GR 47701; (June, 1941) (Digest)
G.R. No. 47701; June 27, 1941
THE MENTHOLATUM CO., INC., and THE PHILIPPINE-AMERICAN DRUG CO., INC., petitioners, vs. ANACLETO MANGALIMAN, FLORENCIO MANGALIMAN, and THE DIRECTOR OF THE BUREAU OF COMMERCE, respondents.
FACTS
On October 1, 1935, The Mentholatum Co., Inc. (a Kansas corporation) and its exclusive Philippine distributing agent, The Philippine-American Drug Co., Inc., filed a complaint in the Court of First Instance of Manila against Anacleto and Florencio Mangaliman for infringement of trademark and unfair competition. The petitioners alleged that the Mentholatum Co. had registered the trademark “Mentholatum” for its medicinal salve, and that the Mangaliman brothers were selling a similar product named “Mentholiman” in containers of identical size, color, and shape, causing damage to sales and goodwill. The trial court ruled in favor of the petitioners, issuing a permanent injunction, ordering an accounting of profits, and imposing a fine. The Court of Appeals reversed this decision, holding that the Mentholatum Co., through its exclusive agent, was transacting business in the Philippines without the required license under Section 69 of the Corporation Law (Act No. 1459), and therefore could not maintain the suit. The petitioners sought a writ of certiorari from the Supreme Court.
ISSUE
Whether the petitioners could prosecute the action for trademark infringement and unfair competition without the Mentholatum Co., Inc. having secured the license required for foreign corporations transacting business in the Philippines under Section 69 of the Corporation Law.
RULING
The Supreme Court denied the petition and affirmed the decision of the Court of Appeals.
1. The Mentholatum Co., Inc. was “transacting business” in the Philippines without a license. The Court found that the Mentholatum Co., a foreign corporation, was not licensed to do business in the Philippines. The determinative question was whether it was “transacting business” here. The Court held that the term implies a continuity of commercial dealings in pursuit of the corporation’s purpose. The petitioners’ own complaint expressly stated that the Philippine-American Drug Co., Inc. was the “exclusive distributing agent” of the Mentholatum Co. for the sale and distribution of its product in the Philippines. Based on this judicial admission, the Court concluded that the acts of the exclusive agent were, in legal contemplation, the acts of the principal. Therefore, the Mentholatum Co. was engaged in a continuous course of business in the country through its agent.
2. Consequence of Transacting Business Without a License. Section 69 of the Corporation Law prohibits an unlicensed foreign corporation transacting business in the Philippines from maintaining any suit for the recovery of any debt, claim, or demand. Consequently, the Mentholatum Co., Inc. could not prosecute the present action for trademark infringement and unfair competition.
3. The Philippine-American Drug Co., Inc. Cannot Maintain the Action Independently. The Court also ruled that the exclusive distributing agent could not independently maintain the suit. As an agent, its character and authority are derivative and representative. It could not claim a separate legal standing in court to assert the rights of its principal, the unlicensed foreign corporation.
4. Distinction from Precedent. The petitioners’ reliance on Western Equipment and Supply Co. vs. Reyes was misplaced. That case was distinguished because there the foreign corporation was found not to be engaged in business in the Philippines. The Court noted that the policy expressed in the Corporation Law controls, and the right to sue is conditioned upon compliance with its licensing requirement.
DISSENTING OPINION (Justice Moran):
Justice Moran dissented, citing the Western Equipment case. He argued that Section 69 of the Corporation Law does not apply to suits for trademark infringement and unfair competition. He maintained that the right to a trademark is a property right (right in rem) that a corporation can protect in any court worldwide, even in countries where it does not transact business, as a trademark transcends territorial boundaries wherever the goods are known.