credit. And the question involved in the instant case is
whether or not the collection by the Department of Enemy Property, Japanese Military
Administration, of the mortgage debt due from the defendants to the plaintiffs was a
confiscation of the latter's credit.
This Court reversed the decision of the lower court in the case of Hongkong and Shanghai
Baking Corporation vs. Luis Perez Samanillo, Inc., et al., on the strength of the ruling of this
Court in the case of Haw Pia vs. China Banking Corporation, (80 Phil 604), in which the
facts and law involved were similar to those in Haw Pia. In this last case we held that
the collection by the Bank of Taiwan of the China Banking Corporation's credit from
the latter's debtor by order of the Japanese Military Administration, was not a
confiscation but a sequestration of the enemy private personal property, and threrefore
the payment by the plaintiff Haw Pia to the Bank of Taiwan was valid and released
plaintiff's obligation to the defendant bank. Therefore, we have to reverse also the
decision of the lower court in the present case.
The plaintiffs contention that the debt of the defendants in the present case was payable
in dollars or its equivalent in Philippine peso at the option of the plaintiffs is immaterial,
because both the Philippine pesos and American dollars at the rate of one dollar for two
pesos were then legal tender in the Philippines according to section 1612 of the Revised
Administration Code, and for that reason the lower court sentenced the defendants to
pay the plaintiffs in dollar or its equivalent in Philippine pesos. Besides we have held in
the case of Haw Pia the following:
But be that it may, whatever might have been the intrinsic or extrinsic worth of the
Japanese war notes which the Bank of Taiwan has received as full satisfaction of the
obligations of the appellee's debtors to it, is of no consequence in the present case. As
we have already stated, the Japanese war-notes were issued as legal tender at par with
the Philippine peso, and guaranteed by Japanese Government "which takes full
responsibility for their usage having the correct amount to back them up (Proclamation
of January 3, 1942). Now that the outcome of the war has turned against Japan, the
enemy banks have the right to demand from Japan, through their States or
Government, payments or compensation in Philippine pesos or U. S. dollars at the case
may be, for the loss or damage inflicted on the property by the emergency war measures
taken by the enemy. If Japan had won the war or were the victor, the property or money
of said banks sequestrated or impounded by her might be retained by Japan and
credited to the respective State of which the owners of said banks were nationals, as a
payment on account of the sums payable by them as indemnity under the treaties, and
the said owners were to look for compensation in Philippine pesos or U. S. dollars to
their respective States. (Treaty of Versailles and other peace treaties entered at the close
of the first World War; VI Hackworth Digest of International Law, p.232.) And if they
cannot get any or sufficient compensation either from the enemy or from their States,
because of their insolvency or impossibility to pay, they have naturally to suffer, as
everybody else, the losses incident to all wars.
In view of the foregoing, the decision appealed from is reversed and the plaintiffs'
action is dismissed.
Moran, C.J., Paras, Bengzon, Montemayor and Reyes, JJ., concur.
Separate Opinions
PERFECTO, J., concurring:
Except the pronouncement about legal tender, upon which we wish not to commit
ourselves, we concur in the above opinion.
TUASON, J., dissenting:
I dissent on the same general principles and reasons stated in Mr. Justice Hilado's
dissenting opinion in Haw Pia vs. China Banking Corporation, G. R. No. L-554, and in my
dissenting opinion in Philippine Trust Company vs. Araneta, G. R. No. L-2734.
RESOLUTION
December 21, 1950
FERIA, J.:
This is a motion for reconsideration of the decision of this Court in the present case
filed by the plaintiffs on the grounds
(I) that "even if it is assumed that the Japanese had authority to demand payment of
plaintiffs' U. S. dollar credit in Japanese military pesos, the payments allegedly made by
the defendants to the Japanese should be credited against the amount owed to plaintiffs
only at the express mortgage rate, namely, at the cost in Japanese military pesos (or at
the fair rate of exchange) of the U. S. dollar demand draft on New York called for in the
mortgage; this would leave a balance due plaintiffs after such application of not less
than $40,024.07"; and
(II) that the decision of this Court in the Haw Pia case on the strength of which the
present case has been decide, is erroneous, and in support of the petitioners' contention
our attention is invited to an article appearing in the June 1949 issue of the Philippine
Law Journal written by Professor Charles Cheney Hyde, author of "International Law as
chiefly interpreted and applied by the United States."
I
As to the first ground, suffice if to say that if the Japanese military occupant had power
to sequestrate and, in fact, sequestrated the plaintiffs' credit, it had subrogated into the
rights or stood in the shoes of the plaintiffs as creditor and, therefore, had the right to
demand and accept, through Japanese Enemy Property Custodian, the payment of all
the defendants' debts to the plaintiffs in Japanese military notes without of course
compelling the defendants to pay interest not yet then due, and completely release
thereby said obligation, without prejudice to the plaintiffs' right to demand, through
their government from the Japanese after the war, the reimbursement of the full value
of their sequestrated credit.
We have held in the decision that "whatever might have been the intrinsic or extrinsic
value of the Japanese war-notes which the Bank of Taiwan has received as full
satisfaction of the obligation of the appellee's debtors to it, is of no consequence in the
present case.
As we have already stated, the Japanese war-notes were issued as legal tender at par with
the Philippine peso, and guaranteed by Japanese Government which "takes full
responsibility for their usage having the correct amount to back them up" (Proclamation
of Jan. 3, 1942).
Now that the outcome of the war has turned against Japan, the enemy banks have the
right to demand from Japan, through their States of Government, payments or
compensation in Philippine peso or U. S. dollars as the case may be, for the loss or
damage inflicted on the property by the emergency war measure taken by the enemy."
Furthermore, when the Court of First Instance of Manila rendered judgment sentencing
the defendants in the present case to pay their debt to the plaintiffs, after the
moratorium has been lifted, in American dollars or its equivalent in Philippine pesos which,
according to said Section 1612 of the Revised Administration Code, was at the rate of
two Philippine pesos to one American dollar, the plaintiffs did not appeal from the said
part of the judgment nor assail it as erroneous in their briefs, and therefore plaintiffs can
not now raise that question for the first time in their motion for reconsideration.
The decision of this Court in the Legarda case did not hold that the defendant Burke
had the right to refuse the payment by the debtor of his debt in British currency in
Japanese war notes. This Supreme Court returned the case to the lower court for further
proceeding and the writer of the opinion of the court in said case only said that "still it
is serious question whether the defendant Burke who was a special creditor having the
right to insist upon his option to receive Japanese money specially at par." Moreover in
the Legarda case the action was instituted by the debtor against his creditor to compel
the latter to accept the payment in Japanese military notes, while in the present the
payment of the debtors' debt to their creditors was demanded and accepted by the
Japanese military Occupant in the exercise of its power to sequestrate the property of
said creditors who were enemy citizens, without prejudice to the right of the latter to
demand from the Japanese Government full compensation for the seizure through State
Department channels at the peace table. (United States v. SS. White Dental
Manufacturing Co., 247 U. S. 398, 402 (1927).
II
With respect to the article of Professor Charles Cheney Hyde on the decision of this
Court in the case of Haw Pia vs. China Banking Corporation,1 G. R. No. L-554,
promulgated on April 9, 1948, it may not be amiss to state, by way of preamble before
proceeding, that according to Article 38 of the Statues of the International Court of
Justice, the Court shall, subject to certain limitations, apply judicial decisions as a
subsidiary means for the determination of rule of International Law.
Although courts are not organs of the State for expressing in a binding manner its views
on foreign affairs, they are nevertheless organs of the State giving, as a rule, impartial
expression to what is believed to be International Law. For this reason, judgments of
municipal tribunals are of considerable practical importance for determining what is the
right rule of International Law.
This is now being increasingly recognizes, and periodical unofficial collections of
decisions of both international and municipal courts are being published. In pleadings
before international tribunals litigants still fortify their arguments by reference to
writings of international jurists, but with the growth of international judicial activity and
of the practice of States evidenced by widely accessible records and reports, it is natural
that reliance on the authority of writers as evidence of International Law should tend to
diminish.
For it is as evidence of the law and not as a law-creating factor that the
usefulness of teaching of writers has been occasionally admitted in judicial
pronouncements. But inasmuch as a source of law is conceived as a factor
influencing the judge in rendering its decision, the work of writers may continue
to play a part in proportion to its intrinsic scientific value, its impartiality and its
determination to scrutinize critically the practice of State by reference to legal
principle. (International Law by Oppenhiem, Vol. I, pp. 29-32).
It does not seem, therefore proper for an attorney or jurist, in trying to protect or
defend the interest of parties affected adversely by a decision rendered by the Supreme
Court of a Sovereign Foreign Power, to assail it with arguments premised on facts
different from those found by their court on which the decision is based and dub that
decision as one in violation of International Law.
A decision of the Supreme Court of the small Republic of the United States of America.
The article of Professor Hyde in which the author, commenting on the decision in the
Haw Pia case, says that it "will do the utmost harm to American Interest" *, does not deserve
the same weight as his opinions set forth in his work "International Law chiefly as
interpreted and applied by the United States."
Because the article was written and published more than one year after our decision, not
by an impartial jurist and ante litem motam, but by an attorney who tries to defend
American interests in the Philippines after an action was instituted in the Supreme Court
of the State of New York by the Compania Tabacalera, a corporation owned mostly by
Spaniards and doing business in these Islands, against the National City Bank of New
York, an action based on the decision of this Supreme Court of the Philippines in the
said Haw Pia case.
For clarity's sake, we shall discuss separately the arguments and conclusions advanced
by Mr. Hyde in support of his contention that our decision in the Haw Pia case is a
violation of a International Law: (1) first, on the validity of the payment made in war
notes to the Bank of Taiwan by Haw Pia of his pre-war debt to the China Bank; (2)
secondly, on the alleged failure of the Bank of Taiwan, liquidator of the China Banking
Corporation, to properly and adequately perform its function as such; (3) and thirdly, on
the so-called failure of the Philippine Republic to heed certain contractual undertaking
in the Inter-Allied Declaration of January 5, 1943, in London, to which the late
President Quezon adhered in behalf of the Commonwealth of the Philippines. We shall
copy the pertinent parts of the article dealing with each of those subjects, and then
refute Mr. Hyde's contentions by transcribing the corresponding portion of our decision
in said Haw Pia case plus some additional comments.
(1) As to the first, Professor Hyde has evidently missed the point with respect to the
main issue decided in the Haw Pia case in the article in question, and consequently his
conclusions are incorrect from the beginning to the end for they are based on wrong
premises. At the beginning he says, among others, the following:
The decision of the Supreme Court of the Philippines Republic in the Haw Pia case
constitutes internationally illegal conduct upon the part of the Philippine Government
which is productive of a solid claim for compensation in behalf of alien nationals or
creditors who suffered loss as a direct consequence of such decision. The Japanese
decrees which permitted Haw Pia, a local debtor, fully to satisfy her pre-war peso
indebtedness to the local office of a foreign creditor bank of payment in a greatly
depreciated Japanese military currency were in violation of International Law. They
permitted the debtor to satisfy her debt in a currency not contemplated by the parties
and of little or no value at the time of payment. By such payments a mortgage of
property given to secure such debt was satisfied of record. The recognition by the
Supreme Court of the Philippines of the Japanese decrees which resulted in this harm-
producing act it is also a violation of International Law by such court.
This decision will do the utmost harm to American interest in the Philippines unless
remedied by Philippine legislation or some kindred process.
In the Haw Pia case there has been confusion of thought manifested in variuos quarters
due in part to failure to observe all the relevant facts in the case, to failure also to
observe the character of the practice that has grown up in relation to the privileges, of a
belligerent occupant especially in relation to uses of legal tender, and to failure to
observe the nature of certain acts on the part of the Japanese agency or so-called
liquidator in the present case, and finally, to observe the failure of the Philippine
Republic to heed certain contractual undertakings which it has accepted.
xxx xxx xxx
In a word, various aspects of the case have been dealt with by the courts and
commentators in a fantastic way that might be called old-fashioned, because of failure to
seek light on what state practices ordained, and because ignorance thereof served to
bolster up conclusions that could not have been reached if faithful and penetrating
studies of that practice had been made. Again, loose treatment of some secondary
materials has pointed to neglectful and superficial work. Thus, for example, the views of
this writer have more than once been quoted or cited as indicating the rights of a
belligerent occupant as such when those views had reference to a different matter, and
notably to what a belligerent State might do with respect to alien enemy property found
within its own domain. Much more important, "no question has been raised as to the
value of the money paid.
xxx xxx xxx
We now come to the question whether a belligerent occupant has the right through
such uses of a depressed currency, by making it legal tender and continuing it as such, to
oblige a creditor to accept in payment of a debt something that was a the time of
payment practically or almost worthless. As has been suggested above, there is no
evidence manifested by any practices that have been seen which indicates that
occupying powers (other than Japan) to have sought by causing a depressed currency to
be legal tender, to oblige a creditor to accept in payment of a debt something that was
of little value. The scope of the occupant's rights depends upon the degree of harm wrought
to the creditor by the occupant's decrees.
In a word, the practice which has developed shows a significant and complete
abstention from such conduct on the part of occupants and also vigorous and
successful restrictions from foreign offended States when it was attempted. In general
the abstention and the correction of abuses may be regarded as establishing a general
rule of International Law forbidding the occupant to make it possible for the debtor to
rob his creditos by the satisfaction of a debt through a greatly depreciated and
practically worthless currency. Indeed what has taken place amounts to an impressive
practice reflecting the creation or acknowledgment of a prohibitive rule of International
Law. The general tenor of the Hague Regulations of 1907 is in complete harmony with
this limitation of the right of the occupant as thus set forth. Or, to express it differently,
those Regulations call for the limitation. . . . (Philippine Law Journal, Vol. XXIV, June,
1949, pp. 141, 142, 144-145).
Professor Hyde has missed the point, because the question involved and decided in the
Haw Pia case was not the validity of the Japanese decrees permitting a local debtor to
satisfy fully his pre-war peso indebtedness to the local office of a foreign creditor bank
by payment in a greatly depreciated military currency, but the power of the Japanese
Military Administration to order validly the liquidation of winding up of the defendant
China Banking Corporation, considered as a hostile bank, by the Bank of Taiwan
appointed as the liquidator and authorized to demand and accept the payment by the
debtors of the defendant bank in order to sequestrate the latter's assets. And the ruling
in the Haw Pia case has been applied to the present case, as well as to the cases
of Hongkong and Shanghai Banking Corporation vs. Luis Perez Samanillo,2 G. R. No. L-1729,
because in these three cases the Japanese Military Administration required the debtors
to pay to the Bank of Taiwan, as depositary of the Bureau of Enemy Property Custody
or Alien Property Custodian, their debts to their creditors who were alien enemies, in
order to sequestrate, not confiscate, the properties of the enemy aliens during the war,
sequestration permitted and not prohibited by International Law or the Hague
Regulations.
In order decisions in the Haw Pia case we held, among others, the following:
The appellant's assignment of error may be reduced to two, to wit: First, whether or not
the Japanese Military Administration had authority to order the liquidation or winding
up to the business of defendant-appellee China Banking Corporation, and to appoint
the Bank of Taiwan liquidator authorized as such to accept the payment by the plaintiff-
appellant's debt to said defendant-appellee, and second, whether or not such payment
by the plaintiff-appellant has extinguished her obligation to said defendant-appellee.
As to the first question, we are of the considered opinion, and therefore hold, that the
Japanese military authorities had power, under the international law, to order the
liquidation of the China Banking Corporation and to appoint and authorize the Bank of
Taiwan as liquidator to accept the payment in question, because such liquidation is not a
confiscation of the properties of the bank appellee, but a mere sequestration of its assets
which required the liquidation or winding up to the business of said bank. All the
arguments to the contrary in support of the decision appealed from are predicated upon
the affairs of the China Banking Corporation in order to determinate its liabilities and
not assets to be sequestrated or controlled was an act of confiscation or appropriation
of private property contrary to article 46, section III of the Hague Regulations of 1907.
xxx xxx xxx
Before the Hague Convention, it was the usage or practice to allow or permit the
confiscation or appropriation by the belligerent occupant not only of public but also of
private property of the enemy in a territory occupied by the belligerent hostile army; and
as such usage or practice was allowed, a fortiori, any other act short of confiscation was
necessarily permitted. Section III of the Hague Regulations only prohibits the
confiscation of and privilege property by order of the Military authorities (art. 46), and
pillage or stealing and thievery thereof by individuals (art. 47); and as regards public
property, article 53 provides that cash funds, and property liable to requisition and all
other movable property belonging to the State susceptible of military use or operation,
may be confiscated or taken possession of as a booty and utilized for the benefit of the
invader's government (II Openheim, 8th ed., sections 137; 320 and 321, War
Department; Base Field Manual, Rules of Land Warfare FM 27-10). The belligerents in
their efforts to control enemy property within their jurisdiction or in territories occupied
by their armed forces in order to avoid their use in aid of the enemy and to increase
their own resources, after the Hague Convention and especially during the first World
War, had to resort to such measures of prevention which do not to a start confiscation,
as freezing, blocking, placing under custody and sequestrating the enemy private
property. Such acts are recognized as not repugnant to the provisions of article 46 or
any other articles of the Hague Regulations by well known writers on International Law,
and are authorized in the Army and Navy Manual of Military Government and Civil
Affairs not only of the United States, but also in similar manuals of Army and Navy of
other civilized countries.
Hyde in his International Law as chiefly interpreted and applied by the United States,
Vol. 3, 6th ed., p. 1727, has the following to say:
In examining the efforts of a belligerent to control in various ways property with its
domain that has such a connection with nationals of the enemy that it may be fairly
regarded as enemy property, it is important to inquire whether the attempt is made to
appropriate property without compensation, diversing him not only of title, but also of
any right or interest in what is taken, without prospect of reimbursement, or whether
those efforts constitute an assumption of control which, regardless of any transfer of
title, is not designed to produce such a deprivation. The character of the belligerent acts
in the two situations is not identical. To refer to both as confiscatory is not productive
of clearness of thought, unless a loose and abroad signification be attached to the term
"confiscation." The point to be noted is that a belligerent may in fact deprive an alien
enemy owner of property by process that are not essentially confiscatory, even though
the taking and retention may cause him severe loss and hardship. Recourse to such non-
confiscatory retentions or deprivations has marked the conduct of belligerents since the
beginning of the World War in 1914. They may perhaps be appropriately reffered to as a
sequestration. . . . .
A belligerent may fairly endeavor to prevent enemy property of any kind within its
territory (or elsewhere within its reach) from being so employed as to afford direct military aid
to its foe. Measures of prevention may, in a particular case, assume a confiscatory
aspect. In such a situation the question may arise whether those measures are,
nevertheless, excusable. It is believed that they may be, and that they are not invariably
unlawful despite the absence of efforts to compensate the owners. (Emphasis ours)
And Oppenheim in his International Law, Vol. 2, 6th ed., by Lauterpacht, says:
But this desire to eliminate the financial and commercial influence of the enemy, and
other motives, presently led in most States to exceptional war measures against the
businesses and property of enemies, which, though not confiscation, inflicted great loss
and injury. Sometimes these measure stopped short of divesting the enemy ownership
of the property; but in other cases the businesses or property were liquidated, and were
represented at the close of hostilities by nothing else that the proceeds of their
realization, often enough out of all proportion to their value. In the Trading with the
Enemy Act, 1939, provisions was made for the appointment of custodians of enemy
property in order to prevent the payment of money to enemies and to preserve enemy
property in contemplation of arrangements to be made at the conclusion of peace.
xxx xxx xxx
Ernest K. Feilchenfeld in his "The International Economic Law of Belligerent
Occupation (1942)" supports the foregoing conclusion of Hyde, when he says that
"According to article 46 of the Hague Regulations, private property must be respected
and cannot be confiscated. This rule affords protection against the laws of property,
through outright confiscation, but not against losses under lawful requisition,
contribution, seizure, fines, taxes, and expropriation" (Par. 208, p. 51). And later on he
adds "A complete nationalization of a corporation for the benefit of the occupant could
not be anything but a permanent measure involving final effects beyond the duration of
the occupation. There is no military need for it because the same practical results can be
achieved by temporary sequestion, (par. 385, p. 107).
Martin Domke * in his Trading with the Enemy in World War II, pp. 4 and 5, speaking
of Warfare on Economic and military fronts, says that "Freezing Control is but one
phase of the present war effort; it is but one weapon on the total war which is now
being on both economic and military fronts. Coupled with Freezing Control as a part of
this nation's program of economic warfare are to be found export control, the
promulgation of a Black List, censorship, seizure of enemy-owned property, and
financial and lend-lease aid to allied and friendly nations. . . .
xxx xxx xxx
The sequetration or liquidation of enemy banks in occupied territories is authorized
expressly by the United States Army and Navy Manual of Military Government and
Civil Affairs F. M. 2710 OPNAV 50-E-3, which, mandatory and controlling upon the
theatre commanders of the U. S. forces in said territories, provides in its paragraph 12
the following:
Functions of Civil Affairs Officers. In the occupation of such territories for a
considerable period of time, the civil affairs officers will in most cases be concerned
with the following and other activities;
1. Money and Banking. Closing, if necessary and guarding of banks, bank funds, safe
deposit boxes, securities and records; providing interim banking and credit
needs; liquidation; reorganization, and reopening of banks at appropriate times; . . . .
The Civil Affairs Officers are concerned, that is, entrusted with the performance of the
functions enumerated above, when so directed by the Chief Commander of the
occupant military forces.
Not only the United States Army and Navy Manual of Military Government and Civil
Affairs but similar manuals of other countries authorize the liquidation of impounding
of the assets of enemy banks or the freezing, blocking and impounding of enemy
properties in the occupied hostile territories without violating article 46 or other article
of the Hague Regulations. They do not amount to an outright confiscation of private
property, and we put into effect by the Allied Army in the occupied hostile territories in
Europe.
On the other hand, the provisions of the Trading with the Enemy Acts enacted by the
United States and almost all the principal nations since the first World War, including
England, Germany, France, and other European countries, as well as Japan, confirms
that the assets of enemy corporations, especially banks incorporated under the laws of
the country at war with the occupant and doing business in the occupied territory, may
be legally sequestrated, and the business thereof wound up or liquidated. Such
sequestration or seizures of properties is not an act for the confiscation of enemy
property, but for the conservation of it, subject to further disposition by treaty between
the belligerents at the end of the war. Section 12 of the Trading with the Enemy Act of
the United States provides that "after the end of the way any claim of enemy or ally of
an enemy to any money or other property received and held by the Alien Custodian or
deposited in the United States Treasury, shall be settled as Congress shall direct."
The purpose of such sequestration is well expounded in the Annual Report of the
Office of the Alien Custodian for a period from March 11, 1943, to June 30, 1943. "In
the absence of effective measures of control, enemy-owned property can be used to
further the interest of the enemy and to impede our own war effect. All enemy-
controlled assets can be used to finance propaganda, espionage, and sabotage in this
country or in countries friendly to our cause. They can be used to acquire stocks of
strategic materials and supplies ... was to the enemy, they will be diverted from our own
war efforts. (Haw Pia vs. China Banking Corporation, L-554, pp. 3-10, 12-13, Original
Decision.)
As we have already said, from the decision above qouted it appears that the "question
whether a belligerent occupant has the right through such uses of a depressed currency,
by making it legal tender and continuing it as such to oblige a creditor to accept in
payment of a debt something that was at the time of payment practically or almost
worthless," which Professor Hyde discusses at length in his article, has no bearing on
the question involved and decided in the Haw Pia case and, therefore, Professor Hyde's
criticism are predicated upon a wrong premise.
However, although the question of legal tender was only incidental to the issue in the
Haw Pia case, we have shown in our decision that the power of a military occupant to
issue military currency is based, not only on the military occupant's general power to
maintain law and order recognized in article 43 of the Hague Regulations, but also on
military necessity; and said power was exercised during the last World War not only by
Germany who used in most occupied areas the Reichskroditkassa mark, a paper
currency printed in Germany and denominated in German monetary units, but also by
the Aliens in the occupied territory of Sicily, Germany and Austria. The Combined
Directives of the Combined Chiefs of Staffs of the Supreme Allied Commander issued
on June 24, 1943, April 28, 1944, and June 27, 1947, declared respectively as legal tender
the yellow seal dollars currency and the British military notes (BMN) in Sicily, the Allied
military mark and the yellow seal dollars in Germany, and the Allied military shillings in
Austria. When the Japanese Military occupant issued the Proclamation of January 3,
1942, which declared the Japanese military notes of small denominations up to ten
pesos as legal tender at par with the Philippine peso, the purchasing power of said notes
was then the same as that of the Philippine peso. If the Japanese war notes became
depressed and valueless, it was because the war was prolonged and lost by the Japanese
contrary to their expectation of winning the war in a short time, and not because they
issued purposely a depressed and valueless currency as legal tender. If their expectation
had been realized no question as to the validity of the Japanese military notes as legal
tender would have come up.
There was no Japanese order or decree or any particular case in which the Japanese
military occupant or agents had actually compelled all creditors to accept in payment of
pre-war debts depressed currency or Japanese war notes; as a matter of fact several cases
are still pending in our courts in which debtors of pre-war debts had to file civil actions
to compel their creditors to accept Japanese war notes deposited by them in court in
payment of pre-war obligations which became due and payable during the occupation.
What the Japanese military occupant did in the Haw Pia case was to issue
Administrative Ordinance No. 1, dated July 31, 1942, ordering the liquidation of the
seven banks of hostile countries, among them the defendant China Banking
Corporation, appointing the Bank of Taiwan, Ltd. as liquidator of said banks and
demanding the payments of all loans, advances and other receivables of the banks which
were thereby declared due and payable to notwithstanding the terms and conditions of
the contract, in order to sequestrate the latter's assets during the war; and in the present
case the Japanese Military Administration ordered the debtors to pay to the Japanese
Enemy Property Custodian or Bank of Taiwan their debts due to their creditors who
were enemy aliens or corporations, in order to sequestrate the money so paid. Of course
the medium of payment, being a currency declared legal tender by the same Japanese
military occupant, had to be accepted by the Bank of Taiwan to refuse to accept them;
for even if they were valueless the enemy creditors would not legally suffer the war to
pay said creditors full compensation for such sequestration through their respective
governments at the conference table, regardless of the intrinsic or extrinsic value of the
money accepted by them.
As we have stated in this connection in our decision "But be that as it may, whatever
might have been the intrinsic or extrinsic value of the Japanese war-notes which the
Bank of Taiwan has received as full satisfaction of the obligation of the appellee's
debtors to it, is of no consequence in the present case." As we have already stated, the
Japanese war-notes were issued as legal tender at par with the Philippine peso, and
guaranteed by Japanese Government "which takes full responsibility for their usage
having the correct amount to back them up (Proclamation of Jan. 3, 1942). Now that
the outcome of the war has turned against Japan, through their States or Government,
payments or compensation in Philippine peso or U. S. dollars as the case may be, for the
loss or damage inflicted on the property by the emergency war measure taken by the
enemy. If Japan had won the war or were the victor, the property or money of said
banks sequestrated or impounded by her might be retained by Japan and credited to the
respective State of which the owners of said banks were nationals, as a payment on
account of the sums payable by them as indemnity under the treaties, and the said
owners were to look for compensation to their respective States (VI Backworth Digest
of International Law, p. 232; 2 Oppenheim, 6th ed. by Lauterpacht, page 263).
We have quoted once the view of Professor Hyde on the assumption that Professor
Hyde would not give the words "domain or territory," wherein private property of
enemy nationals may be sequestrated under the Trading with the Enemy Act, an
interpretation he seems to give now in his article, different from that of the other
writers and authorities we have also quoted and specially of the Executive Department
of the United States Government which we shall hereinafter quote, in order to show
that if the United States as well as the other Allied countries applied and enforced
during the last world war their Trading with the Enemy Act in any territory occupied by
their armed forces, as we have shown in our decision, Japan had also the right to do the
same in the Philippines by virtue of the international law principle that "what is
permitted to one belligerent is also allowed to the other."
An agency of the Executive Branch of the United States Government, i.e., the Alien
Property Custodian, in March, 1944 recognized the validity of the liquidation by the
Japanese military authorities of branches of the National City Bank of New York
situated in Japan, Korea and in territory occupied by the Japanese military forces,
namely Tokyo, Dairen and Harbin. The Custodian expressly held that payments made
by debtors of said branch banks to the Japanese liquidator, namely, the Yokohama
Specie Bank, appointed under the Japanese Enemy Assets Control Law (December 22,
1941), constituted valid payment of such debts to the branch banks. The authority for
the appointment of the Yokohama Specie Bank, Limited, as such liquidator was
identical with that for the appointment of the Bank of Taiwan as liquidator of China
Banking Corporation plaintiff in the Haw Pia case.
This determination was made in the proceedings for the liquidation of the New York
Branch of the Yokohama Specie Bank conducted by the Superintendent of Banks of the
State of New York under the supervision of the United States Alien Property
Custodian, and was based upon an opinion of the General Counsel to the Alien
Property Custodian, dated March 14, 1944, in which the said General Counsel held in
part as follows:
There is in fact reason to believe that National City Bank has no cause of action against
anyone. Article III of the Enemy Assets Control Law of Japan (December 22, 1941)
provides:
When a person liable for a debt to an enemy country, an enemy national, or others
designated by the Order, performs to a person designated by the Government, the
payment of money or the delivery of articles which are the object of the debt it shall
have discharged that obligation.
By order of February 10, 1942, made pursuant to the Enemy Assets Control Law
(December 22, 1941), Yokohama Specie Bank was entrusted by the Japanese
government with the liquidation of National City Bank's branches in Japan and
occupied territory, subject to no presently relevant exceptions. Upon appointment,
Yokohama Specie Bank commenced the liquidation thereof. Information obtained from
an officer of the Department of State, recently repatriated from Japan, indicates that
liquidation of National City Bank, Japan, has proceeded in accordance with the law
quoted above. It is a fair assumption that Yokohama Specie Bank, engaged in liquidating
these branches in its capacity as administrator, collected from itself in its capacity as a
commercial bank the moneys owing to National City Bank's foreign branches, and
consequently that the Yokohama Specie Bank branches were, in accordance with term
of Article III, supra, discharged of those obligations. The deposits of National City
branches in the Far Eastern branches of Yokohama Specie Bank are outside the
jurisdiction of the United States, and the only liability that Yokohama Specie Bank
incurred by its failure to pay was that which the Japanese law might impose. Deutsche
Bank Filiale Nurnberg v. Humphrey, 272 U. S. 517, 520 (1926). By that law, payment of the
deposits to the governmental administrator satisfied the debt owed by the depository. If
the obligation was discharged by Japanese law, no right remains to be recognized in this
country, except such as may be urged through State Department channels at the peace
table. See United States v. S. S. by Mr. Justice Holmes in an analogous case:
. . . in any view of all that had happened the only obligations of the Wiener Bank-
Verein, were those imposed by the law of Austria-Hungary, and that if that law
discharged the debt, the debt was discharged everywhere. Zimmerman v. Sutherland,
274 U. S. 253, 256 (1927).
The opinion proceeds to state that the sequestration in question was effected pursuant
to valid and binding orders of the Japanese government and that recognition is given by
the courts of the United States to the power of a belligerent to thus sequester property
even when that power is exercised adversely to United States nationals. United States v.
White Dental Mfg. Co., 274 U. S. 398. The sequestration was held not to create any right
in the National City Bank except as may arise from subsequent treaties. As was said by
Mr. Justice Stone:
The sequestration of enemy property was within the rights of the German Government
as a belligerent power and when effected left the corporation without right to demand
its releases or compensation for its seizure, at least until the declaration of peace . . . .
United States v. S. S. White Dental Mfg. Co., U. S. 398, 402 (1927)
(2) Prof. Hyde discussing the second point says:
In the present case the Bank of Taiwan is constantly referred to as the "Liquidator" of
the China Banking Corporation. This leads to the question whether it properly or
adequately performed its function as liquidator. The liquidation of a corporation is
synonymous with the winding up of the affairs of the corporation. There is no proper
or complete liquidation in which debts to creditors are not settled and paid as well as
assets reduced to a liquid state. In the present case, only about ten per cent of the
deposits of foreign banks were allowed to be withdrawn.
The conduct of the liquidator in the present case had also another significance. Its
retention of money representing debts due by foreign banks to depositors served in fact
to be a convenient means of preserving them so that they would be subjected to the
Japanese Government might later apply. Thus here was a process whereby the occupant
held within its grip something which later by a method akin to consfiscation it could
ruin the value of, contrary to the injunctions of The Hague Regulations. Looked at in
this way, the conduct of the liquidator as an agency of the Japanese Government
together with the later action of that Government united jointly to facilitate and also
effectuate the commission of an international wrong. That wrong was of a type which
Articles 43 and 46 of the Hague Regulations of 1907 appeared to forbid.
A third conclusion is to be drawn from the same fact. There would be a discrimination
against non-Filipinos not permissible pursuant to international law. Filipinos, axis
nationals and neutrals were able to utilize the payments received by them at a time when
they had value. The foreign bank on the other hand could not pay more than ten per
cent of their deposits and remained indebted to their depositors in full.
xxx xxx xxx
The refusal of the liquidator, the Bank of Taiwan, twice to release the mortgage in the
Haw Pia case stands out as a significant fact. Of course, it is possible that the liquidator
received payment of 4,563.78 pesos made by the debtor in August 1944 merely for what
it was worth. It may have been known to the liquidator at the time that Japanese military
pesos of larger denominations that ten peso notes had not been made legal tender, or it
may have doubted whether they had been tender. Hence the liquidator may have felt
obliged, in case payment were made in such larger Japanese notes, not to regard them as
adequate for the settlement of the debt. Or, the liquidator may have been influenced by
the vastness and improprietry of the Japanese acts of inflation which if allowed to
enable the debtor to pay her debts therewith, would have amounted to sheer robbery of
the creditor, both violative of precedent and hurtful to the prestige of the Japanese
Government. In a word, there are numerous reasons any one of which might have
served to put the liquidator on its guard, and to cause it not leave the matter to its own
later decision. Be that as it may, it is a reasonable assumption that shrewd debtors ran to
the windows of the Bank of Taiwan in the attempt to take advantage of the decrease of
the value of the occupation currency, one peso of the Philippines being then equivalent
to at least fifteen pesos of the military notes.
The liquidation ordered by the Japanese Administrative Ordinance No. 11 of July 31,
1942, was not a complete liquidation of all the affairs of the local banks controlled by
enemy nationals, but only a liquidation of all the credits of said banks in order to
liquidate and sequestrate them. Said Ordinance only provided that "2. The Bank of
Taiwan Ltd. has been appointed liquidator of the above banks. 3. All loans, advances
and other receivables of the banks are hereby declared due and payable notwithstanding
the terms and conditions of the contract. Debtors are given from today until September 30,
1942, to pay the principal and interest of their obligations. All payments made thereafter
shall be charged additional interest at 3 per cent per annum, except only in special case
where they may be waived." For that reason the creditors or depositors of the banks
were allowed to withdraw restricted amounts only from their deposits as a protective
measure to prevent runs on banks owned or controlled by the enemy nationals, which
would result from mass withdrawals. And it is incorrect or contrary to facts to say, as
Professor Hyde avers, that "only about ten per cent of the deposits of foreigners were
allowed to withdrawn". For what we have found in our decision in the Haw Pia case is
the following:
That the liquidation or winding up of the business of the China Banking Corporation
and other enemy banks did not constitute a confiscation or appropriation of their
properties of the debts due them from their debtors, but a mere sequestration of their
assets during the duration of the war for the purposes already stated, is evidenced
conclusively by the following uncontroverted facts set forth in the briefs of both parties
and amici curiae:
(1) Out of the sum of about P34,000,000 collected from the debtors by the liquidator
Bank of Taiwan, the latter paid out to the depositors or creditors of the same Bank
about P9,000,000; and it is common sense that this last amount of about P34,000,000
had it been the intention of the Japanese Military Administration to confiscate this
amount collected by the Bank of Taiwan.
xxx xxx xxx
As the enemy banks were closed and had not received deposits in Japanese Military
notes during the occupation, they did not run the risk, as the other banks did, of being
responsible for such deposits in genuine Philippine currency had not the Philippine
Government declared after liberation such deposits to be of no value. The retention by
the liquidator "of money representing debts due by foreign banks to depositors" did
not, as Professor Hyde affirms, "serve in fact to be a convenient means of preserving
them so that they would be subjected to the dangers of inflation and deterioration of
currency which the Japanese Government might later apply." As all the payments made
to the Bank of Taiwan in Japanese war notes of the credits of the enemy Banks, except
about twenty-seven, not ten, percent paid by the liquidator to the Banks' depositors, had
been sequestrated, said Bank could not have been subjected to the dangers of inflation
or deterioration of currency; because, we have already stated above, the Japanese
Government assumed the responsibility and is responsible for the payment, in terms of
Philippine pesos or U. S. dollars, of the foreign Bank's credits they have collected and
sequestrated, and the Banks may demand the payment thereof through their respective
Governments at the Peace Conference.
Although it is obviously immaterial whatever may have been the opinion of the
legislator on the validity or adequacy of the currency paid by Haw Pia for the settlement
of his debt, there is nothing in the record to show that the Bank of Taiwan refused or
declined twice to release the mortgage in the Haw Pia case, as Professor Hyde affirms.
What appeared in the record was that Haw Pia alleged in his complaint filed in August,
1945, that the defendants, referring to the China Banking Corporation because the Bank
of Taiwan was only a nominal defendant and in 1945 was no longer doing business in
the Philippines, refused and neglected to execute the deed of cancellation of mortgage
of the property, and for that reason Haw Pia had filed that action against the China
Banking Corporation. It is a fact, of which we have judicial notice, that the Bank of
Taiwan had executed deeds of cancellation of mortgages for all payments received by it
in payment of the Banks' and the enemy nationals' mortgage credits, and the plaintiffs in
the present case of Gibbs v. Rodriguez and in the case of Hongkong Shanghai Banking
Corporation v. Perez Samanillo, precisely demanded in their action the annulment of the
deed of cancellation of the defendants' mortgages executed by the Bank of Taiwan.
(3) And, with respect to the so-called failure of the Philippine Republic to heed certain
contractual undertaking in the Inter-Allied Declaration of January 5, 1943, Professor
Hyde says in his article the following:
We now come to an important contractual undertakings by the Philippine Republic. The
Government of the Philippines undertook to invalidate all Japanese dealings by which
property in which nationals of United Nations were interested was hurt by taking is seen
in the "Inter-Allied Declaration Against Acts of Dispossesion Committed in Territories
under Enemy Occupation or Control (with covering Statement by His Majesty's
Government in the United Kingdom and Explanatory Memorandum issued by the
Parties to the Declaration)", London, January 5, 1943, to which the Government of the
Commonwealth of the Philippines adhered on January 19, 1943.
xxx xxx xxx
It is not here contended that the Allied Nations contemplated on January 5, 1943 the
consideration of payments made to Banks in the currency of the occupied European
countries as invalid. The inflation in these countries had not progressed to a degree that
such thoughts came to the minds of the signatories. It is here contended, however, that
property is "dispossessed" within the meaning of the Inter-Allied Declaration where the
degree of inflation is as great as that indicated in the figure in the table above given on
page 155 of this document.
If this be a correct statement, the government participating in the agreement of January
5, 1943, found themselves legally obliged to reach a determination that debtors were not
relieved from liability by payments of debts to occupation authorities, when through a
larger inflation such payment would amount to practical robbery of the creditor for the
benefit of the debtor.
xxx xxx xxx
The Inter-Allied Declaration of January 5, 1943, in the light of the official interpretation
given to it, has a direct bearing upon the obligation assumed by the Philippine Republic
in the Haw Pia case. It is evidence of definite undertaking by the Republic to undo the
consequence of acts mutually regarded as wrongful, and manifested in the inflationary
conduct of Japan that was contemptuous of the rights of Alien creditors growing out of
debts due them by Philippine debtors. Of direct consequence of the agreement was the
obligation on the part of the Republic by some appropriate process to permit no local
agency, judicial or other, to give effect to the Japanese decrees. . . . Thus, when the
Supreme Court, through ignorance of what had taken place, or for any other reason,
regarded as enforceable or valid the Japanese edicts, it made itself the means by which
its own country violated an international obligation laid down by contract. . . . .
As we have already said, we have not determined in the Haw Pia case, contrary to
Professor Hyde's erroneous assumption, that debtors were relieved from liability by
payments in a greatly depreciated currency or Japanese war notes to the occupation
authorities of the pre-war debts they owed to their creditors (national, neutral or enemy
aliens).
What we have declared is that the Military Occupant had power to order the liquidation
of the hostile banks, appoint the Bank of Taiwan as liquidator and sequestrate their
assets, and that, therefore, the payment made by Haw Pia to the Bank of Taiwan of his
pre-war debt to the China Banking Corporation was valid and extinguished his
obligation to the latter; and for that reason this Court did not deem it necessary to
discuss and pass upon the effect on said case of the adherence by the late President
Quezon in behalf of the Commonwealth of the Philippines to the United Nations
Declaration of January 5, 1943, in London. Because in said declaration the United
Nations "stated their intention to do their utmost to defeat the methods of
dispossession practiced by the Governments with which they are at war against the
countries and people who have so wantonly assaulted and despoiled", and "reserved all
their rights to declare invalid, but did not actually invalidate, any transfers of, or dealing
with, property, rights and interest of any description whatsoever" in the occupied
territories which have taken "the form of open looting or plunder"; and we have held
that the acts of the Japanese occupant involved in the Haw Pia case did not constitute a
confiscation but a mere sequestration of private granted such occupant under
International Law.
Besides, as the governments which were parties to that agreement did not bind
themselves, but only reserved all their rights, to invalidate such acts, the Government of
the Philippines did not exercise that reserve right* to declare invalid the payments made
to the Bank of Taiwan by debtors of their debts to the enemy banks or nationals. On
the contrary it enacted in 1945 Commonwealth Act No. 727 which provided that
"payment on demand or tendered and accepted during the period of the Japanese
invasion on obligation incurred or contracted prior to such period shall be considered
valid." Although said Act was vetoed by President Truman on the assumption that it
was a currency statue and required his approval, it is obvious, without necessity of
discussing whether or not said Act 727 was really a currency measure, that it was a
declaration of the policy of the Legislative and Executive Departments of the
Government.

Wherefore, we find both the first ground as well as the second ground of the motion
for reconsideration based on Professor Charles Cheney Hyde's contentions submitted
by the petitioners without merit, and deny said motion for reconsideration.

RAMON A. GONZALES, petitioner,
vs.
RUFINO G. HECHANOVA, as Executive Secretary, MACARIO PERALTA,
JR., as Secretary of Defense, PEDRO GIMENEZ, as Auditor General,
CORNELIO BALMACEDA, as Secretary of Commerce and Industry, and
SALVADOR MARINO, Secretary of Justice, respondents.
Ramon A. Gonzales in his own behalf as petitioner.
Office of the Solicitor General and Estanislao Fernandez for respondents.
CONCEPCION, J.:
This is an original action for prohibition with preliminary injunction.
It is not disputed that on September 22, 1963, respondent Executive Secretary
authorized the importation of 67,000 tons of foreign rice to be purchased from private
sources, and created a rice procurement committee composed of the other respondents
herein1 for the implementation of said proposed importation. Thereupon, or September
25, 1963, herein petitioner, Ramon A. Gonzales a rice planter, and president of the
Iloilo Palay and Corn Planters Association, whose members are, likewise, engaged in the
production of rice and corn filed the petition herein, averring that, in making or
attempting to make said importation of foreign rice, the aforementioned respondents
"are acting without jurisdiction or in excess of jurisdiction", because Republic Act No.
3452 which allegedly repeals or amends Republic Act No. 220 explicitly prohibits the
importation of rice and corn "the Rice and Corn Administration or any other government
agency;" that petitioner has no other plain, speedy and adequate remedy in the ordinary
course of law; and that a preliminary injunction is necessary for the preservation of the
rights of the parties during the pendency this case and to prevent the judgment therein
from coming ineffectual. Petitioner prayed, therefore, that said petition be given due
course; that a writ of preliminary injunction be forthwith issued restraining respondent
their agents or representatives from implementing the decision of the Executive
Secretary to import the aforementioned foreign rice; and that, after due hearing,
judgment be rendered making said injunction permanent.
Forthwith, respondents were required to file their answer to the petition which they did,
and petitioner's pray for a writ of preliminary injunction was set for hearing at which
both parties appeared and argued orally. Moreover, a memorandum was filed, shortly
thereafter, by the respondents. Considering, later on, that the resolution said incident
may require some pronouncements that would be more appropriate in a decision on the
merits of the case, the same was set for hearing on the merits thereafter. The parties,
however, waived the right to argue orally, although counsel for respondents filed their
memoranda.
I. Sufficiency of petitioner's interest.
Respondents maintain that the status of petitioner as a rice planter does not give him
sufficient interest to file the petition herein and secure the relief therein prayed for. We
find no merit in this pretense. Apart from prohibiting the importation of rice and corn
"by the Rice and Corn Administration or any other government agency". Republic Act
No. 3452 declares, in Section 1 thereof, that "the policy of the Government" is to
"engage in the purchase of these basic foods directly from those tenants, farmers,
growers, producers and landowners in the Philippines who wish to dispose of their
products at a price that will afford them a fair and just return for their labor and capital
investment. ... ." Pursuant to this provision, petitioner, as a planter with a rice land of
substantial proportion,2 is entitled to a chance to sell to the Government the rice it now
seeks to buy abroad. Moreover, since the purchase of said commodity will have to be
effected with public funds mainly raised by taxation, and as a rice producer and
landowner petitioner must necessarily be a taxpayer, it follows that he has sufficient
personality and interest to seek judicial assistance with a view to restraining what he
believes to be an attempt to unlawfully disburse said funds.
II. Exhaustion of administrative remedies.
Respondents assail petitioner's right to the reliefs prayed for because he "has not
exhausted all administrative remedies available to him before coming to court". We have
already held, however, that the principle requiring the previous exhaustion of
administrative remedies is not applicable where the question in dispute is purely a legal
one",3 or where the controverted act is "patently illegal" or was performed without
jurisdiction or in excess of jurisdiction, 4 or where the respondent is a department
secretary, whose acts as an alter-ego of the President bear the implied or assumed
approval of the latter,5 unless actually disapproved by him,6 or where there are
circumstances indicating the urgency of judicial intervention.7 The case at bar fails under
each one of the foregoing exceptions to the general rule. Respondents' contention is,
therefore, untenable.
III. Merits of petitioner's cause of action.
Respondents question the sufficiency of petitioner's cause of action upon the theory
that the proposed importation in question is not governed by Republic Acts Nos. 2207
and 3452, but was authorized by the President as Commander-in-Chief "for military
stock pile purposes" in the exercise of his alleged authority under Section 2 of
Commonwealth Act No. 1;8 that in cases of necessity, the President "or his subordinates
may take such preventive measure for the restoration of good order and maintenance of
peace"; and that, as Commander-in-Chief of our armed forces, "the President ... is duty-
bound to prepare for the challenge of threats of war or emergency without waiting for any
special authority".
Regardless of whether Republic Act No. 3452 repeals Republic Act No. 2207, as
contended by petitioner herein - on which our view need not be expressed we are
unanimously of the opinion - assuming that said Republic Act No. 2207 is still in force
that the two Acts are applicable to the proposed importation in question because the
language of said laws is such as to include within the purview thereof all importations of
rice and corn into the Philippines". Pursuant to Republic Act No. 2207, "it shall be
unlawful for any person, association, corporation or government agency to import rice and
corn into any point in the Philippines", although, by way of exception, it adds, that "the
President of the Philippines may authorize the importation of these commodities through
any government agency that he may designate", is the conditions prescribed in Section 2
of said Act are present. Similarly, Republic Act No. 3452 explicitly enjoins "the Rice and
Corn Administration or any government agency" from importing rice and corn.
Respondents allege, however, that said provisions of Republic Act Nos. 2207 and 3452,
prohibiting the importation of rice and corn by any "government agency", do not apply
to importations "made by the Government itself", because the latter is not a
"government agency". This theory is devoid of merit. The Department of National
Defense and the Armed Forces of the Philippines, as well as respondents herein, and
each and every officer and employee of our Government, our government agencies
and/or agents. The applicability of said laws even to importations by the Government
as such, becomes more apparent when we consider that:
1. The importation permitted in Republic Act No. 2207 is to be authorized by the
"President of the Philippines" and, hence, by or on behalf of the Government of the
Philippines;
2. Immediately after enjoining the Rice and Corn administration and any other
government agency from importing rice and corn, Section 10 of Republic Act No. 3452
adds "that the importation of rice and corn is left to private parties upon payment of the
corresponding taxes", thus indicating that only "private parties" may import rice under its
provisions; and
3. Aside from prescribing a fine not exceeding P10,000.00 and imprisonment of not
more than five (5) years for those who shall violate any provision of Republic Act No.
3452 or any rule and regulation promulgated pursuant thereto, Section 15 of said Act
provides that "if the offender is a public official and/or employees", he shall be subject to
the additional penalty specified therein. A public official is an officer of the Government
itself, as distinguished from officers or employees of instrumentalities of the
Government. Hence, the duly authorized acts of the former are those of the Government, unlike
those of a government instrumentality which may have a personality of its own, distinct
and separate from that of the Government, as such. The provisions of Republic Act
No. 2207 are, in this respect, even more explicit. Section 3 thereof provides a similar
additional penalty for any "officer or employee of the Government" who "violates, abets or
tolerates the violation of any provision" of said Act. Hence, the intent to apply the same
to transactions made by the very government is patent.
Indeed, the restrictions imposed in said Republic Acts are merely additional to those
prescribed in Commonwealth Act No. 138, entitled "An Act to give native products and
domestic entities the preference in the purchase of articles for the Government." Pursuant
to Section 1 thereof:
The Purchase and Equipment Division of the Government of the Philippines and other
officers and employees of the municipal and provincial governments and the Government
of the Philippines and of chartered cities, boards, commissions, bureaus, departments, offices,
agencies, branches, and bodies of any description, including government-owned companies,
authorized to requisition, purchase, or contract or make disbursements for articles,
materials, and supplies for public use, public buildings, or public works shall give preference
to materials ... produced ... in the Philippines or in the United States, and to domestic entities,
subject to the conditions hereinbelow specified. (Emphasis supplied.)
Under this provision, in all purchases by the Government, including those made by and/or
for the armed forces, preference shall be given to materials produced in the Philippines. The
importation involved in the case at bar violates this general policy of our Government,
aside from the provisions of Republic Acts Nos. 2207 and 3452.
The attempt to justify the proposed importation by invoking reasons of national security
predicated upon the "worsening situation in Laos and Vietnam", and "the recent
tension created by the Malaysia problem" - and the alleged powers of the President as
Commander-in-Chief of all armed forces in the Philippines, under Section 2 of the
National Defense Act (Commonwealth Act No. 1), overlooks the fact that the
protection of local planters of rice and corn in a manner that would foster and
accelerate self-sufficiency in the local production of said commodities constitutes a
factor that is vital to our ability to meet possible national emergency. Even if the intent
in importing goods in anticipation of such emergency were to bolster up that ability, the
latter would, instead, be impaired if the importation were so made as to discourage our
farmers from engaging in the production of rice.
Besides, the stockpiling of rice and corn for purpose of national security and/or
national emergency is within the purview of Republic Act No. 3452. Section 3 thereof
expressly authorizes the Rice and Corn Administration "to accumulate stocks as
a national reserve in such quantities as it may deem proper and necessary to meet any
contingencies". Moreover, it ordains that "the buffer stocks held as a national reserve ... be deposited
by the administration throughout the country under the proper dispersal plans ... and may be
released only upon the occurrence of calamities or emergencies ...". (Emphasis applied.)
Again, the provisions of Section 2 of Commonwealth Act No. 1, upon which
respondents rely so much, are not self-executory. They merely outline the general
objectives of said legislation. The means for the attainment of those objectives are
subject to congressional legislation. Thus, the conditions under which the services of
citizens, as indicated in said Section 2, may be availed of, are provided for in Sections 3,
4 and 51 to 88 of said Commonwealth Act No. 1. Similarly, Section 5 thereof specifies
the manner in which resources necessary for our national defense may be secured by the
Government of the Philippines, but only "during a national mobilization",9 which does not
exist. Inferentially, therefore, in the absence of a national mobilization, said resources
shall be produced in such manner as Congress may by other laws provide from time to
time. Insofar as rice and corn are concerned, Republic Acts Nos. 2207 and 3452, and
Commonwealth Act No. 138 are such laws.
Respondents cite Corwin in support of their pretense, but in vain. An examination of
the work cited10 shows that Corwin referred to the powers of the President during "war
time"11 or when he has placed the country or a part thereof under "martial law". 12 Since
neither condition obtains in the case at bar, said work merely proves that respondents'
theory, if accepted, would, in effect, place the Philippines under martial law, without a
declaration of the Executive to that effect. What is worse, it would keep
us perpetually under martial law.
It has been suggested that even if the proposed importation violated Republic Acts Nos.
2207 and 3452, it should, nevertheless, be permitted because "it redounds to the benefit
of the people". Salus populi est suprema lex, it is said.
If there were a local shortage of rice, the argument might have some value. But the
respondents, as officials of this Government, have expressly affirmed again and again
that there is no rice shortage. And the importation is avowedly for stockpile of the
Army not the civilian population.
But let us follow the respondents' trend of thought. It has a more serious implication
that appears on the surface. It implies that if an executive officer believes that
compliance with a certain statute will not benefit the people, he is at liberty to disregard
it. That idea must be rejected - we still live under a rule of law.
And then, "the people" are either producers or consumers. Now as respondents
explicitly admit Republic Acts Nos. 2207 and 3452 were approved by the Legislature
for the benefit of producers and consumers, i.e., the people, it must follow that the
welfare of the people lies precisely in the compliance with said Acts.
It is not for respondent executive officers now to set their own opinions against that of
the Legislature, and adopt means or ways to set those Acts at naught. Anyway, those
laws permit importation but under certain conditions, which have not been, and
should be complied with.
IV. The contracts with Vietnam and Burma
It is lastly contended that the Government of the Philippines has already entered into
two (2) contracts for the Purchase of rice, one with the Republic of Vietnam, and
another with the Government of Burma; that these contracts constitute valid executive
agreements under international law; that such agreements became binding effective
upon the signing thereof by representatives the parties thereto; that in case of conflict
between Republic Acts Nos. 2207 and 3452 on the one hand, and aforementioned
contracts, on the other, the latter should prevail, because, if a treaty and a statute are
inconsistent with each other, the conflict must be resolved under the American
jurisprudence in favor of the one which is latest in point of time; that petitioner
herein assails the validity of acts of the Executive relative to foreign relations in the
conduct of which the Supreme Court cannot interfere; and the aforementioned
contracts have already been consummated, the Government of the Philippines having
already paid the price of the rice involved therein through irrevocable letters of credit in
favor of the sell of the said commodity. We find no merit in this pretense.
The Court is not satisfied that the status of said tracts as alleged executive agreements
has been sufficiently established. The parties to said contracts do not pear to have
regarded the same as executive agreements. But, even assuming that said contracts may
properly considered as executive agreements, the same are unlawful, as well as null and
void, from a constitutional viewpoint, said agreements being inconsistent with the
provisions of Republic Acts Nos. 2207 and 3452. Although the President may, under
the American constitutional system enter into executive agreements without previous
legislative authority, he may not, by executive agreement, enter into a transaction which
is prohibited by statutes enacted prior thereto. Under the Constitution, the main function
of the Executive is to enforce laws enacted by Congress. The former may not interfere
in the performance of the legislative powers of the latter, except in the exercise of his
veto power. He may not defeat legislative enactments that have acquired the status of
law, by indirectly repealing the same through an executive agreement providing for the
performance of the very act prohibited by said laws.
The American theory to the effect that, in the event of conflict between a treaty and a
statute, the one which is latest in point of time shall prevail, is not applicable to the case
at bar, for respondents not only admit, but, also insist that the contracts adverted to are
not treaties. Said theory may be justified upon the ground that treaties to which the
United States is signatory require the advice and consent of its Senate, and, hence, of a
branch of the legislative department. No such justification can be given as regards
executive agreements not authorized by previous legislation, without completely
upsetting the principle of separation of powers and the system of checks and balances
which are fundamental in our constitutional set up and that of the United States.
As regards the question whether an international agreement may be invalidated by our
courts, suffice it to say that the Constitution of the Philippines has clearly settled it in
the affirmative, by providing, in Section 2 of Article VIII thereof, that the Supreme
Court may not be deprived "of its jurisdiction to review, revise, reverse, modify, or
affirm on appeal, certiorari, or writ of error as the law or the rules of court may provide,
final judgments and decrees of inferior courts in (1) All cases in which
the constitutionality or validity of any treaty, law, ordinance, or executive order or regulation
is in question". In other words, our Constitution authorizes the nullification of a treaty,
not only when it conflicts with the fundamental law, but, also, when it runs counter to an act
of Congress.
The alleged consummation of the aforementioned contracts with Vietnam and Burma
does not render this case academic, Republic Act No. 2207 enjoins our Government not
from entering into contracts for the purchase of rice, but from importing rice, except under
the conditions Prescribed in said Act. Upon the other hand, Republic Act No. 3452 has
two (2) main features, namely: (a) it requires the Government to purchase rice and
corn directly from our local planters, growers or landowners; and (b) it
prohibits importations of rice by the Government, and leaves such importations to private
parties. The pivotal issue in this case is whether the proposed importation which has
not been consummated as yet is legally feasible.
Lastly, a judicial declaration of illegality of the proposed importation would not compel
our Government to default in the performance of such obligations as it may have
contracted with the sellers of the rice in question, because, aside from the fact that said
obligations may be complied with without importing the commodity into the Philippines,
the proposed importation may still be legalized by complying with the provisions of the
aforementioned laws.
V. The writ of preliminary injunction.
The members of the Court have divergent opinions on the question whether or not
respondents herein should be enjoined from implementing the aforementioned
proposed importation. However, the majority favors the negative view, for which
reason the injunction prayed for cannot be granted.
WHEREFORE, judgment is hereby rendered declaring that respondent Executive
Secretary had and has no power to authorize the importation in question; that he
exceeded his jurisdiction in granting said authority; said importation is not sanctioned by
law and is contrary to its provisions; and that, for lack of the requisite majority, the
injunction prayed for must be and is, accordingly denied. It is so ordered.
Bengzon, CJ, Padilla, Labrador, Reyes, J.B.L., Dizon and Makalintal, JJ., concur.
Paredes and Regala, JJ., concur in the result.
Separate Opinions
BAUTISTA ANGELO, J., concurring:
Under Republic Act No. 2207, which took effect on May 15, 1959, it is unlawful for any
person, association, corporation or government agency to import rice and corn into any
point in the Philippines. The exception is if there is an existing or imminent shortage of
such commodity of much gravity as to constitute national emergency in which case an
importation may be authorized by the President when so certified by the National
Economic Council.
However, on June 14, 1962, Republic Act 3452 was enacted providing that the
importation of rice and corn can onlybe made by private parties thereby prohibiting from
doing so the Rice and Corn Administration or any other government agency. Republic
Act 3452 does not expressly repeal Republic Act 2207, but only repeals or modified
those parts thereof that are inconsistent with its provisions. The question that now
arises is: Has the enactment of Republic Act 3452 the effect of prohibiting completely
the government from importing rice and corn into the Philippines?
My answer is in the negative. Since this Act does not in any manner provide for the
importation of rice and corn in case of national emergency, the provision of the former
law on that matter should stand, for that is not inconsistent with any provision
embodied in Republic Act 3452. The Rice and Corn Administration, or any other
government agency, may therefore still import rice and corn into the Philippines as
provided in Republic Act 2207 if there is a declared national emergency.
The next question that arises is: Can the government authorize the importation of rice
and corn regardless of Republic Act 2207 if that is authorized by the President as
Commander-in-Chief of the Philippine Army as a military precautionary measure for
military stockpile?
Respondents answer this question in the affirmative. They advance the argument that it
is the President's duty to see to it that the Armed Forces of the Philippines are geared to
the defenses of the country as well as to the fulfillment of our international
commitments in Southeast Asia in the event the peace and security of the area are in
danger. The stockpiling of rice, they aver, is an essential requirement of defense
preparation in view of the limited local supply and the probable disruption of trade and
commerce with outside countries in the event of armed hostilities, and this military
precautionary measure is necessary because of the unsettled conditions in the Southeast
Asia bordering on actual threats of armed conflicts as evaluated by the Intelligence
Service of the Military Department of our Government. This advocacy, they contend,
finds support in the national defense policy embodied in Section 2 of our National
Defense Act (Commonwealth Act No. 1), which provides:
(a) The preservation of the State is the obligation of every citizen. The security of the
Philippines and the freedom, independence and perpetual neutrality of the Philippine
Republic shall be guaranteed by the employment of all citizens, without distinction of
sex or age, and all resources.
(b) The employment of the nation's citizens and resources for national defense shall be
effected by a national mobilization.
(c) The national mobilization shall include the execution of all measures necessary to
pass from a peace to a war footing.
(d) The civil authority shall always be supreme. The President of the Philippines as the
Commander-in-Chief of all military forces, shall be responsible that mobilization
measures are prepared at all times.(Emphasis supplied)
Indeed, I find in that declaration of policy that the security of the Philippines and its
freedom constitutes the core of the preservation of our State which is the basic duty of
every citizen and that to secure which it is enjoined that the President employ all the
resources at his command. But over and above all that power and duty, fundamental as
they may seem, there is the injunction that the civil authority shall always be supreme.
This injunction can only mean that while all precautions should be taken to insure the
security and preservation of the State and to this effect the employment of all resources
may be resorted to, the action must always be taken within the framework of the civil
authority. Military authority should be harmonized and coordinated with civil authority,
the only exception being when the law clearly ordains otherwise. Neither Republic Act
2207, nor Republic Act 3452, contains any exception in favor of military action
concerning importation of rice and corn. An exception must be strictly construed.
A distinction is made between the government and government agency in an attempt to
take the former out of the operation of Republic Act 2207. I disagree. The Government
of the Republic of the Philippines under the Revised Administrative Code refers to that
entity through which the functions of government are exercised, including the various
arms through which political authority is made effective whether they be provincial,
municipal or other form of local government, whereas a government instrumentality
refers to corporations owned or controlled by the government to promote certain
aspects of the economic life of our people. A government agency, therefore, must
necessarily refer to the government itself of the Republic, as distinguished from any
government instrumentality which has a personality distinct and separate from it
(Section 2).
The important point to determine, however, is whether we should enjoin respondents
from carrying out the importation of the rice which according to the record has been
authorized to be imported on government to government level, it appearing that the
arrangement to this effect has already been concluded, the only thing lacking being its
implementation. This is evident from the manifestation submitted by the Solicitor
General wherein it appears that the contract for the purchase of 47,000 tons of rice
from had been sign on October 5, 1963, and for the purchase of 20,000 tons from
Burma on October 8, 1963, by the authorized representatives of both our government
and the governments of Vietnam and Burma, respectively. If it is true that, our
government has already made a formal commitment with the selling countries there
arises the question as to whether the act can still be impeded at this stage of the
negotiations. Though on this score there is a divergence of opinion, it is gratifying to
note that the majority has expressed itself against it. This is a plausible attitude for, had
the writ been issued, our government would have been placed in a predicament where,
as a necessary consequence, it would have to repudiate a duly formalized agreement to
its great embarrassment and loss of face. This was avoided by the judicial statesmanship
evinced by the Court.
ABBAS v. COMELEC
November 10, 1989 | Cortes, J. | Local governments, administrative regions,
autonomous regions
Digester: Sumagaysay, Rev
SUMMARY: Petitioners contest the validity of RA 6734 providing for the Organic Act
of ARMM. They argue that parts thereof are unconstitutional and that it is in conflict
with the Tripoli Agreement. Particularly, petitioners allege that the Act gives the
president the power to merge existing regions. The Court held in favor of its
constitutionality. It differentiated administrative regions, which are mere groupings of
contiguous provinces for administrative purposes, from territorial and political
subdivisions, like provinces, cities, municipalities and barangays.
DOCTRINE: There is no conflict between the power of the President to merge
administrative regions with the constitutional provision requiring a plebiscite in the
merger of local government units because the requirement of a plebiscite in a merger
expressly applies only to provinces, cities, municipalities or barangays, not to
administrative regions.
FACTS:
These consolidated petitions pray that the Court:
o (1) enjoin the Commission on Elections (COMELEC) from
conducting the plebiscite in thirteen (13) provinces and nine (9) cities
in Mindanao and Palawan, and the Secretary of Budget and
Management from releasing funds to the COMELEC for that
purpose;
o and (2) declare R.A. No. 6734, entitled "An Act Providing for an
Organic Act for the Autonomous Region in Muslim Mindanao", or
parts thereof, unconstitutional .
The arguments against R.A. 6734 raised by petitioners may generally be categorized
into either of the following:
o (a) that R.A. 6734, or parts thereof, violates the Constitution, and
o (b) that certain provisions of R.A. No. 6734 conflict with the Tripoli
Agreement.
The Tripoli Agreement provided for "[t]he establishment of Autonomy in the
southern Philippines within the realm of the sovereignty and territorial integrity of
the Republic of the Philippines" and enumerated the thirteen (13) provinces
comprising the "areas of autonomy."
In 1987, a new Constitution was ratified, which the for the first time provided for
regional autonomy, Article X, section 15 of the charter provides that "there shall be
created autonomous regions in Muslim Mindanao and in the Cordilleras consisting
of provinces, cities, municipalities, and geographical areas sharing common and
distinctive historical and cultural heritage, economic and social structures, and other
relevant characteristics within the framework of this Constitution and the national
sovereignty as well as territorial integrity of the Republic of the Philippines."
o Sec. 18. xxx
The creation of the autonomous region shall be effective when
approved by majority of the votes cast by the constituent units
in a plebiscite called for the purpose, provided that only the
provinces, cities, and geographic areas voting favorably in such
plebiscite shall be included in the autonomous region.
Pursuant to the constitutional mandate, R.A. No. 6734 was enacted and signed into
law on August 1, 1989.
RULING: Petition DISMISSED.
Whether certain provisions of R.A. No. 6734 conflict with the provisions of the
Tripoli Agreement. IT DOESNT MATTER.
Petitioners: The Tripoli Agreement is part of the law of the land, being a binding
international agreement . The Solicitor General asserts that the Tripoli Agreement
is neither a binding treaty, not having been entered into by the Republic of the
Philippines with a sovereign state and ratified according to the provisions of the
1973 or 1987 Constitutions, nor a binding international agreement.
Court: We find it neither necessary nor determinative of the case to rule on the
nature of the Tripoli Agreement and its binding effect on the Philippine
Government whether under public international or internal Philippine law. In the
first place, it is now the Constitution itself that provides for the creation of an
autonomous region in Muslim Mindanao. The standard for any inquiry into the
validity of R.A. No. 6734 would therefore be what is so provided in the
Constitution. Thus, any conflict between the provisions of R.A. No. 6734 and
 the provisions of the Tripoli Agreement will not have the effect of enjoining
the implementation of the Organic Act.
Assuming for the sake of argument that the Tripoli Agreement is a binding treaty
or international agreement, it would then constitute part of the law of the land. But
as internal law it would not be superior to R.A. No. 6734, an enactment of the
Congress of the Philippines, rather it would be in the same class as the latter. Thus,
if at all, R.A. No. 6734 would be amendatory of the Tripoli Agreement, being a
subsequent law. Only a determination by this Court that R.A. No. 6734
contravened the Constitution would result in the granting of the reliefs sought.
Whether the creation of the autonomous region is dependent on the outcome of
the plebiscite YES.
Petitioner: R.A. No. 6734 unconditionally creates an autonomous region in
Mindanao, contrary to the aforequoted provisions of the Constitution on the
autonomous region which make the creation of such region dependent upon the
outcome of the plebiscite.
o citing Article II, section 1(1) of R.A. No. 6734 which declares that
"[t]here is hereby created the Autonomous Region in Muslim
Mindanao, to be composed of provinces and cities voting favorably
in the plebiscite called for the purpose, in accordance with Section
18, Article X of the Constitution." Petitioner contends that the tenor
of the above provision makes the creation of an autonomous region
absolute, such that even if only two provinces vote in favor of
autonomy, an autonomous region would still be created composed of
the two provinces where the favorable votes were obtained.
Under the Constitution and R.A. No 6734 3, the creation of the autonomous region
shall take effect only when approved by a majority of the votes cast by the
constituent units in a plebiscite, and only those provinces and cities where a
majority vote in favor of the Organic Act shall be included in the autonomous
region.
The provinces and cities wherein such a majority is not attained shall not be
included in the autonomous region.
It may be that even if an autonomous region is created, not all of the thirteen (13)
provinces and nine (9) cities mentioned in Article II, section 1 (2) of R.A. No. 6734
shall be included therein.
The single plebiscite contemplated by the Constitution and R.A. No. 6734 will
therefore be determinative of (1) whether there shall be an autonomous region in
Muslim Mindanao and (2) which provinces and cities, among those enumerated in
R.A. No. 6734, shall compromise it. (See ConCom records)
3 Transitory Provisions (Article XIX) of the Organic Act: SEC. 13. The creation of the Autonomous
Region in Muslim Mindanao shall take effect when approved by a majority of the votes cast by the
constituent units provided in paragraph (2) of Sec. 1 of Article II of this Act in a plebiscite which
shall be held not earlier than ninety (90) days or later than one hundred twenty (120) days after the
approval of this Act: Provided, That only the provinces and cities voting favorably in such plebiscite
Whether by majority of the votes cast by the constituent units in a plebiscite
called for the purpose" [Art. X, sec. 18], majority refers to a majority of the total
votes cast in the plebiscite in all the constituent units, or a majority in each of the
constituent units, or both MAJORITY IN EACH CONSTITUENT
UNIT/SIMPLE MAJORITY IN APPROVING THE ORGANIC ACT.
If the framers of the Constitution intended to require approval by a majority of all
the votes cast in the plebiscite they would have so indicated.
Thus, in Article XVIII, section 27, it is provided that "[t]his Constitution shall take
effect immediately upon its ratification by a majority of the votes cast in a plebiscite
held for the purpose ... Comparing this with the provision on the creation of the
autonomous region, which reads:
o The creation of the autonomous region shall be effective when
approved by majority of the votes cast by the constituent units in a
plebiscite called for the purpose, provided that only provinces, cities
and geographic areas voting favorably in such plebiscite shall be
included in the autonomous region. [Art. X, sec, 18, para, 2].
It will readily be seen that the creation of the autonomous region is made to
depend, not on the total majority vote in the plebiscite, but on the will of the
majority in each of the constituent units and the proviso underscores this. for if the
intention of the framers of the Constitution was to get the majority of the totality
of the votes cast, they could have simply adopted the same phraseology as that used
for the ratification of the Constitution, i.e. "the creation of the autonomous region
shall be effective when approved by a majority of the votes cast in a plebiscite
called for the purpose."
It is thus clear that what is required by the Constitution is a simple majority of
votes approving the organic Act in individual constituent units and not a double
majority of the votes in all constituent units put together, as well as in the individual
constituent units.
More importantly, because of its categorical language, this is also the sense in which
the vote requirement in the plebiscite provided under Article X, section 18 must
have been understood by the people when they ratified the Constitution.
Whether only those areas which share common and distinctive historical and
cultural heritage, economic and social structures, and other relevant
characteristics should be properly included within the coverage of the
autonomous region NO.
Petitioner: R.A. No. 6734 is unconstitutional because only the provinces of
Basilan, Sulu, Tawi-Tawi, Lanao del Sur, Lanao del Norte and Maguindanao and
the cities of Marawi and Cotabato, and not all of the thirteen (13) provinces and
shall be included in the Autonomous Region in Muslim Mindanao. The provinces and cities which in
the plebiscite do not vote for inclusion in the Autonomous Region shall remain the existing
administrative determination, merge the existing regions.
 nine (9) cities included in the Organic Act, possess such concurrence in historical
and cultural heritage and other relevant characteristics.
By including areas which do not strictly share the same characteristic as the others,
petitioner claims that Congress has expanded the scope of the autonomous region
which the constitution itself has prescribed to be limited.
Court: Petitioner's argument is not tenable. The Constitution lays down the
standards by which Congress shall determine which areas should constitute the
autonomous region. Guided by these constitutional criteria, the ascertainment by
Congress of the areas that share common attributes is within the exclusive realm of
the legislature's discretion. Any review of this ascertainment would have to go into
the wisdom of the law. This the Court cannot do without doing violence to the
separation of governmental powers.
Whether the equal protection clause would be violated and that other non-
Muslim areas in Mindanao should be covered NO.
Petitioner: since the Organic Act covers several non-Muslim areas, its scope
should be further broadened to include the rest of the non-Muslim areas in
Mindanao in order for the other non-Muslim areas denies said areas equal
protection of the law, and therefore is violative of the Constitution.
Court: Petitioner's contention runs counter to the very same constitutional
provision he had earlier invoked. Any determination by Congress of what areas in
Mindanao should compromise the autonomous region, taking into account shared
historical and cultural heritage, economic and social structures, and other relevant
characteristics, would necessarily carry with it the exclusion of other areas. As
earlier stated, such determination by Congress of which areas should be covered by
the organic act for the autonomous region constitutes a recognized legislative
prerogative, whose wisdom may not be inquired into by this Court.
Moreover, equal protection permits of reasonable classification, the Court ruled
that one class may be treated differently from another where the groupings are
based on reasonable and real distinctions. The guarantee of equal protection is thus
not infringed in this case, the classification having been made by Congress on the
basis of substantial distinctions as set forth by the Constitution itself.
Whether it violates the constitutional guarantee on free exercise of religion
NO. Since no actual case or controversy.
Petitioner: a provision in the Organic Act which mandates that should there be
any conflict between the Muslim Code [P.D. No. 1083] and the Tribal Code (still to
be enacted) on the one had, and the national law on the other hand, the Shari'ah
courts created under the same Act should apply national law.
o Petitioners maintain that the islamic law (Shari'ah) is derived from the
Koran, which makes it part of divine law.
o Thus it may not be subjected to any "man-made" national law.
o Petitioner Abbas supports this objection by enumerating possible
instances of conflict between provisions of the Muslim Code and
national law, wherein an application of national law might be
offensive to a Muslim's religious convictions.
Court: As enshrined in the Constitution, judicial power includes the duty to settle
actual controversies involving rights which are legally demandable and enforceable.
o In the present case, no actual controversy between real litigants
exists. There are no conflicting claims involving the application of
national law resulting in an alleged violation of religious freedom.
o This being so, the Court in this case may not be called upon to
resolve what is merely a perceived potential conflict between the
provisions the Muslim Code and national law.
[TOPIC (in the book)] Whether the Act grants the President the power to merge
regions, a power which is not conferred by the Constitution upon the President.
NO.
Petitioner: That the President may choose to merge existing regions pursuant to
the Organic Act is challenged as being in conflict with Article X, Section 10 of the
Constitution which provides:
o No province, city, municipality, or barangay may be created, divided,
merged, abolished, or its boundary substantially altered, except in
accordance with the criteria established in the local government code
and subject to approval by a majority of the votes cast in a plebiscite
in the political units directly affected.
Article XIX, section 13 of R.A. No. 6734 states:
o Provided, That only the provinces and cities voting favorably in such
plebiscite shall be included in the Autonomous Region in Muslim
Mindanao. The provinces and cities which in the plebiscite do not
vote for inclusion in the Autonomous Region shall remain in the
existing administrative regions: Provided, however, that the
President may, by administrative determination, merge the
existing regions.
Court: What is referred to in R.A. No. 6734 is the merger of administrative
regions, i.e. Regions I to XII and the National Capital Region, which are mere
groupings of contiguous provinces for administrative purposes [Integrated
Reorganization Plan (1972), which was made as part of the law of the land by Pres.
dec. No. 1, Pres. Dec. No. 742]. Administrative regions are not territorial and
political subdivisions like provinces, cities, municipalities and barangays [see Art. X,
sec. 1 of the Constitution].
While the power to merge administrative regions is not expressly provided for in
the Constitution, it is a power which has traditionally been lodged with the
President to facilitate the exercise of the power of general supervision over local
governments [see Art. X, sec. 4 of the Constitution].
There is no conflict between the power of the President to merge
administrative regions with the constitutional provision requiring a
plebiscite in the merger of local government units because the requirement
of a plebiscite in a merger expressly applies only to provinces, cities,
municipalities or barangays, not to administrative regions.
Whether the oversight committee created is unconstitutional NO.
 An Oversight Committee was created to supervise the transfer to the autonomous
region of the powers, appropriations, and properties vested upon the regional
government by the organic Act [Art. XIX, Secs. 3 and 4].
o Said provisions mandates that the transfer of certain national
government offices and their properties to the regional government
shall be made pursuant to a schedule prescribed by the Oversight
Committee, and that such transfer should be accomplished within six
(6) years from the organization of the regional government.
PETITIONER: While the Constitution states that the creation of the
autonomous region shall take effect upon approval in a plebiscite, the requirement
of organizing an Oversight committee tasked with supervising the transfer of
powers and properties to the regional government would in effect delay the
creation of the autonomous region.
COURT: The creation of the autonomous region hinges only on the result of the
plebiscite.
o If the Organic Act is approved by majority of the votes cast by
constituent units in the scheduled plebiscite, the creation of the
autonomous region immediately takes effect delay the creation of the
autonomous region.
Under the constitution, the creation of the autonomous region hinges only on the
result of the plebiscite. if the Organic Act is approved by majority of the votes cast
by constituent units in the scheduled plebiscite, the creation of the autonomous
region immediately takes effect.
The questioned provisions in R.A. No. 6734 requiring an oversight Committee to
supervise the transfer do not provide for a different date of effectivity.
Much less would the organization of the Oversight Committee cause an
impediment to the operation of the Organic Act, for such is evidently aimed at
effecting a smooth transition period for the regional government. The
constitutional objection on this point thus cannot be sustained as there is no bases
therefor.

NOTES:
Every law has in its favor the presumption of constitutionality. Those who petition this
Court to declare a law, or parts thereof, unconstitutional must clearly establish the basis
for such a declaration. otherwise, their petition must fail. Based on the grounds raised
by petitioners to challenge the constitutionality of R.A. No. 6734, the Court finds that
petitioners have failed to overcome the presumption. The dismissal of these two
petitions is, therefore, inevitable