G.R. No. L-30442 & L-30409 September 30, 1983
HON. CORNELIO BALMACEDA (now LEONIDES VIRATA) & HON. MARCELO BALATBAT, as SECRETARIES OF COMMERCE AND INDUSTRY, petitioners, vs. UNION CARBIDE PHILIPPINES, INC. and HON. FEDERICO C. ALIKPALA, Presiding Judge, CFI Manila, respondents.

FACTS

The Secretary of Commerce and Industry sought to subject Union Carbide Philippines, Inc. to the nationality requirements of the Retail Trade Nationalization Act ( Republic Act No. 1180 ). The government alleged the company was engaged in retail business. Union Carbide contested this before the Court of First Instance of Manila, which issued a restraining order against the government’s enforcement action. The company has two main divisions: a Consumer Products Division selling through retail outlets, and an Industrial Products Division.
The Industrial Products Division comprises several departments handling products like metals, carbide, plastics, industrial chemicals, and polyethylene bags. These are sold primarily to producers, processors, fabricators, and industrial users, though sales were not absolutely prohibited to the general public. The trial court found that these goods are raw materials or components used in manufacturing or production processes, not end-products for personal or household consumption.

ISSUE

Whether Union Carbide Philippines, Inc., through its Industrial Products Division, is engaged in “retail business” as defined under the Retail Trade Nationalization Act.

RULING

The Supreme Court affirmed the lower court’s decision, ruling that Union Carbide is not engaged in retail business. The legal logic rests on the statutory definition as clarified by Presidential Decree No. 714, which amended RA 1180. The law defines “retail business” as the habitual selling of merchandise “direct to the general public… for consumption.” The amendatory decree explicitly excluded from this definition “a manufacturer or processor selling to the industrial and commercial users or consumers who use the products bought by them to render service to the general public and/or produce or manufacture goods which are in turn sold to them.”
The Court found this amendment directly applicable and in point, citing its previous rulings in B.F. Goodrich Philippines, Inc. v. Reyes, Goodyear Tire and Rubber Co. v. Reyes, and Mobil Oil Philippines, Inc. v. Reyes. The goods sold by Union Carbide’s Industrial Products Division are intermediate goods—raw materials or elements utilized in production—and are sold to industrial and commercial users. They are not goods for personal, family, or household consumption that directly satisfy human wants. Therefore, such sales fall under the statutory exclusion. The Court upheld the permanent restraining order, concluding the company’s operations were not within the ambit of the nationalization law. No costs were awarded.