THE MENTHOLATUM CO., INC., ET AL., petitioners
nor
vs. ANACLETO MANGALIMAN, ET. AL., respondents
G.R. No. L-47701 JUNE 27, 1941
Topic: Foreign Corporations
Facts:
Mentholitum Co. is a Kansas corporation which
manufactures “Mentholatum”, a medicament and
salve adapted for the treatment of colds, nasal
irritations, chapped skin, insect bites and other
ailments.
Philippine-American Drug Co. is its exclusive
distributing agent in the Philippines authorized to
protect Mentholitum Co.’s interests.
June 26 1919 & Jan. 21 1921: Mentholitum Co.
registered with the Bureau of Commerce and
Industry the word “Mentholatum” as trade mark for
its products.
Mentholatum Co. alleged that the Managlimans
prepared the same product which they named
“Mentholiman” and which they sold in a packing
container of the same size, color and shape as
“Mentholatum”.
Oct. 1 1935: Mentholatum Co., Inc., and the
Philippine-American Drug Co. instituted an action
against Anacleto Mangaliman, Florencio Mangaliman
and the Director of the Bureau of Commerce for
infringement of trade mark and unfair competition.
Mentholatum Co. prayed for an order restraining the
Mangalimans from selling the Mangalimans’ product
“Mentholiman”, and directing them to render
accounting, and to pay damages.
CFI ruled in favor of Mentholatum Co. but the CA
reversed the CFI ruling. CA held that, according to
Sec. 69 of the Corp. Law, Metholatum Co. cannot
maintain the present suit as they were engaging in
business in the PH (having sold products in the PH
since 1929) but it failed to secure the license as
required under Sec. 68 of the Corporation Law.
Hence, this petition for review on certiorari.
Petitioners argue that:
a. Mentholatum Co. has not sold any of its
products in the Philippines
b. Philippine-American Drug Co., together with
other local entities, was merely an importer and
that its sales were its own and not for
Mentholatum Co.
The Mangalimans, however, contend that:
c. Philippine-American Drug Co. is the exclusive
distributing agent of Mentholatum Co.
d. Because of such agency agreement,
Mentholatum Co. is engaged in business, and
not having acquired the license under Sec. 68 of
the Corp. Law, neither Mentholatum Co.
Phillipine-American Drug Co. can prosecute the
present action.
Issue:
W/N Mentholatum Co. is transacting business in the
Philippines
Held: Yes!
[DOCTRINE] Test for “transacting business”
No general rule or governing principle can be laid
down as to what constitutes "doing" or "engaging in"
or "transacting" business. Each case must be judged
in the light of its peculiar circumstances.
The true test, however, seems to be whether the
foreign corporation is continuing the body or
substance of the business for which it was
organized, or whether it has substantially retired
from it and turned it over to another.
“Transacting business” implies a continuity of
commercial dealings and arrangements, and
contemplates the performance of acts or works, or
the exercise of some of the functions normally
incident to, and in progressive prosecution of, the
purpose and object of its organization.
In this case, the complaint filed by Mentholatum
Co. in the CFI clearly stated that Philippine-
American Drug Co. was their exclusive distributing
agent in the Philippines of their product
“Mentholatum”.
A party cannot subsequently take a position
contradictory or inconsistent with such complaint, as
the facts therein are admitted to be true for the
purpose of the action.
Hence, it follows that whatever transactions the
Philippine-American Drug Co. had executed, in view
of the law, it is as if Mentholatum Co. did it itself.
Since Mentholatum Co. has been established as a
foreign corporation doing business in the
Philippines without the license required by section
68 of the Corporation Law, it may not prosecute
this action for violation of trade mark and unfair
competition.
Neither may the Philippine-American Drug Co., Inc.,
maintain the action here for the reason that the
distinguishing features of the agent being his
representative character and derivative authority, it
cannot now, to the advantage of its principal, claim
an independent standing in court.
The right of the petitioner to protect its rights under
Sec. 69 of the Corp. Law is hereby reserved,
condition upon compliance with the requirements of
the same Section.
HENCE, the writ prayed for is DENIED. Petition is
DISMISSED.
Dissenting Opinion Moran, J.
Sec. 69 of the Corp. Law, as held in Western
Equipment & Supply Company vs. Reyes (51 Phil.,
115), does not apply to suits for infringement of
trade marks and unfair competition, the theory
being that "the right to the use of the corporate and
trade name of a foreign corporation is a property
right, a right in rem, which it may assert and protect
in any of the courts of the world even in countries
where it does not personally transact any business,"
and that "trade mark does not acknowledge any
territorial boundaries but extends to every mark
where the traders' goods have become known and
identified by the use of the mark."

Notes:

Section 69 of Act No. 1459 (Corp. Law):

SEC. 69. No foreign corporation or corporation

formed, organized, or existing under any laws other
than those of the Philippine Islands shall be
permitted to transact business in the Philippine
Islands or maintain by itself or assignee any suit for
the recovery of any debt, claim, or demand
whatever, unless it shall have the license prescribed
in the section immediately preceding. Any officer, or
agent of the corporation or any person transacting
business for any foreign corporation not having the
license prescribed shall be punished by
imprisonment for not less than six months nor more
than two years or by a fine of not less than two
hundred pesos nor more than one thousand pesos,
or by both such imprisonment and fine, in the
discretion of the court.