Mentholatum co. vs.

Mangaliman incident to, and in progressive prosecution of, the purpose and
object of its organization.
FACTS
The Mentholatum Co., Inc., a foreign corporation, and the Philippine-
[Here] the Philippine-American Drug Co., Inc., is the exclusive
American Drug Co., Inc., the formers exclusive distributing agent of
distributing agent in the Philippine Islands of the Mentholatum Co.,
the product Mentholatum in the Philippine Islands, instituted an
Inc., in the sale and distribution of its product known as the
action against Anacleto Mangaliman, Florencio Mangaliman and the
Mentholatum. xxx It follows that whatever transactions the
Director of the Bureau of Commerce for infringement of trade mark
Philippine-American Drug Co., Inc., had executed in view of the law,
and unfair competition, praying for the issuance of an order
the Mentholatum Co., Inc., did it itself.
restraining Anacleto and Florencio Mangaliman from selling their
product Mentholiman, and directing them to render an accounting
(2) NO.
of their sales and profits and to pay damages. Mentholatum, not
licensed to do business in the Philippines, claims that they have not
Section 69 of Act No. 1459 provides that No foreign corporation or
sold personally any of their products in the Philippines and that
corporation formed, organized, or existing under any laws other
products were imported from them by local entities including
than those of the Philippine Islands shall be permitted to maintain
Philippine-American Drug under their own account.
by itself or assignee any suit for the recovery of any debt, claim, or
demand whatever, unless it shall have the license xxx .
ISSUES
The Mentholatum Co., Inc., being a foreign corporation doing
(1) Is Mentholatum Co. Inc. doing business in the Philippines?
business in the Philippines without the license required by section 68
of the Corporation Law, it may not prosecute this action for violation
(2) Is Mentholatum Co. Inc. allowed prosecute its action?
of trade mark and unfair competition. Neither may the Philippine-
American Drug Co., Inc., maintain the action here for the reason
HELD
that the distinguishing features of the agent being his representative
(1) YES.
character and derivative authority.

[The test is] whether the foreign corporation is continuing the body
or substance of the business or enterprise for which it was organized
or whether it has substantially retired from it and turned it over to
another. The term implies a continuity of commercial dealings and
arrangements, and contemplates, to that extent, the performance of
acts or works or the exercise of some of the functions normally
G.R. No. 168008
PETRONILO J. BARAYUGA,, petitioner
versus
ADVENTIST UNIVERSITY OF THE PHILIPPINES,
THROUGH ITS BOARD OF TRUSTEES, REPRESENTED BY ITS
CHAIRMAN, NESTOR D. DAYSON, respondent
Promulgated: August 17, 2011
AUP, a non-stock and non-profit domestic educational institution was
incorporated under Philippine laws and was directly under the North
Philippine Union Mission (NPUM) of the Southern Asia Pacific Division
of the Seventh Day Adventists.
March 3, 1932
November 27,2000-December 1,2000
November 27,2000-December 1,2000
The 3rd Quinquennial Session of the General Conference of Seventh
Day Adventists was held and the NPUM Executive Committee elected
the members of the Board of Trustees of AUP, including the
Chairman and the Secretary. Respondent Nestor D. Dayson was
elected Chairman while the petitioner Petronilo Barayuga was chosen
Secretary.
January 23, 2001
Almost two months following the conclusion of the 3rd Quinquennial
Session, the Board of Trustees appointed the petitioner President of
AUP.
April 2002-October 2002
Petitioners transactions are held during this period.
November 11 - November 13, 2001
During his tenure, within the said period, a group from the NPUM
conducted an external performance audit. The audit revealed the
petitioners autocratic management style, like making major decisions
without the approval or recommendation of the proper committees,
including the Finance Committee; and that he had himself done the
canvassing and purchasing of materials and made withdrawals and
reimbursements for expenses without valid supporting receipts and
without the approval of theFinance Committee. The audit concluded
that he had committed serious violations of fundamental rules and
procedure in the disbursement and use of funds.
Sometime between November 13,2002- December 4,2002
The NPUM Executive Committee and the Board of Trustees decided
to immediately request the services of the General Conference
Auditing Service (GCAS) to determine the veracity of the audit
findings.
December 4- December 20,2002
GCAS auditors worked in the campus to review the petitioners
transactions.
December 20,2002
GCAS auditors reported the results of their review, and submitted
their observations and recommendations to the Board of Trustees.
January 8, 2003
Upon receipt of the CGAS report that confirmed the initial findings of
the auditors on this date, the NPUM informed the petitioner of the
findings and required him to explain.
January 15, 2003
Chairman Dayson and the NPUM Treasurer likewise informed the
petitioner inside the NPUM office on the findings of the auditors in
the presence of the AUP Vice-President for Financial Affairs, and
reminded him of the possible consequences should he fail to
satisfactorily explain the irregularities cited in the report. He replied
that he had already prepared his written explanation.
January 22, 2003
The Board of Trustees set a special meeting at this date. Being the
Secretary, the petitioner himself prepared the agenda and included
an item on his case. In that meeting, he provided copies of the
auditors report and his answers to the members of the Board of
Trustees. After hearing his explanations and oral answers to the
questions raised on issues arising from the report, the members of
the Board of Trustees requested him to leave to allow them to
analyze and evaluate the report and his answers.Despite a long and
careful deliberation, however, the members of the Board of Trustees
decided to adjourn that night and to set another meeting in the
following week considering that the meeting had not been
specifically called for the purpose of deciding his case. The
adjournment would also allow the Board of Trustees more time to
ponder on the commensurate disciplinary measure to be meted on
him.
January 23, 2003
Chairman Dayson notified the petitioner in writing that the Board of
Trustees would hold in abeyance its deliberation on his answer to
the auditors report and would meet again at 10:00 a.m. on January
27, 2003. Chairman Dayson indicated that some sectors in the
campus had not been properly represented in the January 22, 2003
special meeting, and requested the petitioner as Secretary to ensure
that all sectors are duly represented in the next meeting of the
Board of Trustees.
January 27, 2003
A special meeting is held, the petitioner sent a letter to the Board of
Trustees. The members, by secret ballot, voted to remove him as
President because of his serious violations of fundamental rules and
procedures in the disbursement and use of funds as revealed by the
special audit; to appoint an interim committee consisting of three
members to assume the powers and functions of the President; and
to recommend him to the NPUM for consideration as Associate
Director for Secondary Education.
January 28, 2003 (Morning)
The petitioner was handed inside the NPUM office a letter, together
with a copy of the minutes of the special meeting held the previous
day. In turn, he handed to Chairman Dayson a letter requesting two
weeks within which to seek a reconsideration, stating that he needed
time to obtain supporting documents because he was then attending
to his dying mother.
January 28, 2003 (Evening)
The Board of Trustees, most of whose members had not yet left
Cavite, reconvened to consider and decide the petitioners request for
reconsideration. During the meeting, he made an emotional appeal
to allow him to continue as President, promising to immediately
vacate his office should he again commit any of the irregularities
cited in the auditors report. He added that should the Board of
Trustees not favor his appeal, he would settle for a retirement
package for him and his wife and would leave the church.
January 29,2003
The Board of Trustees denied the petitioners request for
reconsideration because his reasons were not meritorious. Board
Member Elizabeth Role served the notice of the denial on him, but
he refused to receive the notice, simply saying "Alam ko nayan."
January 31, 2003
The petitioner later obtained a copy of the inter-school
memorandum, informing AUP students, staff, and faculty members
about his relief as President and the appointment of an interim
committee to assume the powers and duties of the President.
February 4, 2003
The petitioner brought his suit for injunction and damages in the
RTC, with prayer for the issuance of a temporary restraining order
(TRO), impleading AUP and its Board of Trustees, represented by
Chairman Dayson, and the interim committee. His complaint alleged
that the Board of Trustees had relieved him as President without
valid grounds despite his five-year term; that the Board of Trustees
had thereby acted in bad faith; and that his being denied ample and
reasonable time to present his evidence deprived him of his right to
due process.
February 7, 2003
The suit being intra-corporate and summary in nature, the
application for TRO was heard by means of affidavits. In the hearing,
the parties agreed not to harass each other.
February 11, 2003
The RTC used the mutual agreement as its basis to issue a status
quo order.
I. FACTS
II. ISSUES
Whether or not the elected trustees of a non stock corporations
office term duration is within or for 5 years.
Whether or not the petitioners term as President of an educational
corporation is 5 years as the latter contended or 2 years as provided
for in the Universitys by-laws.
III. RATIO DECIDENDI
Regional Trial Court
Wherefore, we grant the petitioners application for a writ of
preliminary injunction. Resolving the issues, namely: (a) whether the
special board meetings were valid; (b) whether the petitioner was
denied due process; (c) whether the conflict-of-interest provision in
the By-Laws and Working Policy was violated.It found for the
petitioner upon all the issues.
Supreme Court
WHEREFORE, we DENY the petition for review on certiorari for lack
of merit, and hereby DISMISS SEC Case No. 028-03 entitled Dr.
Petronilo Barayuga v. Nelson D. Dayson, et al.
Court of Appeals
This Court declares that the rule on judicial admissions admitted of
exceptions, as held in National Power Corporation v. Court of
Appeals, where the Court held that admissions were not evidence
that prevailed over documentary proof; that the petitioners being
able to answer the results of the special audit point-by-point belied
his allegation of denial of due process; that AUP was the party that
stood to be injured by the issuance of the injunctive writ in the form
of a demoralized administration, studentry, faculty and staff, sullied
reputation, and dishonest leadership; and that the assailed RTC
order sowed confusion and chaos because the RTC thereby chose to
subordinate the interest of the entire AUP community to that of the
petitioner who had been deemed not to have satisfied the highest
ideals required of his office. So ORDERED.
Section 106. Incorporation.
Educational corporations shall be governed by special laws and by
the general provisions of this Code. (n)
Educational corporation defined.
An educational corporation is a stock or non-stock corporation
organized to provide facilities for teaching or instruction. Such
corporations normally maintain a regular faculty and curriculum and
normally have a regular organized body of pupils or students, or
attendance at the place where the educational activities are regularly
carried on. (see Oleck,Modern Corporation Law, p. 540.)
Laws Applicable.
Educational corporations are classified by the Code as special
corporations and are different from an ordinary non-stock
corporation formed or organized for educational purpose. (see sec.
88.)
They are governed primarily by special laws, and suppletorily, by the
general provisions of the Corporation Code. (see Sec. 106.) Those
organized as stock corporations are governed by the provisions on
stock corporation as to number and term of directors. (Sec. 108, last
par.)
Section 107. Pre-requisites to incorporation.
Except upon favorable recommendation of the Ministry of
Education and Culture, the Securities and Exchange Commission
shall not accept or approve the articles of incorporation and by-laws
of any educational institution. (168a)
Incorporation.
Except insofar as may be provided by special laws, the incorporation
of educational corporations shall be governed by the provisions of
the Code. (see Secs. 10-19.) The Securities and Exchange
Commission shall not accept or approved the articles of incorporation
and by-laws of any educational institution unless accompanied by a
favorable recommendation of Department of Education, Culture and
Sports.
Section 108. Board of trustees.
Trustees of educational institutions organized as non-stock
corporations shall not be less than five (5) nor more than fifteen
(15): Provided, however, That the number of trustees shall be in
multiples of five (5).
Unless otherwise provided in the articles of incorporation on the by-
laws, the board of trustees of incorporated schools, colleges, or
other institutions of learning shall, as soon as organized, so classify
themselves that the term of office of one-fifth (1/5) of their number
shall expire every year. Trustees thereafter elected to fill vacancies,
occurring before the expiration of a particular term, shall hold office
only for the unexpired period. Trustees elected thereafter to fill
vacancies caused by expiration of term shall hold office for five (5)
years. A majority of the trustees shall constitute a quorum for the
transaction of business. The powers and authority of trustees shall
be defined in the by-laws.
For institutions organized as stock corporations, the number and
term of directors shall be governed by the provisions on stock
corporations. (169a)
Board Of Trustees.
Section. 108 lays down the following rules.
(1) For non-stock educational corporations.
(a) The number of trustees shall not be less than five (5) nor more
than fifteen. (15);
(b) It shall be in multiples of five (5), i.e, their number shall be five
(5), ten (10), or fifteen (15);
(c) Unless otherwise provided in the articles of incorporation or by
laws, the term of office of 1/5 of the number of the trustees shall be
staggered with one (10year interval:
(d) Trustees subsequently elected shall have a term of five (5)
years;
(e) Trustees elected to fill vacancies occurring before the expiration
of a particular term, shall hold office only for the unexpired period;
(f) A majority of the trustees shall constitute a quorum for the
transaction of business; and
(g) The powers and authority of trustees shall defined in the by-
laws.
(2) For stock educational corporations. The number and term of
directors shall be governed by the provisions on stock corporations.
Educational corporations my, through their articles of incorporation
or their by laws, designate their governing boards by any name than
as board of trustees. (Sec. 138)a
Narra Nickel Mining vs Redmont
G.R. No. 195580, January 28, 2015
Facts:
Narra and its co-petitioner corporations Tesoro and MacArthur,
filed a motion before the SC to reconsider its April 21, 2014
Decision which upheld the denial of their MPSA applications. The SC
affirmed the CA ruling that there is a doubt to their nationality, and
that in applying the Grandfather Rule, the finding is that MBMI, a
100% Canadian-owned corporation, effectively owns 60% of the
common stocks of petitioners by owning equity interests of the
petitioners other majority corporate shareholders. Narra, Tesoro
and MacArthur argued that the application of the Grandfather Rule
to determine their nationality is erroneous and allegedly without
basis in the Constitution, the FIA, the Philippine Mining Act, and the
Rules issued by the SEC. These laws and rules supposedly espouse
the application of the Control Test in verifying the Philippine
nationality of corporate entities for purposes of determining
compliance with Sec. 2, Art. XII of the Constitution that only
corporations or associations at least 60% of whose capital is owned
by such Filipino citizens may enjoy certain rights and privileges, like
the exploration and development of natural resources.
Issue: W/N the application by the SC of the grandfather resulted to
the abandonment of the control test
Held:
No. The control test can be applied jointly with the Grandfather
Rule to determine the observance of foreign ownership restriction in
nationalized economic activities. The Control Test and the
Grandfather Rule are not incompatible ownership-determinant
methods that can only be applied alternative to each other. Rather,
these methods can, if appropriate, be used cumulatively in the
determination of the ownership and control of corporations engaged
in fully or partly nationalized activities, as the mining operation
involved in this case or the operation of public utilities.
The Grandfather Rule, standing alone, should not be used to
determine the Filipino ownership and control in a corporation, as it
could result in an otherwise foreign corporation rendered qualified to
perform nationalized or partly nationalized activities. Hence, it is only
when the Control Test is first complied with that the Grandfather
Rule may be applied. Put in another manner, if the subject
corporations Filipino equity falls below the threshold 60%, the
corporation is immediately considered foreign-owned, in which case,
the need to resort to the Grandfather Rule disappears.
In this case, using the control test, Narra, Tesoro and MacArthur
appear to have satisfied the 60-40 equity requirement. But the
nationality of these corporations and the foreign-owned common
investor that funds them was in doubt, hence, the need to apply the
Grandfather Rule.
 2.
PRIMANILA PLANS, INC., herein REPRESENTED by EDUARDO
S. MADRID, Petitioner,
vs.
SECURITIES AND EXCHANGE COMMISSION, Respondent.
G.R. No. 193791 August 6, 2014
PONENTE: Reyes
TOPIC: SRC, registration statement, cease and desist order
FACTS:
On April 9, 2008, SEC issued the subject cease and desist
order after an investigation conducted by the SECs Compliance and
Enforcement Department (CED) on Primanila, a corporation
operating as a pre-need company, yielded the following factual
findings: Primanilas website (www.primanila.com) was offering a
pension plan product called Primasa Plan, that no registration
statement has been filed by Primanila for the approval of said
Primasa Plan, and that many of its planholders mostly members of
the PNP remitted the total amount of Php 2,072,149.38 to Primanila
representing the aforementioned premium collections via salary
deductions, among others.
ISSUES:
1. Whether or not Primanila was accorded due process
notwithstanding the SECs immediate issuance of the cease and
desist order.
Whether or not Primanila violated Sec. 16 of SRC which
barred the sale or offer for sale to the public of a pre-need product
except in accordance with SEC rules and regulations.
HELD:
FIRST ISSUE: Yes.
The Court held that a cease and desist order may be
issued by the SEC motu proprio, it being unnecessary that it results
from a verified complaint from an aggrieved party. A prior hearing is
also not required whenever the Commission finds it appropriate to
issue a cease and desist order that aims to curtail fraud or grave or
irreparable injury to investors. There is good reason for this
provision, as any delay in the restraint of acts that yield such results
can only generate further injury to the public that the SEC is obliged
to protect.
To equally protect individuals and corporations from
baseless and improvident issuances, the authority of the SEC under
this rule is nonetheless with defined limits. A cease and desist order
may only be issued by the Commission after proper investigation or
verification, and upon showing that the acts sought to be restrained
could result in injury or fraud to the investing public. Without doubt,
these requisites were duly satisfied by the SEC prior to its issuance
of the subject cease and desist order.
The SEC was not mandated to allow Primanila to
participate in the investigation conducted by the Commission prior to
the cease and desist orders issuance. Given the circumstances, it
was sufficient for the satisfaction of the demands of due process that
the company was amply apprised of the results of the SEC
investigation, and then given the reasonable opportunity to present
its defense. Primanila was able to do this via its motion to reconsider
and lift the cease and desist order.
SECOND ISSUE: Yes.
The Court held that Primanila clearly violated Section 16
of the SRC which states that no person shall sell or offer for sale to
the public any pre-need plan except in accordance with rules and
regulations which the Commission shall prescribe. Such rules shall
regulate the sale of pre-need plans by, among other things,
requiring the registration of pre-need plans, licensing persons
involved in the sale of pre-need plans, requiring disclosures to
prospective plan holders, prescribing advertising guidelines,
providing for uniform plans, imposing capital, bonding and other
financial responsibility, and establishing trust funds for the payment
of benefits under such plans.
AVON INSURANCE PLC., ET AL. V. CA (G.R. NO. 97642)
Facts:
Respondent Yupangco Cotton Mills engaged to secure with
Worldwide Security and Insurance Co. several of its properties which
were then covered by reinsurance treaties between Worldwide
Security and several foreign reinsurance companies, including herein
petitioners. These reinsurance agreements had been made through
an international broker acting for Worldwide Security. While the
policies are in effect, Yupangcos properties were razed in fire giving
rise to their indemnification. Worldwide acknowledged a remaining
balance and assigned to Yupangco all reinsurance proceeds still
collectible from all the reinsurance companies. Thus, as assignee and
original insured, Yupangco instituted a collection suit against
petitioners. Petitioners averred that they are foreign corporations not
doing business in the Philippines therefore cannot be subject to the
jurisdiction of its courts. CA found for Yupangco.
Issue:
Whether or not petitioners are foreign corporations doing business in
the Philippines.
Ruling: NO.
To qualify the petitioners business of reinsurance within the
Philippine forum, resort must be made to the established principles
in determining what is meant by doing business in the Philippines.
The term ordinarily implies a continuity of commercial dealings and
arrangements, and contemplates, to that extent, the performance of
acts or works or the exercise of the functions normally incident to
and in progressive prosecution of the purpose and object of its
organization.
As it is, private respondent has made no allegation or demonstration
of the existence of petitioners domestic agent, but avers simply that
they are doing business not only abroad but in the Philippines as
well. It does not appear at all that the petitioners had performed any
act which would give the general public the impression that it had
been engaging, or intends to engage in its ordinary and usual
business undertakings in the country. The reinsurance treaties
between the petitioners and Worldwide Surety and Insurance were
made through an international insurance broker, and not through
any entity or means remotely connected with the Philippines.
Moreover, there is authority to the effect that a reinsurance
company is not doing business in a certain state merely because the
property or lives which are insured by the original insurer company
are located in that state. The reason for this is that a contract of
reinsurance is generally a separate and distinct arrangement from
the original contract of insurance, whose contracted risk is insured in
the reinsurance agreement. Hence, the original insured has generally
no interest in the contract of reinsurance.
Indeed, if a foreign corporation does not do business here, there
would be no reason for it to be subject to the States regulation. As
we observed, in so far as the State is concerned, such foreign
corporation has no legal existence. Therefore, to subject such
corporation to the courts jurisdiction would violate the essence of
sovereignty.
Bognot vs. RRI Lending
Bognot vs. RRI Lending
GR No. 180144, September 24, 2014
Brion, J.:
Facts: Whether the parties obligation was extinguished by payment
In September 1996, Leonardo Bognot and his younger brother,
Held:
Rolando Bognot applied for and obtained a loan of P500,000.00 from
Jurisprudence tells us that one who pleads payment has the burden
RRI Lending, payable on November 30, 1996. The loan was
of proving it; the burden rests on the defendant to prove payment,
evidenced by a promissory note and was secured by a post dated
rather than on the plaintiff to prove non-payment. Indeed, once the
check dated November 30, 1996.
existence of an indebtedness is duly established by evidence, the
Evidence on record shows that Leonardo renewed the loan several
burden of showing with legal certainty that the obligation has been
times on a monthly basis. He paid a renewal fee of P54,600.00 for
discharged by payment rests on the debtor.
each renewal, issued a new post-dated check as security, and
In the present case, Leonardo failed to satisfactorily prove that his
executed and/or renewed the promissory note previously issued. RRI
obligation had already been extinguished by payment. As the CA
Lending on the other hand, cancelled and returned to Leonardo the
correctly noted, the petitioner failed to present any evidence that
post-dated checks issued prior to their renewal.
RRI Lending had in fact encashed his check and applied the
Leonardo purportedly paid the renewal fees and issued a post-dated
proceeds to the payment of the loan. Neither did he present official
check dated June 30, 1997 as security. As had been done in the
receipts evidencing payment, nor any proof that the check had been
past, RRI Lending superimposed the date "June 30, 1997" on the
dishonored.
promissory note to make it appear that it would mature on the said
date.
We note that the petitioner merely relied on the respondents
Several days before the loans maturity, Rolandos wife, Julieta, went cancellation and return to him of the check dated April 1, 1997. The
to the respondents office and applied for another renewal of the evidence shows that this check was issued to secure the
loan. She issued in favor of RRI Lending a promissory note and a indebtedness. The acts imputed on the respondent, standing alone,
check dated July 30, 1997, in the amount of P54,600.00 as renewal do not constitute sufficient evidence of payment.
fee. Article 1249, paragraph 2 of the Civil Code provides:
On the excuse that she needs to bring home the loan documents for xxxx
the Bognot siblings signatures and replacement, Julieta asked the The delivery of promissory notes payable to order, or bills of
RRI Lending clerk to release to her the promissory note, the exchange or other mercantile documents shall produce the effect of
disclosure statement, and the check dated July 30, 1997. Julieta, payment only when they have been cashed, or when through the
however, never returned these documents nor issued a new post- fault of the creditor they have been impaired. (Emphasis supplied)
dated check. Consequently, RRI Lending sent Leonardo follow-up
Also, we held in Bank of the Philippine Islands v. Spouses Royeca:
letters demanding payment of the loan, plus interest and penalty
Settled is the rule that payment must be made in legal tender. A
charges. These demands went unheeded.
check is not legal tender and, therefore, cannot constitute a valid
In his Answer, Leonardo, claimed, among other things, that the
tender of payment. Since a negotiable instrument is only a substitute
complaint states no cause of action because RRI Lendings claim had
for money and not money, the delivery of such an instrument does
been paid, waived, abandoned or otherwise extinguished, and that
not, by itself, operate as payment. Mere delivery of checks does not
the one (1) month loan contracted by Rolando and his wife in
discharge the obligation under a judgment. The obligation is not
November 1996 which was lastly renewed in March 1997 had
extinguished and remains suspended until the payment by
already been fully paid and extinguished in April 1997.
commercial document is actually realized.(Emphasis supplied)
Issue:
Although Article 1271 of the Civil Code provides for a legal
presumption of renunciation of action (in cases where a private
document evidencing a credit was voluntarily returned by the
creditor to the debtor), this presumption is merely prima facie and is
not conclusive; the presumption loses efficacy when faced with
evidence to the contrary.
Moreover, the cited provision merely raises a presumption, not of
payment, but of the renunciation of the credit where more
convincing evidence would be required than what normally would be
called for to prove payment. Thus, reliance by the petitioner on the
legal presumption to prove payment is misplaced.
To reiterate, no cash payment was proven by the petitioner. The
cancellation and return of the check dated April 1, 1997, simply
established his renewal of the loan not the fact of payment.
Furthermore, it has been established during trial, through repeated
acts, that the respondent cancelled and surrendered the post-dated
check previously issued whenever the loan is renewed.
Samsung Construction Co.
Facts: Samsung Construction held an account with Far East Bank.
One day a check worth 900,000, payable to cash, was presented by
one Roberto Gonzaga in the Makati Branch of Far East Bank. The
check was certified to be true by Jose Sempio, the assistant
accountant of Samsung, who was also present during the time the
check was cashed. Later however it was discovered that no such
check was ever approved by the Samsungs head accountant, the
president of the company also never signed any such check.
Issue: Whether or not Far East Bank is liable to reimburse Samsung
for cashing out the forged check, which was drawn from the account
of Samsung
Held: Far East Bank is liable for reimbursement. Sec. 23 of the
Negotiable Instrument Law states that a forged signature makes the
instrument wholly inoperative. If payment is made the drawee (Far
East) cannot charge it to the drawers account (Samsung). The fact
that the forgery is clever is immaterial. The forged signature may so
closely resemble the genuine as to defy detection by the depositor
himself. And yet, if the bank pays the check, it is paying out with its
own money and not of the depositors. This rule of liability can be
stated briefly in these words: A bank is bound to know its
depositors signature. The accusation of negligence on the part of
Samsung was not clearly proven. Absence of proof to the contrary,
the presumption is that the ordinary course of business was
followed.
HONGKONG AND SHANGHAI BANKING CORPORATION
LIMITED v. CECILIA DIEZ CATALAN. G.R. No. 159590.
October 18, 2004.
FACTS:
Frederick Arthur Thomson drew 5 checks payable to defendant
Cecilia. Catalan presented these checks to Hongkong and Shanghai
Banking Corporation Limited (HSBANK). The checks were dishonored
for having insufficient funds. Thomson demanded that the checks be
made good because he, in fact, had sufficient funds. Still, HSBANK
did not accept the checks.
Subsequently, Thomson died but Catalan was not paid yet. The
account was transferred to HSBC International Trustee Limited
(TRUSTEE). Catalan then requested TRUSTEE to pay her but still
refused and even asked her to submit back to them the original
checks for verification.
Catalan and her lawyer went to Hong Kong on their own expense to provided: deposited first with BPI Bank, and that
personally submit the checks. They still were not honored, leading
actual payment of the value of the warrants would be made only
Catalan to file a suit against HSBC to collect the money.
after the same had been duly accepted and cleared by the
ISSUE: Whether the check can be encashed. Treasurer

RULING:
BPI accepted them w/ "subject to collection only"
The SC held that the HSBC was being sued becasue of their evident
failure to heed the instructions of Thomson. HSBANK cited Sec. 189
of the NIL but the SC said that what is being sued is how they acted each bore the indorsement of the payees and that of
in relation to Catalan's claim for payment despite repeated requests the Corporation
and not of the check's value.

The reason was likewise the same towards TRUSTEE as Catalan BPI Bank credited the proceeds
even went to Hong Kong to personally deliver the checks.

December 23, 1952: 3 warrants returned - forged

Republic Of The Phils. V. BPI (1964)

December 27, 1952: 2 warrants returned - forged
G.R. No. L-15894 January 30, 1964
Lessons Applicable: Forgery (Negotiable Instruments Law)
January 16, 1953: 19 warrants returned - forged

FACTS:

July to December 1952: Corporacion de los Padres January 15, 1958: Treasurer notified the Equitable Bank of

Dominicos acquired the 24 treasury warrants by the 4 forged warrants deposited to it by and demanded

accommodating Jacinto Carranza who asked the Corporacion to reimbursement

cash the warrants

 Republic of the Philippines seeks to recover from the
Equitable Banking Corporation P17,100, representing 4 treasury
warrants and BPI Bank P342,767.63 24 paid to them by the
Treasurer of the Philippines
genuine forms but signature of the drawing office
and that of the representative of the Auditor General in that
office are forged
CFI: dismissed the case
ISSUE: W/N Republic has the right to recover from the banks
HELD: YES. Affirmed
All items cleared at 11:00 o'clock a.m. shall be returned not
later than 2:00 o'clock p.m. on the same day and all items
cleared at 3:00 o'clock p.m. shall be returned not later than 8:30
a.m. of the following business day, except for items cleared on
Saturday which may be returned not later than 3:30 a.m. of the
following day
irregularity of warrants was apparent the face from the
viewpoint of the Treasury
each over P5,000 - beyond the authority of the
auditor of the Treasury
it also did not advise the loss of genuine forms of its
warrants
did not inform the irregularity until after December
23, 1952 - not giving notice of forgery until December 5
Where a loss, which must be borne by one of two parties
alike innocent of forgery, can be traced to the neglect or fault of
either, it is reasonable that it would be borne by him, even if
innocent of any intentional fraud, through whose means it has
succeeded
Columbia pictures inc vs CA
In 1986, the Videogram Regulatory Board (VRB) applied for a
warrant against Jose Jinco (Jingco), owner of Showtime Enterprises
for allegedly pirating movies produced and owned by Columbia
Pictures and other motion picture companies. Jingco filed a motion
to quash the search warrant but the same was denied in 1987.
Subsequently, Jinco filed an Urgent Motion to Lift the Search
Warrant and Return the Articles Seized. In 1989, the RTC judge
granted the motion. The judge ruled that based on the ruling in the
1988 case of 20th Century Fox Film Corporation vs CA , before a
search warrant could be issued in copyright cases, the master copy
of the films alleged to be pirated must be attached in the application
for warrant.
ISSUE: Whether or not the 20th Century Fox ruling may be applied
retroactively in this case.
HELD: No. In 1986, obviously the 1988 case of 20 th Century Fox was
not yet promulgated. The lower court could not possibly have
expected more evidence from the VRB and Columbia Pictures in their
application for a search warrant other than what the law and
jurisprudence, then existing and judicially accepted , required with
respect to the finding of probable cause.
The Supreme Court also revisited and clarified the ruling in the
20th Century Fox Case. It is evidently incorrect to suggest, as the
ruling in 20th Century Fox may appear to do, that in copyright
infringement cases, the presentation of master tapes of the
copyright films is always necessary to meet the requirement of
probable cause for the issuance of a search warrant. It is true that
such master tapes are object evidence, with the merit that in this
class of evidence the ascertainment of the controverted fact is made
through demonstration involving the direct use of the senses of the
presiding magistrate. Such auxiliary procedure, however, does not
rule out the use of testimonial or documentary evidence,
depositions, admissions or other classes of evidence tending to
prove the factum probandum, especially where the production in
court of object evidence would result in delay, inconvenience or
expenses out of proportion to is evidentiary value.
In fine, the supposed pronouncement in said case regarding the
necessity for the presentation of the master tapes of the copy-
righted films for the validity of search warrants should at most be
understood to merely serve as a guidepost in determining the
existence of probable cause in copy-right infringement cases where
there is doubt as to the true nexus between the master tape and the
pirated copies. An objective and careful reading of the decision in
said case could lead to no other conclusion than that said directive
was hardly intended to be a sweeping and inflexible requirement in
all or similar copyright infringement cases.
Merrill Lynch Futures vs. CA Case Digest
Merrill Lynch Futures vs. Court of Appeals
[GR 97816, 24 July 1992]
Facts: On 23 November 1987, Merrill Lynch futures, Inc. (ML
FUTURES) filed a complaint with the Regional Trial Court at Quezon
City against the Spouses Pedro M. Lara and Elisa G. Lara for the
recovery of a debt and interest thereon, damages, and attorney's
fees. In its complaint ML FUTURES described itself as (a) "a non-
resident foreign corporation, not doing business in the Philippines,
duly organized and existing under and by virtue of the laws of the
state of Delaware, U.S.A.;" as well as (b) a 'futures commission
merchant' duly licensed to act as such in the futures markets and
exchanges in the United States, . . . essentially functioning as a
broker (executing) orders to buy and sell futures contracts received
from its customers on U.S. futures exchanges." In its complaint ML
FUTURES alleged (1) that on 28 September 1983 it entered into a
Futures Customer Agreement with the spouses (Account 138-
12161), in virtue of which it agreed to act as the latter's broker for
the purchase and sale of futures contracts in the U.S.; (2) that
pursuant to the contract, orders to buy and sell futures contracts
were transmitted to ML FUTURES by the Lara Spouses "through the
facilities of Merrill Lynch Philippines, Inc., a Philippine corporation
and a company servicing ML Futures' customers;" (3) that from the
outset, the Lara Spouses "knew and were duly advised that Merrill
Lynch Philippines, Inc. was not a broker in futures contracts," and
that it "did not have a license from the Securities and Exchange
Commission to operate as a commodity trading advisor (i.e., "and
entity which, not being a broker, furnishes advice on commodity
futures to persons who trade in futures contracts"); (4) that in line
with the above mentioned agreement and through said Merill Lynch
Philippines, Inc., the Lara Spouses actively traded in futures
contracts, including "stock index futures" for four years or so, i.e.,
from 1983 to October, 1987, there being more or less regular
accounting and corresponding remittances of money (or crediting or
debiting) made between the spouses and ML FUTURES; (5) that
because of a loss amounting to US $160,749.69 incurred in respect
of 3 transactions involving "index futures," and after setting this off
against an amount of US $75,913.42 then owing by ML FUTURES to
the Lara Spouses, said spouses became indebted to ML FUTURES for
the ensuing balance of US $84,836.27, which the latter asked them
to pay; (6) that the Lara Spouses however refused to pay this
balance, "alleging that the transactions were null and void because
Merrill Lynch Philippines, Inc., the Philippine company servicing
accounts of ML Futures, had no license to operate as a "commodity
and/or financial futures broker."
On the foregoing essential facts, ML FUTURES prayed (1) for a
preliminary attachment against the spouses' properties "up to the
value of at least P2,267,139.50," and (2) for judgment, after trial,
sentencing the spouses to pay ML FUTURES: (a) the Philippine peso
equivalent of $84,836.27 at the applicable exchange rate on date of
payment, with legal interest from the date of demand until full
payment; (b) exemplary damages in the sum of at least
P500,000,00; and (c) attorney's fees and expenses of litigation as
may be proven at the trial. Preliminary attachment issued ex parte
on 2 December 1987, and the spouses were duly served with
summons. The spouses filed a motion to dismiss dated 18 December
1987 on the grounds that (1) ML FUTURES had "no legal capacity to
sue" and (2) its "complaint states no cause of action since it is not
the real party in interest." On 12 January 1988, the Trial Court
promulgated an Order sustaining the motion to dismiss, directing the
dismissal of the case and discharging the writ of preliminary
attachment. It later denied ML FUTURES's motion for
reconsideration, by Order dated 29 February 1988. ML FUTURES
appealed to the Court of Appeals. In its own decision promulgated
on 27 November 1990, the Court of Appeals affirmed the Trial
Court's judgment. Its motion for reconsideration having been denied,
ML FUTURES appealed to the Supreme Court on certiorari.
Issue:
1. Whether ML FUTURES was doing business in the
Philippines without license.
2. Whether in light of the fact that the Laras were
fully aware of its lack of license to do business in the
Philippines, and in relation to those transactions had made
payments to, and received money from it for several years
the Lara Spouses are estopped to impugn ML FUTURES
capacity to sue them in the courts of the forum.
Held:
1. The facts on record adequately establish that ML FUTURES,
operating in the United States, had indeed done business with the
Lara Spouses in the Philippines over several years, had done so at all
times through Merrill Lynch Philippines, Inc. (MLPI), a corporation
organized in this country, and had executed all these transactions
without ML FUTURES being licensed to so transact business here,
and without MLPI being authorized to operate as a commodity
futures trading advisor. These are the factual findings to both the
Trial Court and the Court of Appeals. These, too, are the conclusions
of the Securities & Exchange Commission which denied MLPI's
application to operate as a commodity futures trading advisor, a
denial subsequently affirmed by the Court of Appeals. Prescinding
from the proposition that factual findings of the Court of Appeals are
generally conclusive, the Supreme Court has been cited to no
circumstance of substance to warrant reversal of said Appellate
Court's findings or conclusions in this case. Further, the Laras did
transact business with ML FUTURES through its agent corporation
organized in the Philippines, it being unnecessary to determine
whether this domestic firm was MLPI (Merrill Lynch Philippines, Inc.)
or Merrill Lynch Pierce Fenner & Smith (MLPI's alleged predecessor).
The fact is that ML FUTURES did deal with futures contracts in
exchanges in the United States in behalf and for the account of the
Lara Spouses, and that on several occasions the latter received
account documents and money in connection with those
transactions. Given these facts, if indeed the last transaction
executed by ML FUTURES in the Laras's behalf had resulted in a loss
amounting to US $160,749.69; that in relation to this loss, ML
FUTURES had credited the Laras with the amount of US $ 75,913.42
which it (ML FUTURES) then admittedly owed the spouses and
thereafter sought to collect the balance, US $84,836.27, but the
Laras had refused to pay (for the reasons already above stated).
2. The Laras received benefits generated by their business relations
with ML FUTURES. Those business relations, according to the Laras
themselves, spanned a period of 7 years; and they evidently found
those relations to be of such profitability as warranted their
maintaining them for that not insignificant period of time; otherwise,
it is reasonably certain that they would have terminated their
dealings with ML FUTURES much, much earlier. In fact, even as
regards their last transaction, in which the Laras allegedly suffered a
loss in the sum of US$160,749.69, the Laras nonetheless still
received some monetary advantage, for ML FUTURES credited them
with the amount of US $75,913.42 then due to them, thus reducing
their debt to US $84,836.27. Given these facts, and assuming that
the Lara Spouses were aware from the outset that ML FUTURES had
no license to do business in this country and MLPI, no authority to
act as broker for it, it would appear quite inequitable for the Laras to
evade payment of an otherwise legitimate indebtedness due and
owing to ML FUTURES upon the plea that it should not have done
business in this country in the first place, or that its agent in this
country, MLPI, had no license either to operate as a "commodity
and/or financial futures broker." Considerations of equity dictate
that, at the very least, the issue of whether the Laras are in truth
liable to ML FUTURES and if so in what amount, and whether they
were so far aware of the absence of the requisite licenses on the
part of ML FUTURES and its Philippine correspondent, MLPI, as to be
estopped from alleging that fact as a defense to such liability, should
be ventilated and adjudicated on the merits by the proper trial court.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 147905 May 28, 2007
B. VAN ZUIDEN BROS., LTD., Petitioner,
vs.
GTVL MANUFACTURING INDUSTRIES, INC., Respondent.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review1 of the 18 April 2001
Decision2 of the Court of Appeals in CA-G.R. CV No. 66236. The
Court of Appeals affirmed the Order3 of the Regional Trial Court,
Branch 258, Paraaque City (trial court) dismissing the complaint for
sum of money filed by B. Van Zuiden Bros., Ltd. (petitioner) against
GTVL Manufacturing Industries, Inc. (respondent).
The Facts
On 13 July 1999, petitioner filed a complaint for sum of money
against respondent, docketed as Civil Case No. 99-0249. The
pertinent portions of the complaint read:
1. Plaintiff, ZUIDEN, is a corporation, incorporated under the
laws of Hong Kong. x x x ZUIDEN is not engaged in business
in the Philippines, but is suing before the Philippine Courts,
for the reasons hereinafter stated.
xxxx
3. ZUIDEN is engaged in the importation and exportation of
several products, including lace products.
4. On several occasions, GTVL purchased lace products from
[ZUIDEN].
 5. The procedure for these purchases, as per the
instructions of GTVL, was that ZUIDEN delivers the products
purchased by GTVL, to a certain Hong Kong corporation,
known as Kenzar Ltd. (KENZAR), x x x and the products are
then considered as sold, upon receipt by KENZAR of the
goods purchased by GTVL.
KENZAR had the obligation to deliver the products to the
Philippines and/or to follow whatever instructions GTVL had
on the matter.
Insofar as ZUIDEN is concerned, upon delivery of the goods
to KENZAR in Hong Kong, the transaction is concluded; and
GTVL became obligated to pay the agreed purchase price.
xxxx
7. However, commencing October 31, 1994 up to the
present, GTVL has failed and refused to pay the agreed
purchase price for several deliveries ordered by it and
delivered by ZUIDEN, as above-mentioned.
xxxx
9. In spite [sic] of said demands and in spite [sic] of
promises to pay and/or admissions of liability, GTVL has
failed and refused, and continues to fail and refuse, to pay
the overdue amount of U.S.$32,088.02 [inclusive of
interest].4
Instead of filing an answer, respondent filed a Motion to Dismiss 5 on
the ground that petitioner has no legal capacity to sue. Respondent
alleged that petitioner is doing business in the Philippines without
securing the required license. Accordingly, petitioner cannot sue
before Philippine courts.
After an exchange of several pleadings6 between the parties, the trial
court issued an Order on 10 November 1999 dismissing the
complaint.
On appeal, the Court of Appeals sustained the trial courts dismissal
of the complaint.
Hence, this petition.
The Court of Appeals Ruling
In affirming the dismissal of the complaint, the Court of Appeals
relied on Eriks Pte., Ltd. v. Court of Appeals.7 In that case, Eriks, an
unlicensed foreign corporation, sought to collect US$41,939.63 from
a Filipino businessman for goods which he purchased and received
on several occasions from January to May 1989. The transfers of
goods took place in Singapore, for the Filipinos account, F.O.B.
Singapore, with a 90-day credit term. Since the transactions involved
were not isolated, this Court found Eriks to be doing business in the
Philippines. Hence, this Court upheld the dismissal of the complaint
on the ground that Eriks has no capacity to sue.
The Court of Appeals noted that in Eriks, while the deliveries of the
goods were perfected in Singapore, this Court still found Eriks to be
engaged in business in the Philippines. Thus, the Court of Appeals
concluded that the place of delivery of the goods (or the place where
the transaction took place) is not material in determining whether a
foreign corporation is doing business in the Philippines. The Court of
Appeals held that what is material are the proponents to the
transaction, as well as the parties to be benefited and obligated by
the transaction.
In this case, the Court of Appeals found that the parties entered into
a contract of sale whereby petitioner sold lace products to
respondent in a series of transactions. While petitioner delivered the
goods in Hong Kong to Kenzar, Ltd. (Kenzar), another Hong Kong
company, the party with whom petitioner transacted was actually
respondent, a Philippine corporation, and not Kenzar. The Court of
Appeals believed Kenzar is merely a shipping company. The Court of
Appeals concluded that the delivery of the goods in Hong Kong did
not exempt petitioner from being considered as doing business in
the Philippines.
The Issue
The sole issue in this case is whether petitioner, an unlicensed
foreign corporation, has legal capacity to sue before Philippine
courts. The resolution of this issue depends on whether petitioner is
doing business in the Philippines.
The Ruling of the Court
The petition is meritorious.
Section 133 of the Corporation Code provides:
Doing business without license. No foreign corporation transacting
business in the Philippines without a license, or its successors or
assigns, shall be permitted to maintain or intervene in any action,
suit or proceeding in any court or administrative agency of the
Philippines; but such corporation may be sued or proceeded against
before Philippine courts or administrative tribunals on any valid
cause of action recognized under Philippine laws.
The law is clear. An unlicensed foreign corporation doing business in
the Philippines cannot sue before Philippine courts. On the other
hand, an unlicensed foreign corporation not doing business in the
Philippines can sue before Philippine courts.
In the present controversy, petitioner is a foreign corporation which
claims that it is not doing business in the Philippines. As such, it
needs no license to institute a collection suit against respondent
before Philippine courts.
Respondent argues otherwise. Respondent insists that petitioner is
doing business in the Philippines without the required license. Hence,
petitioner has no legal capacity to sue before Philippine courts.
Under Section 3(d) of Republic Act No. 7042 (RA 7042) or "The
Foreign Investments Act of 1991," the phrase "doing business"
includes:
x x x soliciting orders, service contracts, opening offices, whether
called "liaison" offices or branches; appointing representatives or
distributors domiciled in the Philippines or who in any calendar year
stay in the country for a period or periods totalling one hundred
eighty (180) days or more; participating in the management,
supervision or control of any domestic business, firm, entity or
corporation in the Philippines; and any other act or acts that imply a
continuity of commercial dealings or arrangements, and contemplate
to that extent the performance of acts or works, or the exercise of
some of the functions normally incident to, and in progressive
prosecution of, commercial gain or of the purpose and object of the
business organization: Provided, however, That the phrase "doing
business" shall not be deemed to include mere investment as a
shareholder by a foreign entity in domestic corporations duly
registered to do business, and/or the exercise of rights as such
investor; nor having a nominee director or officer to represent its
interests in such corporation; nor appointing a representative or
distributor domiciled in the Philippines which transacts business in its
own name and for its own account.
The series of transactions between petitioner and respondent cannot
be classified as "doing business" in the Philippines under Section
3(d) of RA 7042. An essential condition to be considered as "doing
business" in the Philippines is the actual performance of specific
commercial acts within the territory of the Philippines for the plain
reason that the Philippines has no jurisdiction over commercial acts
performed in foreign territories. Here, there is no showing that
petitioner performed within the Philippine territory the specific acts
of doing business mentioned in Section 3(d) of RA 7042. Petitioner
did not also open an office here in the Philippines, appoint a
representative or distributor, or manage, supervise or control a local
business. While petitioner and respondent entered into a series of
transactions implying a continuity of commercial dealings, the
perfection and consummation of these transactions were done
outside the Philippines.8
In its complaint, petitioner alleged that it is engaged in the
importation and exportation of several products, including lace
products. Petitioner asserted that on several occasions, respondent
purchased lace products from it. Petitioner also claimed that
respondent instructed it to deliver the purchased goods to Kenzar,
which is a Hong Kong company based in Hong Kong. Upon Kenzars
receipt of the goods, the products were considered sold. Kenzar, in
turn, had the obligation to deliver the lace products to the
Philippines. In other words, the sale of lace products was
consummated in Hong Kong.
As earlier stated, the series of transactions between petitioner and
respondent transpired and were consummated in Hong Kong.9 We
also find no single activity which petitioner performed here in the
Philippines pursuant to its purpose and object as a business
organization.10 Moreover, petitioners desire to do business within the
Philippines is not discernible from the allegations of the complaint or
from its attachments. Therefore, there is no basis for ruling that
petitioner is doing business in the Philippines.
In Eriks, respondent therein alleged the existence of a distributorship
agreement between him and the foreign corporation. If duly
established, such distributorship agreement could support
respondents claim that petitioner was indeed doing business in the
Philippines. Here, there is no such or similar agreement between
petitioner and respondent.
We disagree with the Court of Appeals ruling that the proponents to
the transaction determine whether a foreign corporation is doing
business in the Philippines, regardless of the place of delivery or
place where the transaction took place. To accede to such theory
makes it possible to classify, for instance, a series of transactions
between a Filipino in the United States and an American company
based in the United States as "doing business in the Philippines,"
even when these transactions are negotiated and consummated only
within the United States.
An exporter in one country may export its products to many foreign
importing countries without performing in the importing countries
specific commercial acts that would constitute doing business in the
importing countries. The mere act of exporting from ones own
country, without doing any specific commercial act within the
territory of the importing country, cannot be deemed as doing
business in the importing country. The importing country does not
acquire jurisdiction over the foreign exporter who has not performed
any specific commercial act within the territory of the importing
country. Without jurisdiction over the foreign exporter, the importing
country cannot compel the foreign exporter to secure a license to do
business in the importing country.
Otherwise, Philippine exporters, by the mere act alone of exporting
their products, could be considered by the importing countries to be
doing business in those countries. This will require Philippine
exporters to secure a business license in every foreign country where
they usually export their products, even if they do not perform any
specific commercial act within the territory of such importing
countries. Such a legal concept will have a deleterious effect not only
on Philippine exports, but also on global trade.
To be doing or "transacting business in the Philippines" for purposes
of Section 133 of the Corporation Code, the foreign corporation
must actually transact business in the Philippines, that is, perform
specific business transactions within the Philippine territory on a
continuing basis in its own name and for its own account. Actual
transaction of business within the Philippine territory is an essential
requisite for the Philippines to acquire jurisdiction over a foreign
corporation and thus require the foreign corporation to secure a
Philippine business license. If a foreign corporation does not transact
such kind of business in the Philippines, even if it exports its
products to the Philippines, the Philippines has no jurisdiction to
require such foreign corporation to secure a Philippine business
license.
Considering that petitioner is not doing business in the Philippines, it
does not need a license in order to initiate and maintain a collection
suit against respondent for the unpaid balance of respondents
purchases.
WHEREFORE, we GRANT the petition. We REVERSE the Decision
dated 18 April 2001 of the Court of Appeals in CA-G.R. CV No.
66236. No costs.
SO ORDERED.
Eriks Pte. Ltd. vs. CA Case Digest
Eriks Pte. Ltd. vs. Court of Appeals
[GR 118843, 6 February 1997]
Facts: Eriks Pte. Ltd. is a non-resident foreign corporation engaged
in the manufacture and sale of elements used in sealing pumps,
valves and pipes for industrial purposes, valves and control
equipment used for industrial fluid control and PVC pipes and fittings
for industrial uses. On various dates covering the period January 17
August 16, 1989, Delfin Enriquez, Jr., doing business under the
name and style of Delrene EB Controls Center and/or EB Karmine
Commercial, ordered and received from Eriks Pte. Ltd. various
elements used in sealing pumps, valves, pipes and control
equipment, PVC pipes and fittings. The transfers of goods were
perfected in Singapore, for Enriquez's account, F.O.B. Singapore,
with a 90-day credit term. Subsequently, demands were made by
Eriks upon Enriquez to settle his account, but the latter
failed/refused to do so. On 28 August 1991, Eriks filed with the
Regional Trial Court of Makati, Branch 138, Civil Case 91-2373 for
the recovery of S$41,939.63 or its equivalent in Philippine currency,
plus interest thereon and damages. Enriquez responded with a
Motion to Dismiss, contending that Eriks had no legal capacity to
sue. In an Order dated 8 March 1993, the trial court dismissed the
action on the ground that Eriks is a foreign corporation doing
business in the Philippines without a license.
On appeal and on 25 January 1995, the appellate court (CA GR CV
41275) affirmed said order as it deemed the series of transactions
between Eriks and Enriquez not to be an "isolated or casual
transaction." Thus, the appellate court likewise found Eriks to be
without legal capacity to sue. Eriks filed the petition for review.
Issue: Whether a foreign corporation which sold its products 16
times over a five-month period to the same Filipino buyer without
first obtaining a license to do business in the Philippines, is
prohibited from maintaining an action to collect payment therefor in
Philippine courts.
Held: Section 133 of the Corporation Code provides that "No foreign
corporation transacting business in the Philippines without a license,
or its successors or assigns, shall be permitted to maintain or
intervene in any action, suit or proceeding in any court or
administrative agency of the Philippines; but such corporation may
be sued or proceeded against before Philippine courts or
administrative tribunals on any valid cause of action recognized
under Philippine laws." The provision prohibits, not merely absence
of the prescribed license, but it also bars a foreign corporation
"doing business" in the Philippines without such license access to
Philippine courts. A foreign corporation without such license is not
ipso facto incapacitated from bringing an action. A license is
necessary only if it is "transacting or doing business" in the country.
However, there is no definitive rule on what constitutes "doing,"
"engaging in," or "transacting" business. The Corporation Code itself
does not define such terms. To fill the gap, the evolution of its
statutory definition has produced a rather all-encompassing concept
in Republic Act 7042 in this wise: "The phrase 'doing business' shall
include soliciting orders, service contracts, opening offices, whether
called 'liaison' offices or branches; appointing representatives or
distributors domiciled in the Philippines or who in any calendar year
stay in the country for a period or periods totaling one hundred
eight(y) (180) days or more; participating in the management,
supervision or control of any domestic business, firm, entity or
corporation in the Philippines; and any other act or acts that imply a
continuity of commercial dealings or arrangements, and contemplate
to that extent the performance of acts or works, or the exercise of
some of the functions normally incident to, and in progressive
prosecution of, commercial gain or of the purpose and object of the
business organization: Provided, however, That the phrase 'doing
business' shall not be deemed to include mere investment as a
shareholder by a foreign entity in domestic corporations duly
registered to do business, and/or the exercise of rights as such
investor; nor having a nominee director or officer to represent its
interests in such corporation; nor appointing a representative or
distributor domiciled in the Philippines which transacts business in its
own name and for its own account." The accepted rule in
jurisprudence is that each case must be judged in the light of its own
environmental circumstances. It should be kept in mind that the
purpose of the law is to subject the foreign corporation doing
business in the Philippines to the jurisdiction of Philippine courts. It is
not to prevent the foreign corporation from performing single or
isolated acts, but to bar it from acquiring a domicile for the purpose
of business without first taking the steps necessary to render it
amenable to suits in the local courts. Herein, more than the sheer
number of transactions entered into, a clear and unmistakable
intention on the part of Eriks to continue the body of its business in
the Philippines is more than apparent. As alleged in its complaint, it
is engaged in the manufacture and sale of elements used in sealing
pumps, valves, and pipes for industrial purposes, valves and control
equipment used for industrial fluid control and PVC pipes and fittings
for industrial use.
Thus, the sale by Eriks of the items covered by the receipts, which
are part and parcel of its main product line, was actually carried out
in the progressive prosecution of commercial gain and the pursuit of
the purpose and object of its business, pure and simple. Further, its
grant and extension of 90-day credit terms to Enriquez for every
purchase made, unarguably shows an intention to continue
transacting with Enriquez, since in the usual course of commercial
transactions, credit is extended only to customers in good standing
or to those on whom there is an intention to maintain long-term
relationship. The series of transactions in question could not have
been isolated or casual transactions. What is determinative of "doing
business" is not really the number or the quantity of the
transactions, but more importantly, the intention of an entity to
continue the body of its business in the country. The number and
quantity are merely evidence of such intention. The phrase "isolated
transaction" has a definite and fixed meaning, i.e. a transaction or
series of transactions set apart from the common business of a
foreign enterprise in the sense that there is no intention to engage in
a progressive pursuit of the purpose and object of the business
organization. Whether a foreign corporation is "doing business" does
not necessarily depend upon the frequency of its transactions, but
more upon the nature and character of the transactions. Given the
facts of the case, the Court cannot see how Eriks' business dealings
will fit the category of "isolated transactions" considering that its
intention to continue and pursue the corpus of its business in the
country had been clearly established. It has not presented any
convincing argument with equally convincing evidence for the Court
to rule otherwise. Accordingly and ineluctably, Eriks must be held to
be incapacitated to maintain the action a quo against Enriquez.
Smith Kline Beckman Corporation vs Court of Appeals
409 SCRA 33 Intellectual Property Law Law on Patents
Doctrine of Equivalents
Smith Kline is a US corporation licensed to do business in the
Philippines. In 1981, a patent was issued to it for its invention
entitled Methods and Compositions for Producing Biphasic
Parasiticide Activity Using Methyl 5 Propylthio-2-Benzimidazole
Carbamate. The invention is a means to fight off gastrointestinal
parasites from various cattles and pet animals.
Tryco Pharma is a local corporation engaged in the same business as
Smith Kline.
Smith Kline sued Tryco Pharma because the latter was selling a
veterinary product called Impregon which contains a drug called
Albendazole which fights off gastro-intestinal roundworms,
lungworms, tapeworms and fluke infestation in carabaos, cattle and
goats.
Smith Kline is claiming that Albendazole is covered in their patent
because it is substantially the same as methyl 5 propylthio-2-
benzimidazole carbamate covered by its patent since both of them
are meant to combat worm or parasite infestation in animals. And
that Albendazole is actually patented under Smith Kline in the US.
Tryco Pharma averred that nowhere in Smith Klines patent does it
mention that Albendazole is present but even if it were, the same is
unpatentable.
Smith Kline thus invoked the doctrine of equivalents, which implies
that the two substances substantially do the same function in
substantially the same way to achieve the same results, thereby
making them truly identical for in spite of the fact that the word
Albendazole does not appear in Tryco Paharmas letters of patent, it
has ably shown by evidence its sameness with methyl 5 propylthio-
2-benzimidazole carbamate.
ISSUE: Whether or not there is patent infringement in this case
HELD: No. Smith Kline failed to prove that Albendazole is a
compound inherent in the patented invention. Nowhere in the patent
is the word Albendazole found. When the language of its claims is
clear and distinct, the patentee is bound thereby and may not claim
anything beyond them. Further, there was a separate patent for
Albendazole given by the US which implies that Albendazole is
indeed separate and distinct from the patented compound here.
A scrutiny of Smith Klines evidence fails to prove the substantial
sameness of the patented compound and Albendazole. While both
compounds have the effect of neutralizing parasites in animals,
identity of result does not amount to infringement of patent unless
Albendazole operates in substantially the same way or by
substantially the same means as the patented compound, even
though it performs the same function and achieves the same result.
In other words, the principle or mode of operation must be the same
or substantially the same.
The doctrine of equivalents thus requires satisfaction of the function-
means-and-result test, the patentee having the burden to show that
all three components of such equivalency test are met.
ECOLE DE CUISINE MANILLE V. COINTREAU (G.R. NO. 185830)
Facts:
Respondent Cointreau, a partnership registered under the laws of
France, applied for the registration of the mark Le Cordon Bleu &
Device. Petitioner Ecole De Cuisine opposed on the ground that it is
the owner of the mark Le Cordon Bleu, Ecole De Cuisine Manille
used in its culinary activities and restaurant business and that the
registration will create confusion to the public. Respondent Cointreau
answered claiming it is the true and lawful owner of the mark and
had long been using it worldwide. The IPO Bureau of Legal Affairs
sustained petitioners opposition stating that Cointreau had no prior
use of the mark in the Philippines to be entitled to a proprietary right
over it. The IPO Director General reversed the decision and allowed
the marks registration holding that under RA No. 166, actual use in
the Philippines is not necessary to acquire ownership of the mark.
Issue:
Whether or not respondents prior use of the mark is a requirement
for its registration.
Ruling: YES.
Under Section 2 of R.A. No. 166, in order to register a trademark,
one must be the owner thereof and must have actually used the
mark in commerce in the Philippines for 2 months prior to the
application for registration. Section 2-A of the same law sets out to
define how one goes about acquiring ownership thereof. Under
Section 2-A, it is clear that actual use in commerce is also the test of
ownership but the provision went further by saying that the mark
must not have been so appropriated by another. Additionally, it is
significant to note that Section 2-A does not require that the actual
use of a trademark must be within the Philippines. Thus, as correctly
mentioned by the CA, under R.A. No. 166, one may be an owner of
a mark due to its actual use but may not yet have the right to
register such ownership here due to the owners failure to use the
same in the Philippines for 2 months prior to registration. In the
instant case, it is undisputed that Cointreau has been using the
subject mark in France, prior to Ecoles averred first use of the same
in the Philippines, of which the latter was fully aware thereof. On the
other hand, Ecole has no certificate of registration over the subject
mark but only a pending application. Under the foregoing
circumstances, even if Ecole was the first to use the mark in the
Philippines, it cannot be said to have validly appropriated the same.
In any case, the present law on trademarks, Republic Act No. 8293,
otherwise known as the Intellectual Property Code of the Philippines,
as amended, has already dispensed with the requirement of prior
actual use at the time of registration. Thus, there is more reason to
allow the registration of the subject mark under the name of
Cointreau as its true and lawful owner.
FIRST DIVISION
G.R. No. 166391, October 21, 2015
MICROSOFT CORPORATION, Petitioner, v. ROLANDO D.
MANANSALA AND/OR MEL MANANSALA, DOING BUSINESS
AS DATAMAN TRADING COMPANY AND/OR COMIC
ALLEY, Respondent.
DECISION
BERSAMIN, J.:
This appeal seeks to overturn the decision promulgated on February
27, 2004,1 whereby the Court of Appeals (CA) dismissed the petition
for certiorari filed by petitioner to annul the orders of the
Department of Justice (DOJ) dated March 20, 2000,2 May 15,
2001,3 and January 27, 20034 dismissing the criminal charge of
violation of Section 29 of Presidential Decree No. 49 (Decree on
Intellectual Property) it had instituted against the respondents; and
the resolution promulgated on December 6, 2004 denying its motion
for reconsideration.5
Antecedents
The CA summarized the factual and procedural antecedents thusly:
Petitioner (Microsoft Corporation) is the copyright and trademark
owner of all rights relating to all versions and editions of Microsoft
software (computer programs) such as, but not limited to, MS-DOS
(disk operating system), Microsoft Encarta, Microsoft Windows,
Microsoft Word, Microsoft Excel, Microsoft Access, Microsoft Works,
Microsoft Powerpoint, Microsoft Office, Microsoft Flight Simulator and
Microsoft FoxPro, among others, and their user's guide/manuals.
Private Respondent-Rolando Manansala is doing business under the
name of DATAMAN TRADING COMPANY and/or COMIC ALLEY with
business address at 3rd Floor, University Mall Building, Tail Avc,
Manila.
Private Respondent Manansala, without authority from petitioner,
was engaged in distributing and selling Microsoft computer software
programs.
On November 3, 1997, Mr. John Benedict A. Sacriz, a private
investigator accompanied by an agent from the National Bureau of
Investigation (NBI) was able to purchase six (6) CD-ROMs containing
various computer programs belonging to petitioner.
As a result of the test-purchase, the agent from the NBI applied for a
search warrant to search the premises of the private respondent.
On November 17, 1997, a Search Warrant was issued against the
premises of the private respondent.

On November 19, 1997, the search warrant was served on the
private respondent's premises and yielded several illegal copies of
Microsoft programs.
Subsequently, petitioner, through Atty. Teodoro Kalaw IV tiled an
Affidavit-Complaint in the DOJ based on the results of the search
and seizure operation conducted on private respondent's premises.
However, in a Resolution dated March 20, 2000, public respondent
State Prosecutor dismissed the charge against private respondent for
violation of Section 29 P.D. 49 in this wise, to quote:
'The evidence is extant in the records to show that respondent is
selling Microsoft computer software programs bearing the copyrights
and trademarks owned by Microsoft Corporation. There is, however,
no proof that respondent was the one who really printed or copied
the products of complainant for sale in his store.
WHEREFORE, it is hereby, recommended that respondent be
charged for violation of Article 189 of the Revised Penal Code. The
charge for violation of Section 29 of PD No. 49 is recommended
dismissed for lack of evidence.'
Petitioner filed a Motion for Partial Reconsideration arguing that
printing or copying is not essential in the crime of copyright
infringement under Section 29 of PD No. 49.
On May 15, 2001, the public respondent issued a Resolution denying
the Motion for Partial Reconsideration.
Thereafter, petitioner filed a Petition for Review with the DOJ, which
denied the petition for review.6ChanRoblesVirtualawlibrary
Dissatisfied with the outcome of its appeal, the petitioner filed its
petition for certiorari in the CA to annul the DOJ's dismissal of its
petition for review on the ground of grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of the DOJ.
On February 27, 2004, the CA rendered the assailed decision
affirming the dismissal by the DOJ,7disposing as follows:
WHEREFORE, premises considered, the instant petition
is DENIED. Consequently, the Orders dated March 20, 2000, May
15, 2001 and January 27, 2003 respectively are hereby AFFIRMED.
SO ORDERED.8ChanRoblesVirtualawlibrary
Issue
The petitioner insists that printing or copying was not essential in the
commission of the crime of copyright infringement under Section 29
of Presidential Decree No. 49; hence, contrary to the holding of the
DOJ, as upheld by the CA, the mere selling of pirated computer
software constituted copyright infringement.9
Ruling of the Court
The appeal is meritorious.
Although the general rule is that the determination of the existence
of probable cause by the public prosecutor is not to be judicially
scrutinized because it is an executive function, an exception exists
when the determination is tainted with grave abuse of
discretion.10 Bearing this in mind, we hold that the DOJ committed
grave abuse of discretion in sustaining the public prosecutor's
dismissal of the charge of copyright infringement under Section 29 of
Presidential Decree No. 49 on the ground of lack of evidence
because the public prosecutor thereby flagrantly disregarded the
existence of acts sufficient to engender the well-founded belief that
the crime of copyright infringement had been committed, and that
the respondent was probably guilty thereof.11
Section 5 of Presidential Decree No. 49 specifically defined copyright
as an exclusive right in the following manner:
Section 5. Copyright shall consist in the exclusive right;
(A) To print, reprint, publish, copy, distribute, multiply, sell, and
make photographs, photo-engravings, and pictorial illustrations of
the works;
(B) To make any translation or other version or extracts or
arrangements or adaptations thereof; to dramatize it if it be a non-
dramatic work; to convert it into a non-dramatic work if it be a
drama; to complete or execute if it be a model or design;
(C) To exhibit, perform, represent, produce, or reproduce, the work
in any manner or by any method whatever for profit or otherwise; it
not reproduced in copies for sale, to sell any manuscript or any
record whatsoever thereof;
(D) To make any other use or disposition of the work consistent with
the laws of the land.
Accordingly, the commission of any of the acts mentioned in Section
5 of Presidential Decree No. 49 without the copyright owner's
consent constituted actionable copyright infringement. In Columbia
Pictures, Inc. v. Court of Appeals,12 the Court has emphatically
declared:
Infringement of a copyright is a trespass on a private domain owned
and occupied by the owner of the copyright, and, therefore,
protected by law, and infringement of copyright, or piracy, which is a
synonymous term in this connection, consists in the doing by any
person, without the consent of the owner of the copyright, of
anything the sole right to do which is conferred by statute on the
owner of the copyright.
The "gravamen of copyright infringement," according to NBI-
Microsoft Corporation v. Hwang:13
is not merely the unauthorized manufacturing of intellectual works
but rather the unauthorized performance of any of the acts covered
by Section 5. Hence, any person who performs any of the acts under
Section 5 without obtaining the copyright owners prior consent
renders himself civilly and criminally liable for copyright
infringement.14ChanRoblesVirtualawlibrary
The CA stated in the assailed decision as follows:
A reading of Section 5 (a) of the Copyright Law shows that the acts
enumerated therein are punctuated by commas and the last phrase
is conjoined by the words 'and'. Clearly, the same should be
interpreted to mean as 'relating to one another' because it is basic in
legal hermeneutics that the word 'and' is not meant to separate
words but is a conjunction used to denote a 'joinder' or 'union'.
In the book of Noli C. Diaz entitled as STATUTORY CONSTRUCTION,
the word 'and' was defined as a 'conjunction connecting words or
phrases expressing the idea that the latter is to be added to or taken
along with the first'. Stated differently, the word 'and' is a
conjunction pertinently defined as meaning 'together with', 'joined
with', 'along or together with', 'added to or linked to' used to conjoin
'word with word', 'phrase with phrase', 'clause with clause'. The word
'and' does not mean 'or', it is a conjunction used to denote a joinder
or union, 'binding together', relating the one to the other.
Hence the key to interpret and understand Section 5 (a) of P.D. 49 is
the word 'and'. From the foregoing definitions of the word 'and' it is
unmistakable that to hold a person liable under the said provision of
law, all the acts enumerated therein must be present and proven. As
such, it is not correct to construe the acts enumerated therein as
being separate or independent from one another.
In the case at bar, petitioner failed to allege and adduce evidence
showing that the private respondent is the one who copied,
replicated or reproduced the software programs of the petitioner. In
other words, 'sale' alone of pirated copies of Microsoft software
programs does not constitute copyright infringement punishable
under P.D. 49.15ChanRoblesVirtualawlibrary
The CA erred in its reading and interpretation of Section 5 of
Presidential Decree No. 49. Under the rules on syntax, the
conjunctive word "and" denotes a "joinder or union" of words,
phrases, or clause;16 it is different from the disjunctive word "or" that
signals disassociation or independence.17 However, a more important
rule of statutory construction dictates that laws should be construed
in a manner that avoids absurdity or unreasonableness.18 As the
Court pointed out in Automotive Parts & Equipment Company, Inc.
v. Lingad:19
Nothing is better settled then that courts are not to give words a
meaning which would lead to absurd or unreasonable consequence.
That is a principle that goes back to In re Allen decided on October
29, 1903, where it was held that a literal interpretation is to be
rejected if it would be unjust or lead to absurd results. That is a
strong argument against its adoption. The words of Justice Laurel
are particularly apt. Thus: 'The fact that the construction placed
upon the statute by the appellants would lead to an absurdity is
another argument for rejecting it x x x.'
It is of the essence of judicial duty to construe statutes so as to
avoid such a deplorable result. That has long been a judicial
function. A literal reading of a legislative act which could be thus
characterized is to be avoided if the language thereof can be given a
reasonable application consistent with the legislative purpose. In the
apt language of Frankfurter: A decent respect for the policy of
Congress must save us from imputing to it a self-defeating, if not
disingenuous purpose. Certainly, we must reject a construction that
at best amounts to a manifestation of verbal ingenuity but hardly
satisfies the test of rationality on which law must be
based.20ChanRoblesVirtualawlibrary
The conjunctive "and" should not be taken in its ordinary
acceptation, but should be construed like the disjunctive "or" if the
literal interpretation of the law would pervert or obscure the
legislative intent.21 To accept the CA's reading and interpretation is
to accept absurd results because the violations listed in Section 5(a)
of Presidential Decree No. 49 - "To print, reprint, publish, copy,
distribute, multiply, sell, and make photographs, photo-engravings,
and pictorial illustrations of the works" cannot be carried out on
all of the classes of works enumerated in Section 2 of Presidential
Decree No. 49, viz.:
Section 2. - The Rights granted by this Decree shall, from the
moment of creation, subsist with respect to any of the following
classes of works:chanRoblesvirtualLawlibrary
(A) Books, including composite and encyclopedic works,
manuscripts, directories, and gazetteers;
(B) Periodicals, including pamphlets and newspapers;
(C) Lectures, sermons, addresses, dissertations prepared for oral
delivery;
(D) Letters;
(E) Dramatic or dramatico-musical compositions; choreographic
works and entertainments in dumb shows, the acting form of which
is fixed in writing or otherwise;
(F) Musical compositions, with or without words;
(G) Works of drawing, painting, architecture, sculpture, engraving,
lithography, and other works of art; models or designs for works of
art;
(H) Reproductions of a work of art;
(I) Original ornamental designs or models for articles of
manufacture, whether or not patentable, and other works of applied
art;
(J) Maps, plans, sketches, and charts;
(K) Drawings, or plastic works of a scientific or technical character;
(L) Photographic works and works produced by a process analogous
to photography; lantern slides;
(M) Cinematographic works and works produced by a process
analogous to cinematography or any process for making audio-visual
recordings;
(N) Computer programs;
(O) Prints, pictorial, illustration, advertising copies, labels, tags, and
box wraps;
(P) Dramatization, translations, adaptations, abridgements,
arrangements and other alterations of literary, musical or artistic
works or of works of the Philippine Government as herein defined,
which shall be protected as provided in Section 8 of this Decree. promulgated on February 27, 2004 in C.A.-G.R. SP No.
76402; DIRECTS the Department of Justice to render the proper
(Q) Collection of literary, scholarly, or artistic works or of works resolution to charge respondent ROLANDO D. MANANSALA
referred to in Section 9 of this Decree which by reason of the and/or MEL MANANSALA, doing business as DATAMAN
selection and arrangement of their contents constitute intellectual TRADING COMPANY and/or COMIC ALLEY in accordance with
creations, the same to be protected as such in accordance with this decision; and ORDERS the respondents to pay the costs of suit.
Section 8 of this Decree.
SO ORDERED.chanroblesv
(R) Other literary, scholarly, scientific and artistic works.
Presidential Decree No. 49 thereby already acknowledged the
phil pharmawealth v pfizer
existence of computer programs as works or creations protected by
copyright.22 To hold, as the CA incorrectly did, that the legislative
intent was to require that the computer programs be first
Facts: Pfizer is the registered owner of a patent pertaining to
photographed, photo-engraved, or pictorially illustrated as a
Sulbactam Ampicillin. It is marketed under the brand name
condition for the commission of copyright infringement invites
Unasyn. Sometime in January and February 2003, Pfizer
ridicule. Such interpretation of Section 5(a) of Presidential Decree
discovered that Pharmawealth submitted bids for the supply of
No. 49 defied logic and common sense because it focused on terms
Sulbactam Ampicillin to several hospitals without the Pfizers
like "copy," "multiply," and "sell," but blatantly ignored terms like
consent. Pfizer then demanded that the hospitals cease and desist
"photographs," "photo-engravings," and "pictorial illustrations." Had
from accepting such bids. Pfizer also demanded that Pharmawealth
the CA taken the latter words into proper account, it would have
immediately withdraw its bids to supply Sulbactam Ampicillin.
quickly seen the absurdity of its interpretation.
Pharmawealth and the hospitals ignored the demands.
The mere sale of the illicit copies of the software programs was
Pfizer then filed a complaint for patent infringement with a prayer for
enough by itself to show the existence of probable cause for
permanent injunction and forfeiture of the infringing products. A
copyright infringement. There was no need for the petitioner to still
preliminary injunction effective for 90 days was granted by the IPOs
prove who copied, replicated or reproduced the software programs.
Bureau of Legal Affairs (IPO-BLA). Upon expiration, a motion for
Indeed, the public prosecutor and the DOJ gravely abused their
extension filed by Pfizer was denied. Pfizer filed a Special Civil Action
discretion in dismissing the petitioner's charge for copyright
for Certiorari in the Court of Appeals (CA) assailing the denial.
infringement against the respondents for lack of evidence. There
was grave abuse of discretion because the public prosecutor and the
While the case was pending in the CA, Pfizer filed with the Regional
DOJ acted whimsically or arbitrarily in disregarding the settled
Trial Court of Makati (RTC) a complaint for infringement and unfair
jurisprudential rules on finding the existence of probable cause to
competition, with a prayer for injunction. The RTC issued a
charge the offender in court. Accordingly, the CA erred in upholding
temporary restraining order, and then a preliminary injunction.
the dismissal by the DOJ of the petitioner's petition for review. We
reverse.
Pharmawealth filed a motion to dismiss the case in the CA, on the
ground of forum shopping. Nevertheless, the CA issued a temporary
WHEREFORE, the Court GRANTS the petition for review
restraining order. Pharmawealth again filed a motion to dismiss,
on certiorari; REVERSES and SETS ASIDE the decision
alleging that the patent, the main basis of the case, had already
lapsed, thus making the case moot, and that the CA had no
jurisdiction to review the order of the IPO-BLA because this was
granted to the Director General. The CA denied all the motions.
Pharmawealth filed a petition for review on Certiorari with the
Supreme Court.
Issues:
a) Can an injunctive relief be issued based on an action of patent
infringement when the patent allegedly infringed has already lapsed?
b) What tribunal has jurisdiction to review the decisions of the
Director of Legal Affairs of the Intellectual Property Office?
c) Is there forum shopping when a party files two actions with two
seemingly different causes of action and yet pray for the same
relief?
Held:
a) No. The provision of R.A. 165, from which the Pfizers patent was
based, clearly states that "[the] patentee shall have the exclusive
right to make, use and sell the patented machine, article or product,
and to use the patented process for the purpose of industry or
commerce, throughout the territory of the Philippines for the term of
the patent; and such making, using, or selling by any person without
the authorization of the patentee constitutes infringement of the
patent."
Clearly, the patentees exclusive rights exist only during the term of
the patent. Since the patent was registered on 16 July 1987, it
expired, in accordance with the provisions of R.A. 165, after 17
years, or 16 July 2004. Thus, after 16 July 2004, Pfizer no longer
possessed the exclusive right to make, use, and sell the products
covered by their patent. The CA was wrong in issuing a temporary
restraining order after the cut-off date.
b) According to IP Code, the Director General of the IPO exercises
exclusive jurisdiction over decisions of the IPO-BLA. The question in
the CA concerns an interlocutory order, and not a decision. Since the
IP Code and the Rules and Regulations are bereft of any remedy
regarding interlocutory orders of the IPO-BLA, the only remedy
available to Pfizer is to apply the Rules and Regulations suppletorily.
Under the Rules, a petition for certiorari to the CA is the proper
remedy. This is consistent with the Rules of Court. Thus, the CA had
jurisdiction.
c) Yes. Forum shopping is defined as the act of a party against
whom an adverse judgment has been rendered in one forum, of
seeking another (and possibly favorable) opinion in another forum
(other than by appeal or the special civil action of certiorari), or the
institution of two (2) or more actions or proceedings grounded on
the same cause on the supposition that one or the other court would
make a favorable disposition.
The elements of forum shopping are: (a) identity of parties, or at
least such parties that represent the same interests in both actions;
(b) identity of rights asserted and reliefs prayed for, the reliefs being
founded on the same facts; (c) identity of the two preceding
particulars, such that any judgment rendered in the other action will,
regardless of which party is successful, amount to res judicata in the
action under consideration. This instance meets these elements.
The parties are clearly identical. In both the complaints in the BLA-
IPO and RTC, the rights allegedly violated and the acts allegedly
violative of such rights are identical, regardless of whether the
patents on which the complaints were based are different. In both
cases, the ultimate objective of Pfizer was to ask for damages and to
permanently prevent Pharmawealth from selling the contested
products. Relevantly, the Supreme Court has decided that the filing
of two actions with the same objective, as in this instance,
constitutes forum shopping.
Owing to the substantial identity of parties, reliefs and issues in the
IPO and RTC cases, a decision in one case will necessarily amount to
res judicata in the other action.