FIRST DIVISION

G.R. No. 100098 December 29, 1995

EMERALD GARMENT MANUFACTURING CORPORATION, petitioner,
vs.
HON. COURT OF APPEALS, BUREAU OF PATENTS, TRADEMARKS
AND TECHNOLOGY TRANSFER and H.D. LEE COMPANY, INC.,
respondents.

KAPUNAN, J.:

confusion, mistake and deception on the part of the purchasing public as to the
origin of the goods." 2
In its answer dated 23 March 1982, petitioner contended that its trademark was
entirely and unmistakably different from that of private respondent and that its
certificate of registration was legally and validly granted. 3
On 20 February 1984, petitioner caused the publication of its application for
registration of the trademark "STYLISTIC MR. LEE" in the Principal Register."
4

On 27 July 1984, private respondent filed a notice of opposition to petitioner's

application for registration also on grounds that petitioner's trademark was
confusingly similar to its "LEE" trademark. 5 The case was docketed as Inter
Partes Case No. 1860.

In this petition for review on certiorari under Rule 45 of the Revised Rules of
Court, Emerald Garment Manufacturing Corporation seeks to annul the decision
of the Court of Appeals dated 29 November 1990 in CA-G.R. SP No. 15266
declaring petitioner's trademark to be confusingly similar to that of private
respondent and the resolution dated 17 May 1991 denying petitioner's motion for
reconsideration.

On 21 June 1985, the Director of Patents, on motion filed by private respondent

dated 15 May 1985, issued an order consolidating Inter Partes Cases Nos. 1558
and 1860 on grounds that a common question of law was involved. 6

The record reveals the following antecedent facts:

The Director of Patents found private respondent to be the prior registrant of the
trademark "LEE" in the Philippines and that it had been using said mark in the
Philippines. 7

On 18 September 1981, private respondent H.D. Lee Co., Inc., a foreign

corporation organized under the laws of Delaware, U.S.A., filed with the Bureau
of Patents, Trademarks & Technology Transfer (BPTTT) a Petition for
Cancellation of Registration No. SR 5054 (Supplemental Register) for the
trademark "STYLISTIC MR. LEE" used on skirts, jeans, blouses, socks, briefs,
jackets, jogging suits, dresses, shorts, shirts and lingerie under Class 25, issued
on 27 October 1980 in the name of petitioner Emerald Garment Manufacturing
Corporation, a domestic corporation organized and existing under Philippine
laws. The petition was docketed as Inter Partes Case No. 1558. 1
Private respondent, invoking Sec. 37 of R.A. No. 166 (Trademark Law) and Art.
VIII of the Paris Convention for the Protection of Industrial Property, averred
that petitioner's trademark "so closely resembled its own trademark, 'LEE' as
previously registered and used in the Philippines, and not abandoned, as to be
likely, when applied to or used in connection with petitioner's goods, to cause

On 19 July 1988, the Director of Patents rendered a decision granting private

respondent's petition for cancellation and opposition to registration.

Moreover, the Director of Patents, using the test of dominancy, declared that
petitioner's trademark was confusingly similar to private respondent's mark
because "it is the word 'Lee' which draws the attention of the buyer and leads
him to conclude that the goods originated from the same manufacturer. It is
undeniably the dominant feature of the mark." 8
On 3 August 1988, petitioner appealed to the Court of Appeals and on 8 August
1988, it filed with the BPTTT a Motion to Stay Execution of the 19 July 1988
decision of the Director of Patents on grounds that the same would cause it great
and irreparable damage and injury. Private respondent submitted its opposition
on 22 August 1988. 9

On 23 September 1988, the BPTTT issued Resolution No. 88-33 granting

petitioner's motion to stay execution subject to the following terms and
conditions:
1. That under this resolution, Respondent-Registrant is
authorized only to dispose of its current stock using the mark
"STYLISTIC MR. LEE";
2. That Respondent-Registrant is strictly prohibited from further
production, regardless of mode and source, of the mark in
question (STYLISTIC MR. LEE) in addition to its current
stock;
3. That this relief Order shall automatically cease upon
resolution of the Appeal by the Court of Appeals and, if the
Respondent's appeal loses, all goods bearing the mark
"STYLISTIC MR. LEE" shall be removed from the market,
otherwise such goods shall be seized in accordance with the
law.
SO ORDERED. 10
On 29 November 1990, the Court of Appeals promulgated its decision affirming
the decision of the Director of Patents dated 19 July 1988 in all respects. 11
In said decision the Court of Appeals expounded, thus:
xxx xxx xxx
Whether or not a trademark causes confusion and is likely to
deceive the public is a question of fact which is to be resolved
by applying the "test of dominancy", meaning, if the competing
trademark contains the main or essential or dominant features
of another by reason of which confusion and deception are
likely to result, then infringement takes place; that duplication
or imitation is not necessary, a similarity in the dominant
features of the trademark would be sufficient.
The word "LEE" is the most prominent and distinctive feature
of the appellant's trademark and all of the appellee's "LEE"

trademarks. It is the mark which draws the attention of the

buyer and leads him to conclude that the goods originated from
the same manufacturer. While it is true that there are other
words such as "STYLISTIC", printed in the appellant's label,
such word is printed in such small letters over the word "LEE"
that it is not conspicuous enough to draw the attention of
ordinary buyers whereas the word "LEE" is printed across the
label in big, bold letters and of the same color, style, type and
size of lettering as that of the trademark of the appellee. The
alleged difference is too insubstantial to be noticeable. Even
granting arguendo that the word "STYLISTIC" is conspicuous
enough to draw attention, the goods may easily be mistaken for
just another variation or line of garments under the ap appelle's
"LEE" trademarks in view of the fact that the appellee has
registered trademarks which use other words in addition to the
principal mark "LEE" such as "LEE RIDERS", "LEESURES"
and "LEE LEENS". The likelihood of confusion is further made
more probable by the fact that both parties are engaged in the
same line of business. It is well to reiterate that the
determinative factor in ascertaining whether or not the marks
are confusingly similar to each other is not whether the
challenged mark would actually cause confusion or deception
of the purchasers but whether the use of such mark would likely
cause confusion or mistake on the part of the buying public.
xxx xxx xxx
The appellee has sufficiently established its right to prior use
and registration of the trademark "LEE" in the Philippines and
is thus entitled to protection from any infringement upon the
same. It is thus axiomatic that one who has identified a peculiar
symbol or mark with his goods thereby acquires a property right
in such symbol or mark, and if another infringes the trademark,
he thereby invokes this property right.
The merchandise or goods being sold by the parties are not that
expensive as alleged to be by the appellant and are quite
ordinary commodities purchased by the average person and at
times, by the ignorant and the unlettered. Ordinary purchasers
will not as a rule examine the small letterings printed on the
label but will simply be guided by the presence of the striking

mark "LEE". Whatever difference there may be will pale in

insignificance in the face of an evident similarity in the
dominant features and overall appearance of the labels of the
parties. 12
xxx xxx xxx
On 19 December 1990, petitioner filed a motion for reconsideration of the
above-mentioned decision of the Court of Appeals.
Private respondent opposed said motion on 8 January 1991 on grounds that it
involved an impermissible change of theory on appeal. Petitioner allegedly
raised entirely new and unrelated arguments and defenses not previously raised
in the proceedings below such as laches and a claim that private respondent
appropriated the style and appearance of petitioner's trademark when it registered
its "LEE" mark under Registration No. 44220. 13
On 17 May 1991, the Court of Appeals issued a resolution rejecting petitioner's
motion for reconsideration and ruled thus:
xxx xxx xxx
A defense not raised in the trial court cannot be raised on appeal
for the first time. An issue raised for the first time on appeal and
not raised timely in the proceedings in the lower court is barred
by estoppel.
The object of requiring the parties to present all questions and
issues to the lower court before they can be presented to this
Court is to have the lower court rule upon them, so that this
Court on appeal may determine whether or not such ruling was
erroneous. The purpose is also in furtherance of justice to
require the party to first present the question he contends for in
the lower court so that the other party may not be taken by
surprise and may present evidence to properly meet the issues
raised.
Moreover, for a question to be raised on appeal, the same must
also be within the issues raised by the parties in their pleadings.
Consequently, when a party deliberately adopts a certain theory,

and the case is tried and decided based upon such theory
presented in the court below, he will not be permitted to change
his theory on appeal. To permit him to do so would be unfair to
the adverse party. A question raised for the first time on appeal,
there having opportunity to raise them in the court of origin
constitutes a change of theory which is not permissible on
appeal.
In the instant case, appellant's main defense pleaded in its
answer dated March 23, 1982 was that there was "no confusing
similarity between the competing trademark involved. On
appeal, the appellant raised a single issue, to wit:
The only issue involved in this case is whether
or not respondent-registrant's trademark
"STYLISTIC MR. LEE" is confusingly
similar with the petitioner's trademarks "LEE
or LEERIDERS, LEE-LEENS and LEESURES."
Appellant's main argument in this motion for reconsideration on
the other hand is that the appellee is estopped by laches from
asserting its right to its trademark. Appellant claims although
belatedly that appellee went to court with "unclean hands" by
changing the appearance of its trademark to make it identical to
the appellant's trademark.
Neither defenses were raised by the appellant in the
proceedings before the Bureau of Patents. Appellant cannot
raise them now for the first time on appeal, let alone on a mere
motion for reconsideration of the decision of this Court
dismissing the appellant's appeal.
While there may be instances and situations justifying
relaxation of this rule, the circumstance of the instant case,
equity would be better served by applying the settled rule it
appearing that appellant has not given any reason at all as to
why the defenses raised in its motion for reconsideration was
not invoked earlier. 14
xxx xxx xxx

Twice rebuffed, petitioner presents its case before this Court on the following
assignment of errors:
I. THE COURT OF APPEALS ERRED IN NOT FINDING
THAT PRIVATE RESPONDENT CAUSED THE ISSUANCE
OF A FOURTH "LEE" TRADEMARK IMITATING THAT OF
THE PETITIONER'S ON MAY 5, 1989 OR MORE THAN
EIGHT MONTHS AFTER THE BUREAU OF PATENT'S
DECISION DATED JULY 19, 1988.
II. THE COURT OF APPEALS ERRED IN RULING THAT
THE DEFENSE OF ESTOPPEL BY LACHES MUST BE
RAISED IN THE PROCEEDINGS BEFORE THE BUREAU
OF PATENTS, TRADEMARKS AND TECHNOLOGY
TRANSFER.
III. THE COURT OF APPEALS ERRED WHEN IT
CONSIDERED PRIVATE RESPONDENT'S PRIOR
REGISTRATION OF ITS TRADEMARK AND
DISREGARDED THE FACT THAT PRIVATE RESPONDENT
HAD FAILED TO PROVE COMMERCIAL
USE THEREOF BEFORE FILING OF APPLICATION FOR
REGISTRATION. 15

THE REGISTRATION OF ITS TRADEMARK IS PRIMA

FACIE EVIDENCE OF GOOD FAITH.
IV. PETITIONER'S "STYLISTIC MR. LEE" TRADEMARK
CANNOT BE CONFUSED WITH PRIVATE
RESPONDENT'S LEE TRADEMARK. 16
Petitioner contends that private respondent is estopped from instituting an action
for infringement before the BPTTT under the equitable principle of laches
pursuant to Sec. 9-A of R.A. No. 166, otherwise known as the Law on Trademarks, Trade-names and Unfair Competition:
Sec. 9-A. Equitable principles to govern proceedings. In
opposition proceedings and in all other inter partes proceedings
in the patent office under this act, equitable principles of laches,
estoppel, and acquiescence, where applicable, may be
considered and applied.
Petitioner alleges that it has been using its trademark "STYLISTIC MR. LEE"
since 1 May 1975, yet, it was only on 18 September 1981 that private respondent
filed a petition for cancellation of petitioner's certificate of registration for the
said trademark. Similarly, private respondent's notice of opposition to petitioner's
application for registration in the principal register was belatedly filed on 27 July
1984. 17

In addition, petitioner reiterates the issues it raised in the Court of Appeals:

I. THE ISSUE INVOLVED IN THIS CASE IS WHETHER OR
NOT PETITIONER'S TRADEMARK SYTLISTIC MR. LEE,
IS CONFUSINGLY SIMILAR WITH THE PRIVATE
RESPONDENT'S TRADEMARK LEE OR LEE-RIDER, LEELEENS AND LEE-SURES.
II. PETITIONER'S EVIDENCES ARE CLEAR AND
SUFFICIENT TO SHOW THAT IT IS THE PRIOR USER
AND ITS TRADEMARK IS DIFFERENT FROM THAT OF
THE PRIVATE RESPONDENT.
III. PETITIONER'S TRADEMARK IS ENTIRELY
DIFFERENT FROM THE PRIVATE RESPONDENT'S AND

Private respondent counters by maintaining that petitioner was barred from

raising new issues on appeal, the only contention in the proceedings below being
the presence or absence of confusing similarity between the two trademarks in
question. 18
We reject petitioner's contention.
Petitioner's trademark is registered in the supplemental register. The Trademark
Law (R.A. No. 166) provides that "marks and tradenames for the supplemental
register shall not be published for or be subject to opposition, but shall be
published on registration in the Official Gazette." 19 The reckoning point,
therefore, should not be 1 May 1975, the date of alleged use by petitioner of its
assailed trademark but 27 October 1980, 20 the date the certificate of registration
SR No. 5054 was published in the Official Gazette and issued to petitioner.

It was only on the date of publication and issuance of the registration certificate
that private respondent may be considered "officially" put on notice that
petitioner has appropriated or is using said mark, which, after all, is the function
and purpose of registration in the supplemental register. 21 The record is bereft of
evidence that private respondent was aware of petitioner's trademark before the
date of said publication and issuance. Hence, when private respondent instituted
cancellation proceedings on 18 September 1981, less than a year had passed.
Corollarily, private respondent could hardly be accused of inexcusable delay in
filing its notice of opposition to petitioner's application for registration in the
principal register since said application was published only on 20 February 1984.
22
From the time of publication to the time of filing the opposition on 27 July
1984 barely five (5) months had elapsed. To be barred from bringing suit on
grounds of estoppel and laches, the delay must be
lengthy. 23
More crucial is the issue of confusing similarity between the two trademarks.
Petitioner vehemently contends that its trademark "STYLISTIC MR. LEE" is
entirely different from and not confusingly similar to private respondent's "LEE"
trademark.
Private respondent maintains otherwise. It asserts that petitioner's trademark
tends to mislead and confuse the public and thus constitutes an infringement of
its own mark, since the dominant feature therein is the word "LEE."
The pertinent provision of R.A. No. 166 (Trademark Law) states thus:
Sec. 22. Infringement, what constitutes. Any person who
shall use, without the consent of the registrant, any
reproduction, counterfeit, copy or colorable imitation of any
registered mark or trade-name in connection with the sale,
offering for sale, or advertising of any goods, business or
services on or in connection with which such use is likely to
cause confusion or mistake or to deceive purchasers or others as
to the source or origin of such goods or services, or identity of
such business; or reproduce, counterfeit, copy or colorably
imitable any such mark or trade-name and apply such
reproduction, counterfeit, copy, or colorable imitation to labels,
signs, prints, packages, wrappers, receptacles or advertisements
intended to be used upon or in connection with such goods,

business or services; shall be liable to a civil action by the

registrant for any or all of the remedies herein provided.
Practical application, however, of the aforesaid provision is easier said than
done. In the history of trademark cases in the Philippines, particularly in
ascertaining whether one trademark is confusingly similar to or is a colorable
imitation of another, no set rules can be deduced. Each case must be decided on
its own merits.
In Esso Standard Eastern, Inc. v. Court of Appeals, 24 we held:
. . . But likelihood of confusion is a relative concept; to be
determined only according to the particular, and sometimes
peculiar, circumstances of each case. It is unquestionably true
that, as stated in Coburn vs. Puritan Mills, Inc.: "In trademark
cases, even more than in other litigation, precedent must be
studied in the light of the facts of the particular case."
xxx xxx xxx
Likewise, it has been observed that:
In determining whether a particular name or mark is a
"colorable imitation" of another, no all-embracing rule seems
possible in view of the great number of factors which must
necessarily be considered in resolving this question of fact, such
as the class of product or business to which the article belongs;
the product's quality, quantity, or size, including its wrapper or
container; the dominant color, style, size, form, meaning of
letters, words, designs and emblems used; the nature of the
package, wrapper or container; the character of the product's
purchasers; location of the business; the likelihood of deception
or the mark or name's tendency to confuse;
etc. 25
Proceeding to the task at hand, the essential element of infringement is colorable
imitation. This term has been defined as "such a close or ingenious imitation as
to be calculated to deceive ordinary purchasers, or such resemblance of the
infringing mark to the original as to deceive an ordinary purchaser giving such

attention as a purchaser usually gives, and to cause him to purchase the one
supposing it to be the other." 26
Colorable imitation does not mean such similitude as amounts
to identity. Nor does it require that all the details be literally
copied. Colorable imitation refers to such similarity in form,
content, words, sound, meaning, special arrangement, or
general appearance of the trademark or tradename with that of
the other mark or tradename in their over-all presentation or in
their essential, substantive and distinctive parts as would likely
mislead or confuse persons in the ordinary course of purchasing
the genuine article. 27
In determining whether colorable imitation exists, jurisprudence has developed
two kinds of tests the Dominancy Test applied in Asia Brewery, Inc. v. Court
of Appeals 28 and other cases 29 and the Holistic Test developed in Del Monte
Corporation v. Court of Appeals 30 and its proponent cases. 31
As its title implies, the test of dominancy focuses on the similarity of the
prevalent features of the competing trademarks which might cause confusion or
deception and thus constitutes infringement.
xxx xxx xxx
. . . If the competing trademark contains the main or essential or
dominant features of another, and confusion and deception is
likely to result, infringement takes place. Duplication or
imitation is not necessary; nor it is necessary that the infringing
label should suggest an effort to imitate. [C. Neilman Brewing
Co. v. Independent Brewing Co., 191 F., 489, 495, citing Eagle
White Lead Co., vs. Pflugh (CC) 180 Fed. 579]. The question at
issue in cases of infringement of trademarks is whether the use
of the marks involved would be likely to cause confusion or
mistakes in the mind of the public or deceive purchasers.
(Auburn Rubber Corporation vs. Honover Rubber Co., 107 F.
2d 588; . . .) 32
xxx xxx xxx

On the other side of the spectrum, the holistic test mandates that the entirety of
the marks in question must be considered in determining confusing similarity.
xxx xxx xxx
In determining whether the trademarks are confusingly similar,
a comparison of the words is not the only determinant factor.
The trademarks in their entirety as they appear in their
respective labels or hang tags must also be considered in
relation to the goods to which they are attached. The discerning
eye of the observer must focus not only on the predominant
words but also on the other features appearing in both labels in
order that he may draw his conclusion whether one is
confusingly similar to the other. 33
xxx xxx xxx
Applying the foregoing tenets to the present controversy and taking into account
the factual circumstances of this case, we considered the trademarks involved as
a whole and rule that petitioner's "STYLISTIC MR. LEE" is not confusingly
similar to private respondent's "LEE" trademark.
Petitioner's trademark is the whole "STYLISTIC MR. LEE." Although on its
label the word "LEE" is prominent, the trademark should be considered as a
whole and not piecemeal. The dissimilarities between the two marks become
conspicuous, noticeable and substantial enough to matter especially in the light
of the following variables that must be factored in.
First, the products involved in the case at bar are, in the main, various kinds of
jeans. These are not your ordinary household items like catsup, soysauce or soap
which are of minimal cost. Maong pants or jeans are not inexpensive.
Accordingly, the casual buyer is predisposed to be more cautious and
discriminating in and would prefer to mull over his purchase. Confusion and
deception, then, is less likely. In Del Monte Corporation v. Court of Appeals, 34
we noted that:
. . . Among these, what essentially determines the attitudes of
the purchaser, specifically his inclination to be cautious, is the
cost of the goods. To be sure, a person who buys a box of
candies will not exercise as much care as one who buys an

expensive watch. As a general rule, an ordinary buyer does not

exercise as much prudence in buying an article for which he
pays a few centavos as he does in purchasing a more valuable
thing. Expensive and valuable items are normally bought only
after deliberate, comparative and analytical investigation. But
mass products, low priced articles in wide use, and matters of
everyday purchase requiring frequent replacement are bought
by the casual consumer without great
care. . . .
Second, like his beer, the average Filipino consumer generally buys his jeans by
brand. He does not ask the sales clerk for generic jeans but for, say, a Levis,
Guess, Wrangler or even an Armani. He is, therefore, more or less
knowledgeable and familiar with his preference and will not easily be distracted.
Finally, in line with the foregoing discussions, more credit should be given to the
"ordinary purchaser." Cast in this particular controversy, the ordinary purchaser
is not the "completely unwary consumer" but is the "ordinarily intelligent buyer"
considering the type of product involved.
The definition laid down in Dy Buncio v. Tan Tiao Bok 35 is better suited to the
present case. There, the "ordinary purchaser" was defined as one "accustomed to
buy, and therefore to some extent familiar with, the goods in question. The test of
fraudulent simulation is to be found in the likelihood of the deception of some
persons in some measure acquainted with an established design and desirous of
purchasing the commodity with which that design has been associated. The test
is not found in the deception, or the possibility of deception, of the person who
knows nothing about the design which has been counterfeited, and who must be
indifferent between that and the other. The simulation, in order to be
objectionable, must be such as appears likely to mislead the ordinary intelligent
buyer who has a need to supply and is familiar with the article that he seeks to
purchase."
There is no cause for the Court of Appeal's apprehension that petitioner's
products might be mistaken as "another variation or line of garments under
private respondent's 'LEE' trademark". 36 As one would readily observe, private
respondent's variation follows a standard format "LEERIDERS," "LEESURES"
and "LEELEENS." It is, therefore, improbable that the public would immediately
and naturally conclude that petitioner's "STYLISTIC MR. LEE" is but another
variation under private respondent's "LEE" mark.

As we have previously intimated the issue of confusing similarity between

trademarks is resolved by considering the distinct characteristics of each case. In
the present controversy, taking into account these unique factors, we conclude
that the similarities in the trademarks in question are not sufficient as to likely
cause deception and confusion tantamount to infringement.
Another way of resolving the conflict is to consider the marks involved from the
point of view of what marks are registrable pursuant to Sec. 4 of R.A. No. 166,
particularly paragraph 4 (e):
CHAPTER II-A. The Principal Register
(Inserted by Sec. 2, Rep. Act No. 638.)
Sec. 4. Registration of trade-marks, trade-names and servicemarks on the principal register. There is hereby established
a register of trade-marks, trade-names and service-marks which
shall be known as the principal register. The owner of a trademark, trade-name or service-mark used to distinguish his goods,
business or services from the goods, business or services of
others shall have the right to register the same on the principal
register, unless it:
xxx xxx xxx
(e) Consists of a mark or trade-name which, when applied to or
used in connection with the goods, business or services of the
applicant is merely descriptive or deceptively misdescriptive of
them, or when applied to or used in connection with the goods,
business or services of the applicant is primarily geographically
descriptive or deceptively misdescriptive of them, or is
primarily merely a surname; (Emphasis ours.)
xxx xxx xxx
"LEE" is primarily a surname. Private respondent cannot, therefore, acquire
exclusive ownership over and singular use of said term.
. . . It has been held that a personal name or surname may not be
monopolized as a trademark or tradename as against others of
the same name or surname. For in the absence of contract,

fraud, or estoppel, any man may use his name or surname in all
legitimate ways. Thus, "Wellington" is a surname, and its first
user has no cause of action against the junior user of
"Wellington" as it is incapable of exclusive appropriation. 37
In addition to the foregoing, we are constrained to agree with petitioner's
contention that private respondent failed to prove prior actual commercial use of
its "LEE" trademark in the Philippines before filing its application for
registration with the BPTTT and hence, has not acquired ownership over said
mark.
Actual use in commerce in the Philippines is an essential prerequisite for the
acquisition of ownership over a trademark pursuant to Sec. 2 and 2-A of the
Philippine Trademark Law (R.A. No. 166) which explicitly provides that:
CHAPTER II. Registration of Marks and Trade-names.
Sec. 2. What are registrable. Trade-marks, trade-names, and
service marks owned by persons, corporations, partnerships or
associations domiciled in the Philippines and by persons,
corporations, partnerships, or associations domiciled in any
foreign country may be registered in accordance with the
provisions of this act: Provided, That said trade-marks, tradenames, or service marks are actually in use in commerce and
services not less than two months in the Philippines before the
time the applications for registration are filed: And Provided,
further, That the country of which the applicant for registration
is a citizen grants by law substantially similar privileges to
citizens of the Philippines, and such fact is officially certified,
with a certified true copy of the foreign law translated into the
English language, by the government of the foreign country to
the Government of the Republic of the Philippines. (As
amended.) (Emphasis ours.)
Sec. 2-A. Ownership of trade-marks, trade-names and servicemarks; how acquired. Anyone who lawfully produces or
deals in merchandise of any kind or who engages in lawful
business, or who renders any lawful service in commerce, by
actual use hereof in manufacture or trade, in business, and in
the service rendered; may appropriate to his exclusive use a
trade-mark, a trade-name, or a service-mark not so appropriated

by another, to distinguish his merchandise, business or services

from others. The ownership or possession of trade-mark, tradename, service-mark, heretofore or hereafter appropriated, as in
this section provided, shall be recognized and protected in the
same manner and to the same extent as are other property rights
to the law. (As amended.) (Emphasis ours.)
The provisions of the 1965 Paris Convention for the Protection of Industrial
Property 38 relied upon by private respondent and Sec. 21-A of the Trademark
Law (R.A. No. 166) 39 were sufficiently expounded upon and qualified in the
recent case of Philip Morris, Inc. v. Court of Appeals: 40
xxx xxx xxx
Following universal acquiescence and comity, our municipal
law on trademarks regarding the requirement of actual use in
the Philippines must subordinate an international agreement
inasmuch as the apparent clash is being decided by a municipal
tribunal (Mortisen vs. Peters, Great Britain, High Court of
Judiciary of Scotland, 1906, 8 Sessions, 93; Paras, International
Law and World Organization, 1971 Ed., p. 20). Withal, the fact
that international law has been made part of the law of the land
does not by any means imply the primacy of international law
over national law in the municipal sphere. Under the doctrine of
incorporation as applied in most countries, rules of international
law are given a standing equal, not superior, to national
legislative enactments.
xxx xxx xxx
In other words, (a foreign corporation) may have the capacity to
sue for infringement irrespective of lack of business activity in
the Philippines on account of Section 21-A of the Trademark
Law but the question of whether they have an exclusive right
over their symbol as to justify issuance of the controversial writ
will depend on actual use of their trademarks in the Philippines
in line with Sections 2 and 2-A of the same law. It is thus
incongruous for petitioners to claim that when a foreign
corporation not licensed to do business in the Philippines files a
complaint for infringement, the entity need not be actually
using its trademark in commerce in the Philippines. Such a

foreign corporation may have the personality to file a suit for

infringement but it may not necessarily be entitled to protection
due to absence of actual use of the emblem in the local market.
xxx xxx xxx
Undisputably, private respondent is the senior registrant, having obtained several
registration certificates for its various trademarks "LEE," "LEERIDERS," and
"LEESURES" in both the supplemental and principal registers, as early as 1969
to 1973. 41 However, registration alone will not suffice. In Sterling Products
International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft, 42 we declared:

Sec. 20. Certificate of registration prima facie evidence of

validity. A certificate of registration of a mark or tradename
shall be a prima facie evidence of the validity of the
registration, the registrant's ownership of the mark or tradename, and of the registrant's exclusive right to use the same in
connection with the goods, business or services specified in the
certificate, subject to any conditions and limitations stated
therein.

xxx xxx xxx

The credibility placed on a certificate of registration of one's trademark, or its

weight as evidence of validity, ownership and exclusive use, is qualified. A
registration certificate serves merely as prima facie evidence. It is not conclusive
but can and may be rebutted by controverting evidence.

A rule widely accepted and firmly entrenched because it has

come down through the years is that actual use in commerce or
business is a prerequisite in the acquisition of the right of
ownership over a trademark.

Moreover, the aforequoted provision applies only to registrations in the principal

register. 43 Registrations in the supplemental register do not enjoy a similar
privilege. A supplemental register was created precisely for the registration of
marks which are not registrable on the principal register due to some defects. 44

xxx xxx xxx

The determination as to who is the prior user of the trademark is a question of

fact and it is this Court's working principle not to disturb the findings of the
Director of Patents on this issue in the absence of any showing of grave abuse of
discretion. The findings of facts of the Director of Patents are conclusive upon
the Supreme Court provided they are supported by substantial evidence. 45

It would seem quite clear that adoption alone of a trademark

would not give exclusive right thereto. Such right "grows out of
their actual use." Adoption is not use. One may make
advertisements, issue circulars, give out price lists on certain
goods; but these alone would not give exclusive right of use.
For trademark is a creation of use. The underlying reason for all
these is that purchasers have come to understand the mark as
indicating the origin of the wares. Flowing from this is the
trader's right to protection in the trade he has built up and the
goodwill he has accumulated from use of the trademark.
Registration of a trademark, of course, has value: it is an
administrative act declaratory of a pre-existing right.
Registration does not, however, perfect a trademark right.
(Emphasis ours.)
xxx xxx xxx
To augment its arguments that it was, not only the prior registrant, but also the
prior user, private respondent invokes Sec. 20 of the Trademark Law, thus:

In the case at bench, however, we reverse the findings of the Director of Patents
and the Court of Appeals. After a meticulous study of the records, we observe
that the Director of Patents and the Court of Appeals relied mainly on the
registration certificates as proof of use by private respondent of the trademark
"LEE" which, as we have previously discussed are not sufficient. We cannot give
credence to private respondent's claim that its "LEE" mark first reached the
Philippines in the 1960's through local sales by the Post Exchanges of the U.S.
Military Bases in the Philippines 46 based as it was solely on the self-serving
statements of Mr. Edward Poste, General Manager of Lee (Phils.), Inc., a wholly
owned subsidiary of the H.D. Lee, Co., Inc., U.S.A., herein private respondent. 47
Similarly, we give little weight to the numerous
vouchers representing various advertising expenses in the Philippines for "LEE"
products. 48 It is well to note that these expenses were incurred only in 1981 and
1982 by LEE (Phils.), Inc. after it entered into a licensing agreement with private
respondent on 11 May 1981. 49

On the other hand, petitioner has sufficiently shown that it has been in the
business of selling jeans and other garments adopting its "STYLISTIC MR.
LEE" trademark since 1975 as evidenced by appropriate sales invoices to various
stores and retailers. 50

SO ORDERED.

Our rulings in Pagasa Industrial Corp. v. Court of Appeals 51 and Converse

Rubber Corp. v. Universal Rubber Products, Inc., 52 respectively, are instructive:
The Trademark Law is very clear. It requires actual commercial
use of the mark prior to its registration. There is no dispute that
respondent corporation was the first registrant, yet it failed to
fully substantiate its claim that it used in trade or business in the
Philippines the subject mark; it did not present proof to invest it
with exclusive, continuous adoption of the trademark which
should consist among others, of considerable sales since its first
use. The invoices submitted by respondent which were dated
way back in 1957 show that the zippers sent to the Philippines
were to be used as "samples" and "of no commercial value."
The evidence for respondent must be clear, definite and free
from inconsistencies. "Samples" are not for sale and therefore,
the fact of exporting them to the Philippines cannot be
considered to be equivalent to the "use" contemplated by law.
Respondent did not expect income from such "samples." There
were no receipts to establish sale, and no proof were presented
to show that they were subsequently sold in the Philippines.
xxx xxx xxx
The sales invoices provide the best proof that there were actual
sales of petitioner's product in the country and that there was
actual use for a protracted period of petitioner's trademark or
part thereof through these sales.
For lack of adequate proof of actual use of its trademark in the Philippines prior
to petitioner's use of its own mark and for failure to establish confusing
similarity between said trademarks, private respondent's action for infringement
must necessarily fail.
WHEREFORE, premises considered, the questioned decision and resolution are
hereby REVERSED and SET ASIDE.

G.R. No. 114508 November 19, 1999

PRIBHDAS J. MIRPURI, petitioner,
vs.
COURT OF APPEALS, DIRECTOR OF PATENTS and the BARBIZON
CORPORATION, respondents.

PUNO, J.:
The Convention of Paris for the Protection of Industrial Property is a multilateral treaty which the Philippines bound itself to honor and enforce in this
country. As to whether or not the treaty affords protection to a foreign
corporation against a Philippine applicant for the registration of a similar
trademark is the principal issue in this case.
On June 15, 1970, one Lolita Escobar, the predecessor-in-interest of petitioner
Pribhdas J. Mirpuri, filed an application with the Bureau of Patents for the
registration of the trademark "Barbizon" for use in brassieres and ladies
undergarments. Escobar alleged that she had been manufacturing and selling
these products under the firm name "L & BM Commercial" since March 3, 1970.
Private respondent Barbizon Corporation, a corporation organized and doing
business under the laws of New York, U.S.A., opposed the application. It
claimed that:
The mark BARBIZON of respondent-applicant is confusingly
similar to the trademark BARBIZON which opposer owns and
has not abandoned.

That opposer will be damaged by the registration of the mark

BARBIZON and its business reputation and goodwill will
suffer great and irreparable injury.

Escobar later assigned her application to herein petitioner and this application
was opposed by private respondent. The case was docketed as Inter Partes Case
No. 2049 (IPC No. 2049).

That the respondent-applicant's use of the said mark

BARBIZON which resembles the trademark used and owned
by opposer, constitutes an unlawful appropriation of a mark
previously used in the Philippines and not abandoned and
therefore a statutory violation of Section 4 (d) of Republic Act
No. 166, as amended. 1

In its opposition, private respondent alleged that:

This was docketed as Inter Partes Case No. 686 (IPC No. 686). After
filing of the pleadings, the parties submitted the case for decision.
On June 18, 1974, the Director of Patents rendered judgment dismissing the
opposition and giving due course to Escobar's application, thus:
WHEREFORE, the opposition should be, as it is hereby,
DISMISSED. Accordingly, Application Serial No. 19010 for
the registration of the trademark BARBIZON, of respondent
Lolita R. Escobar, is given due course.
IT IS SO ORDERED. 2
This decision became final and on September 11, 1974, Lolita Escobar
was issued a certificate of registration for the trademark "Barbizon." The
trademark was "for use in "brassieres and lady's underwear garments
like panties." 3
Escobar later assigned all her rights and interest over the trademark to petitioner
Pribhdas J. Mirpuri who, under his firm name then, the "Bonito Enterprises,"
was the sole and exclusive distributor of Escobar's "Barbizon" products.
In 1979, however, Escobar failed to file with the Bureau of Patents the Affidavit
of Use of the trademark required under Section 12 of Republic Act (R.A.) No.
166, the Philippine Trademark Law. Due to this failure, the Bureau of Patents
cancelled Escobar's certificate of registration.
On May 27, 1981, Escobar reapplied for registration of the cancelled trademark.
Mirpuri filed his own application for registration of Escobar's trademark.

(a) The Opposer has adopted the trademark BARBIZON

(word), sometime in June 1933 and has then used it on various
kinds of wearing apparel. On August 14, 1934, Opposer
obtained from the United States Patent Office a more recent
registration of the said mark under Certificate of Registration
No. 316,161. On March 1, 1949, Opposer obtained from the
United States Patent Office a more recent registration for the
said trademark under Certificate of Registration No. 507,214, a
copy of which is herewith attached as Annex "A." Said
Certificate of Registration covers the following goods
wearing apparel: robes, pajamas, lingerie, nightgowns and slips;
(b) Sometime in March 1976, Opposer further adopted the
trademark BARBIZON and Bee design and used the said mark
in various kinds of wearing apparel. On March 15, 1977,
Opposer secured from the United States Patent Office a
registration of the said mark under Certificate of Registration
No. 1,061,277, a copy of which is herein enclosed as Annex
"B." The said Certificate of Registration covers the following
goods: robes, pajamas, lingerie, nightgowns and slips;
(c) Still further, sometime in 1961, Opposer adopted the
trademark BARBIZON and a Representation of a Woman and
thereafter used the said trademark on various kinds of wearing
apparel. Opposer obtained from the United States Patent Office
registration of the said mark on April 5, 1983 under Certificate
of Registration No. 1,233,666 for the following goods: wearing
apparel: robes, pajamas, nightgowns and lingerie. A copy of the
said certificate of registration is herewith enclosed as Annex
"C."
(d) All the above registrations are subsisting and in force and
Opposer has not abandoned the use of the said trademarks. In
fact, Opposer, through a wholly-owned Philippine subsidiary,
the Philippine Lingerie Corporation, has been manufacturing

the goods covered by said registrations and selling them to

various countries, thereby earning valuable foreign exchange
for the country. As a result of respondent-applicant's
misappropriation of Opposer's BARBIZON trademark,
Philippine Lingerie Corporation is prevented from selling its
goods in the local market, to the damage and prejudice of
Opposer and its wholly-owned subsidiary.
(e) The Opposer's goods bearing the trademark BARBIZON
have been used in many countries, including the Philippines, for
at least 40 years and has enjoyed international reputation and
good will for their quality. To protect its registrations in
countries where the goods covered by the registrations are
being sold, Opposer has procured the registration of the
trademark BARBIZON in the following countries: Australia,
Austria, Abu Dhabi, Argentina, Belgium, Bolivia, Bahrain,
Canada, Chile, Colombia, Denmark, Ecuador, France, West
Germany, Greece, Guatemala, Hongkong, Honduras, Italy,
Japan, Jordan, Lebanon, Mexico, Morocco, Panama, New
Zealand, Norway, Sweden, Switzerland, Syria, El Salvador,
South Africa, Zambia, Egypt, and Iran, among others;
(f) To enhance its international reputation for quality goods and
to further promote goodwill over its name, marks and products,
Opposer has extensively advertised its products, trademarks and
name in various publications which are circulated in the United
States and many countries around the world, including the
Philippines;
(g) The trademark BARBIZON was fraudulently registered in
the Philippines by one Lolita R. Escobar under Registration No.
21920, issued on September 11, 1974, in violation of Article
189 (3) of the Revised Penal Code and Section 4 (d) of the
Trademark Law. Herein respondent applicant acquired by
assignment the "rights" to the said mark previously registered
by Lolita Escobar, hence respondent-applicant's title is vitiated
by the same fraud and criminal act. Besides, Certificate of
Registration No. 21920 has been cancelled for failure of either
Lolita Escobar or herein respondent-applicant, to seasonably
file the statutory affidavit of use. By applying for a reregistration of the mark BARBIZON subject of this opposition,

respondent-applicant seeks to perpetuate the fraud and criminal

act committed by Lolita Escobar.
(h) Opposer's BARBIZON as well as its BARBIZON and Bee
Design and BARBIZON and Representation of a Woman
trademarks qualify as well-known trademarks entitled to
protection under Article 6bis of the Convention of Paris for the
Protection of Industrial Property and further amplified by the
Memorandum of the Minister of Trade to the Honorable
Director of Patents dated October 25, 1983 [sic], 4 Executive
Order No. 913 dated October 7, 1963 and the Memorandum of
the Minister of Trade and Industry to the Honorable Director of
Patents dated October 25, 1983.
(i) The trademark applied for by respondent applicant is
identical to Opposer's BARBIZON trademark and constitutes
the dominant part of Opposer's two other marks namely,
BARBIZON and Bee design and BARBIZON and a
Representation of a Woman. The continued use by respondentapplicant of Opposer's trademark BARBIZON on goods
belonging to Class 25 constitutes a clear case of commercial
and criminal piracy and if allowed registration will violate not
only the Trademark Law but also Article 189 of the Revised
Penal Code and the commitment of the Philippines to an
international treaty. 5
Replying to private respondent's opposition, petitioner raised the defense
of res judicata.
On March 2, 1982, Escobar assigned to petitioner the use of the business name
"Barbizon International." Petitioner registered the name with the Department of
Trade and Industry (DTI) for which a certificate of registration was issued in
1987.
Forthwith, private respondent filed before the Office of Legal Affairs of the DTI
a petition for cancellation of petitioner's business name.
On November 26, 1991, the DTI, Office of Legal Affairs, cancelled petitioner's
certificate of registration, and declared private respondent the owner and prior
user of the business name "Barbizon International." Thus:

WHEREFORE, the petition is hereby GRANTED and

petitioner is declared the owner and prior user of the business
name "BARBIZON INTERNATIONAL" under Certificate of
Registration No. 87-09000 dated March 10, 1987 and issued in
the name of respondent, is [sic] hereby ordered revoked and
cancelled. . . . . 6
Meanwhile, in IPC No. 2049, the evidence of both parties were received by the
Director of Patents. On June 18, 1992, the Director rendered a decision declaring
private respondent's opposition barred by res judicata and giving due course to
petitioner's application for registration, to wit:
WHEREFORE, the present Opposition in Inter Partes Case No.
2049 is hereby DECLARED BARRED by res judicata and is
hereby DISMISSED. Accordingly, Application Serial No.
45011 for trademark BARBIZON filed by Pribhdas J. Mirpuri
is GIVEN DUE COURSE.
SO ORDERED. 7
Private respondent questioned this decision before the Court of Appeals in CAG.R. SP No. 28415. On April 30, 1993, the Court of Appeals reversed the
Director of Patents finding that IPC No. 686 was not barred by judgment in IPC
No. 2049 and ordered that the case be remanded to the Bureau of Patents for
further proceedings, viz:
WHEREFORE, the appealed Decision No. 92-13 dated June
18, 1992 of the Director of Patents in Inter Partes Case No.
2049 is hereby SET ASIDE; and the case is hereby remanded to
the Bureau of Patents for further proceedings, in accordance
with this pronouncement. No costs. 8
In a Resolution dated March 16, 1994, the Court of Appeals denied
reconsideration of its decision. 9 Hence, this recourse.
Before us, petitioner raises the following issues:
1. WHETHER OR NOT THE DECISION OF THE
DIRECTOR OF PATENTS IN INTER PARTES CASE NO.
686 RENDERED ON JUNE 18, 1974, ANNEX C HEREOF,

CONSTITUTED RES JUDICATA IN SO FAR AS THE CASE

BEFORE THE DIRECTOR OF PATENTS IS CONCERNED;
2. WHETHER OR NOT THE DIRECTOR OF PATENTS
CORRECTLY APPLIED THE PRINCIPLE OF RES
JUDICATA IN DISMISSING PRIVATE RESPONDENT
BARBIZON'S OPPOSITION TO PETITIONER'S
APPLICATION FOR REGISTRATION FOR THE
TRADEMARK BARBIZON, WHICH HAS SINCE RIPENED
TO CERTIFICATE OF REGISTRATION NO. 53920 ON
NOVEMBER 16, 1992;
3. WHETHER OR NOT THE REQUISITE THAT A
"JUDGMENT ON THE MERITS" REQUIRED A "HEARING
WHERE BOTH PARTIES ARE SUPPOSED TO ADDUCE
EVIDENCE" AND WHETHER THE JOINT SUBMISSION
OF THE PARTIES TO A CASE ON THE BASIS OF THEIR
RESPECTIVE PLEADINGS WITHOUT PRESENTING
TESTIMONIAL OR DOCUMENTARY EVIDENCE FALLS
WITHIN THE MEANING OF "JUDGMENT ON THE
MERITS" AS ONE OF THE REQUISITES TO CONSTITUTE
RES JUDICATA;
4. WHETHER A DECISION OF THE DEPARTMENT OF
TRADE AND INDUSTRY CANCELLING PETITIONER'S
FIRM NAME "BARBIZON INTERNATIONAL" AND
WHICH DECISION IS STILL PENDING
RECONSIDERATION NEVER OFFERED IN EVIDENCE
BEFORE THE DIRECTOR OF PATENTS IN INTER PARTES
CASE NO. 2049 HAS THE RIGHT TO DECIDE SUCH
CANCELLATION NOT ON THE BASIS OF THE BUSINESS
NAME LAW (AS IMPLEMENTED BY THE BUREAU OF
DOMESTIC TRADE) BUT ON THE BASIS OF THE PARIS
CONVENTION AND THE TRADEMARK LAW (R.A. 166)
WHICH IS WITHIN THE ORIGINAL AND EXCLUSIVE
JURISDICTION OF THE DIRECTOR OF PATENTS. 10
Before ruling on the issues of the case, there is need for a brief background on
the function and historical development of trademarks and trademark law.

A "trademark" is defined under R.A. 166, the Trademark Law, as including "any
word, name, symbol, emblem, sign or device or any combination thereof adopted
and used by a manufacturer or merchant to identify his goods and distinguish
them from those manufactured, sold or dealt in by others. 11 This definition has
been simplified in R.A. No. 8293, the Intellectual Property Code of the
Philippines, which defines a "trademark" as "any visible sign capable of
distinguishing goods." 12 In Philippine jurisprudence, the function of a trademark
is to point out distinctly the origin or ownership of the goods to which it is
affixed; to secure to him, who has been instrumental in bringing into the market
a superior article of merchandise, the fruit of his industry and skill; to assure the
public that they are procuring the genuine article; to prevent fraud and
imposition; and to protect the manufacturer against substitution and sale of an
inferior and different article as his product. 13
Modern authorities on trademark law view trademarks as performing three
distinct functions: (1) they indicate origin or ownership of the articles to which
they are attached; (2) they guarantee that those articles come up to a certain
standard of quality; and (3) they advertise the articles they symbolize. 14
Symbols have been used to identify the ownership or origin of articles for
several centuries. 15 As early as 5,000 B.C., markings on pottery have been found
by archaeologists. Cave drawings in southwestern Europe show bison with
symbols on their flanks. 16 Archaeological discoveries of ancient Greek and
Roman inscriptions on sculptural works, paintings, vases, precious stones,
glassworks, bricks, etc. reveal some features which are thought to be marks or
symbols. These marks were affixed by the creator or maker of the article, or by
public authorities as indicators for the payment of tax, for disclosing state
monopoly, or devices for the settlement of accounts between an entrepreneur and
his workmen. 17
In the Middle Ages, the use of many kinds of marks on a variety of goods was
commonplace. Fifteenth century England saw the compulsory use of identifying
marks in certain trades. There were the baker's mark on bread, bottlemaker's
marks, smith's marks, tanner's marks, watermarks on paper, etc. 18 Every guild
had its own mark and every master belonging to it had a special mark of his own.
The marks were not trademarks but police marks compulsorily imposed by the
sovereign to let the public know that the goods were not "foreign" goods
smuggled into an area where the guild had a monopoly, as well as to aid in
tracing defective work or poor craftsmanship to the artisan. 19 For a similar
reason, merchants also used merchants' marks. Merchants dealt in goods

acquired from many sources and the marks enabled them to identify and reclaim
their goods upon recovery after shipwreck or piracy. 20
With constant use, the mark acquired popularity and became voluntarily adopted.
It was not intended to create or continue monopoly but to give the customer an
index or guarantee of quality. 21 It was in the late 18th century when the
industrial revolution gave rise to mass production and distribution of consumer
goods that the mark became an important instrumentality of trade and commerce.
22
By this time, trademarks did not merely identify the goods; they also indicated
the goods to be of satisfactory quality, and thereby stimulated further purchases
by the consuming public. 23 Eventually, they came to symbolize the goodwill and
business reputation of the owner of the product and became a property right
protected by law. 24 The common law developed the doctrine of trademarks and
tradenames "to prevent a person from palming off his goods as another's, from
getting another's business or injuring his reputation by unfair means, and, from
defrauding the public." 25 Subsequently, England and the United States enacted
national legislation on trademarks as part of the law regulating unfair trade. 26 It
became the right of the trademark owner to exclude others from the use of his
mark, or of a confusingly similar mark where confusion resulted in diversion of
trade or financial injury. At the same time, the trademark served as a warning
against the imitation or faking of products to prevent the imposition of fraud
upon the public. 27
Today, the trademark is not merely a symbol of origin and goodwill; it is often
the most effective agent for the actual creation and protection of goodwill. It
imprints upon the public mind an anonymous and impersonal guaranty of
satisfaction, creating a desire for further satisfaction. In other words, the mark
actually sells the goods. 28 The mark has become the "silent salesman," the
conduit through which direct contact between the trademark owner and the
consumer is assured. It has invaded popular culture in ways never anticipated
that it has become a more convincing selling point than even the quality of the
article to which it refers. 29 In the last half century, the unparalleled growth of
industry and the rapid development of communications technology have enabled
trademarks, tradenames and other distinctive signs of a product to penetrate
regions where the owner does not actually manufacture or sell the product itself.
Goodwill is no longer confined to the territory of actual market penetration; it
extends to zones where the marked article has been fixed in the public mind
through advertising. 30 Whether in the print, broadcast or electronic
communications medium, particularly on the Internet, 31 advertising has paved
the way for growth and expansion of the product by creating and earning a

reputation that crosses over borders, virtually turning the whole world into one
vast marketplace.
This is the mise-en-scene of the present controversy. Petitioner brings this action
claiming that "Barbizon" products have been sold in the Philippines since 1970.
Petitioner developed this market by working long hours and spending
considerable sums of money on advertisements and promotion of the trademark
and its products. Now, almost thirty years later, private respondent, a foreign
corporation, "swaggers into the country like a conquering hero," usurps the
trademark and invades petitioner's market. 32 Justice and fairness dictate that
private respondent be prevented from appropriating what is not its own. Legally,
at the same time, private respondent is barred from questioning petitioner's
ownership of the trademark because of res judicata. 33
Literally, res judicata means a matter adjudged, a thing judicially acted upon or
decided; a thing or matter settled by judgment. 34 In res judicata, the judgment in
the first action is considered conclusive as to every matter offered and received
therein, as to any other admissible matter which might have been offered for that
purpose, and all other matters that could have been adjudged therein. 35 Res
judicata is an absolute bar to a subsequent action for the same cause; and its
requisites are: (a) the former judgment or order must be final; (b) the judgment
or order must be one on the merits; (c) it must have been rendered by a court
having jurisdiction over the subject matter and parties; (d) there must be between
the first and second actions, identity of parties, of subject matter and of causes of
action. 36
The Solicitor General, on behalf of respondent Director of Patents, has joined
cause with petitioner. Both claim that all the four elements of res judicata have
been complied with: that the judgment in IPC No. 686 was final and was
rendered by the Director of Patents who had jurisdiction over the subject matter
and parties; that the judgment in IPC No. 686 was on the merits; and that the
lack of a hearing was immaterial because substantial issues were raised by the
parties and passed upon by the Director of Patents. 37
The decision in IPC No. 686 reads as follows:
xxx xxx xxx.

Neither party took testimony nor adduced documentary

evidence. They submitted the case for decision based on the
pleadings which, together with the pertinent records, have all
been carefully considered.
Accordingly, the only issue for my disposition is whether or not
the herein opposer would probably be damaged by the
registration of the trademark BARBIZON sought by the
respondent-applicant on the ground that it so resembles the
trademark BARBIZON allegedly used and owned by the former
to be "likely to cause confusion, mistake or to deceive
purchasers."
On record, there can be no doubt that respondent-applicant's
sought-to-be-registered trademark BARBIZON is similar, in
fact obviously identical, to opposer's alleged trademark
BARBIZON, in spelling and pronunciation. The only
appreciable but very negligible difference lies in their
respective appearances or manner of presentation. Respondentapplicant's trademark is in bold letters (set against a black
background), while that of the opposer is offered in stylish
script letters.
It is opposer's assertion that its trademark BARBIZON has been
used in trade or commerce in the Philippines prior to the date of
application for the registration of the identical mark
BARBIZON by the respondent-applicant. However, the
allegation of facts in opposer's verified notice of opposition is
devoid of such material information. In fact, a reading of the
text of said verified opposition reveals an apparent, if not
deliberate, omission of the date (or year) when opposer's
alleged trademark BARBIZON was first used in trade in the
Philippines (see par. No. 1, p. 2, Verified Notice of Opposition,
Rec.). Thus, it cannot here and now be ascertained whether
opposer's alleged use of the trademark BARBIZON could be
prior to the use of the identical mark by the herein respondentapplicant, since the opposer attempted neither to substantiate its
claim of use in local commerce with any proof or evidence.
Instead, the opposer submitted the case for decision based
merely on the pleadings.

On the other hand, respondent-applicant asserted in her

amended application for registration that she first used the
trademark BARBIZON for brassiere (or "brasseire") and ladies
underwear garments and panties as early as March 3, 1970. Be
that as it may, there being no testimony taken as to said date of
first use, respondent-applicant will be limited to the filing date,
June 15, 1970, of her application as the date of first use (Rule
173, Rules of Practice in Trademark Cases).
From the foregoing, I conclude that the opposer has not made
out a case of probable damage by the registration of the
respondent-applicant's mark BARBIZON.
WHEREFORE, the opposition should be, as it is hereby,
DISMISSED. Accordingly, Application Serial No. 19010, for
the registration of the trademark BARBIZON of respondent
Lolita R. Escobar, is given due course. 38
The decision in IPC No. 686 was a judgment on the merits and it was error for
the Court of Appeals to rule that it was not. A judgment is on the merits when it
determines the rights and liabilities of the parties based on the disclosed facts,
irrespective of formal, technical or dilatory objections. 39 It is not necessary that a
trial should have been conducted. If the court's judgment is general, and not
based on any technical defect or objection, and the parties had a full legal
opportunity to be heard on their respective claims and contentions, it is on the
merits although there was no actual hearing or arguments on the facts of the case.
40
In the case at bar, the Director of Patents did not dismiss private respondent's
opposition on a sheer technicality. Although no hearing was conducted, both
parties filed their respective pleadings and were given opportunity to present
evidence. They, however, waived their right to do so and submitted the case for
decision based on their pleadings. The lack of evidence did not deter the Director
of Patents from ruling on the case, particularly on the issue of prior use, which
goes into the very substance of the relief sought by the parties. Since private
respondent failed to prove prior use of its trademark, Escobar's claim of first use
was upheld.
The judgment in IPC No. 686 being on the merits, petitioner and the Solicitor
General allege that IPC No. 686 and IPC No. 2049 also comply with the fourth
requisite of res judicata, i.e., they involve the same parties and the same subject
matter, and have identical causes of action.

Undisputedly, IPC No. 686 and IPC No. 2049 involve the same parties and the
same subject matter. Petitioner herein is the assignee of Escobar while private
respondent is the same American corporation in the first case. The subject matter
of both cases is the trademark "Barbizon." Private respondent counter-argues,
however, that the two cases do not have identical causes of action. New causes of
action were allegedly introduced in IPC No. 2049, such as the prior use and
registration of the trademark in the United States and other countries worldwide,
prior use in the Philippines, and the fraudulent registration of the mark in
violation of Article 189 of the Revised Penal Code. Private respondent also cited
protection of the trademark under the Convention of Paris for the Protection of
Industrial Property, specifically Article 6bis thereof, and the implementation of
Article 6bis by two Memoranda dated November 20, 1980 and October 25, 1983
of the Minister of Trade and Industry to the Director of Patents, as well as
Executive Order (E.O.) No. 913.
The Convention of Paris for the Protection of Industrial Property, otherwise
known as the Paris Convention, is a multilateral treaty that seeks to protect
industrial property consisting of patents, utility models, industrial designs,
trademarks, service marks, trade names and indications of source or appellations
of origin, and at the same time aims to repress unfair competition. 41 The
Convention is essentially a compact among various countries which, as members
of the Union, have pledged to accord to citizens of the other member countries
trademark and other rights comparable to those accorded their own citizens by
their domestic laws for an effective protection against unfair competition. 42 In
short, foreign nationals are to be given the same treatment in each of the member
countries as that country makes available to its own citizens. 43 Nationals of the
various member nations are thus assured of a certain minimum of international
protection of their industrial property. 44
The Convention was first signed by eleven countries in Paris on March 20, 1883.
45
It underwent several revisions at Brussels in 1900, at Washington in 1911,
at The Hague in 1925, at London in 1934, at Lisbon in 1958, 46 and at Stockholm
in 1967. Both the Philippines and the United States of America, herein private
respondent's country, are signatories to the Convention. The United States
acceded on May 30, 1887 while the Philippines, through its Senate, concurred on
May 10, 1965. 47 The Philippines' adhesion became effective on September 27,
1965, 48 and from this date, the country obligated itself to honor and enforce the
provisions of the Convention. 49
In the case at bar, private respondent anchors its cause of action on the first
paragraph of Article 6bis of the Paris Convention which reads as follows:

Article 6bis
(1) The countries of the Union undertake, either
administratively if their legislation so permits, or at the request
of an interested party, to refuse or to cancel the registration and
to prohibit the use, of a trademark which constitutes a
reproduction, an imitation, or a translation, liable to create
confusion, of a mark considered by the competent authority of
the country of registration or use to be well-known in that
country as being already the mark of a person entitled to the
benefits of this Convention and used for identical or similar
goods. These provisions shall also apply when the essential part
of the mark constitutes a reproduction of any such well-known
mark or an imitation liable to create confusion therewith.
(2) A period of at least five years from the date of registration
shall be allowed for seeking the cancellation of such a mark.
The countries of the Union may provide for a period within
which the prohibition of use must be sought.
(3) No time limit shall be fixed for seeking the cancellation or
the prohibition of the use of marks registered or used in bad
faith. 50
This Article governs protection of well-known trademarks. Under the
first paragraph, each country of the Union bound itself to undertake to
refuse or cancel the registration, and prohibit the use of a trademark
which is a reproduction, imitation or translation, or any essential part of
which trademark constitutes a reproduction, liable to create confusion,
of a mark considered by the competent authority of the country where
protection is sought, to be well-known in the country as being already
the mark of a person entitled to the benefits of the Convention, and used
for identical or similar goods.
Art. 6bis was first introduced at The Hague in 1925 and amended in Lisbon in
1952. 51 It is a self-executing provision and does not require legislative
enactment to give it effect in the member country. 52 It may be applied directly by
the tribunals and officials of each member country by the mere publication or
proclamation of the Convention, after its ratification according to the public law
of each state and the order for its execution. 53

The essential requirement under Article 6bis is that the trademark to be protected
must be "well-known" in the country where protection is sought. The power to
determine whether a trademark is well-known lies in the "competent authority of
the country of registration or use." This competent authority would be either the
registering authority if it has the power to decide this, or the courts of the country
in question if the issue comes before a court. 54
Pursuant to Article 6bis, on November 20, 1980, then Minister Luis Villafuerte
of the Ministry of Trade issued a Memorandum to the Director of Patents. The
Minister ordered the Director that:
Pursuant to the Paris Convention for the Protection of Industrial
Property to which the Philippines is a signatory, you are hereby
directed to reject all pending applications for Philippine
registration of signature and other world-famous trademarks by
applicants other than its original owners or users.
The conflicting claims over internationally known trademarks
involve such name brands as Lacoste, Jordache, Vanderbilt,
Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar de la
Renta, Calvin Klein, Givenchy, Ralph Lauren, Geoffrey Beene,
Lanvin and Ted Lapidus.
It is further directed that, in cases where warranted, Philippine
registrants of such trademarks should be asked to surrender
their certificates of registration, if any, to avoid suits for
damages and other legal action by the trademarks' foreign or
local owners or original users.
You are also required to submit to the undersigned a progress
report on the matter.
For immediate compliance. 55
Three years later, on October 25, 1983, then Minister Roberto Ongpin issued
another Memorandum to the Director of Patents, viz:
Pursuant to Executive Order No. 913 dated 7 October 1983
which strengthens the rule-making and adjudicatory powers of
the Minister of Trade and Industry and provides inter alia, that

"such rule-making and adjudicatory powers should be

revitalized in order that the Minister of Trade and Industry can .
. . apply more swift and effective solutions and remedies to old
and new problems . . . such as infringement of internationallyknown tradenames and trademarks . . ." and in view of the
decision of the Intermediate Appellate Court in the case of LA
CHEMISE LACOSTE, S.A., versus RAM SADWHANI [ACG.R. SP NO. 13359 (17) June 1983] 56 which affirms the
validity of the MEMORANDUM of then Minister Luis R.
Villafuerte dated 20 November 1980 confirming our obligations
under the PARIS CONVENTION FOR THE PROTECTION
OF INDUSTRIAL PROPERTY to which the Republic of the
Philippines is a signatory, you are hereby directed to implement
measures necessary to effect compliance with our obligations
under said Convention in general, and, more specifically, to
honor our commitment under Section 6bis 57 thereof, as follows:
1. Whether the trademark under consideration
is well-known in the Philippines or is a mark
already belonging to a person entitled to the
benefits of the CONVENTION, this should be
established, pursuant to Philippine Patent
Office procedures in inter partes and ex parte
cases, according to any of the following
criteria or any combination thereof:
(a) a declaration by the
Minister of Trade and
Industry that the trademark
being considered is already
well-known in the
Philippines such that
permission for its use by
other than its original owner
will constitute a reproduction,
imitation, translation or other
infringement;
(b) that the trademark is used
in commerce internationally,
supported by proof that goods

bearing the trademark are

sold on an international scale,
advertisements, the
establishment of factories,
sales offices, distributorships,
and the like, in different
countries, including volume
or other measure of
international trade and
commerce;
(c) that the trademark is duly
registered in the industrial
property office(s) of another
country or countries, taking
into consideration the date of
such registration;
(d) that the trademark has
long been established and
obtained goodwill and
international consumer
recognition as belonging to
one owner or source;
(e) that the trademark
actually belongs to a party
claiming ownership and has
the right to registration under
the provisions of the
aforestated PARIS
CONVENTION.
2. The word trademark, as used in this
MEMORANDUM, shall include tradenames,
service marks, logos, signs, emblems, insignia
or other similar devices used for identification
and recognition by consumers.
3. The Philippine Patent Office shall refuse all
applications for, or cancel the registration of,

trademarks which constitute a reproduction,

translation or imitation of a trademark owned
by a person, natural or corporate, who is a
citizen of a country signatory to the PARIS
CONVENTION FOR THE PROTECTION
OF INDUSTRIAL PROPERTY.
4. The Philippine Patent Office shall give due
course to the Opposition in cases already or
hereafter filed against the registration of
trademarks entitled to protection of Section
6bis of said PARIS CONVENTION as
outlined above, by remanding applications
filed by one not entitled to such protection for
final disallowance by the Examination
Division.
5. All pending applications for Philippine
registration of signature and other worldfamous trademarks filed by applicants other
than their original owners or users shall be
rejected forthwith. Where such applicants have
already obtained registration contrary to the
abovementioned PARIS CONVENTION
and/or Philippine Law, they shall be directed
to surrender their Certificates of Registration
to the Philippine Patent Office for immediate
cancellation proceedings.
xxx xxx xxx. 58
In the Villafuerte Memorandum, the Minister of Trade instructed the Director of
Patents to reject all pending applications for Philippine registration of signature
and other world-famous trademarks by applicants other than their original
owners or users. The Minister enumerated several internationally-known
trademarks and ordered the Director of Patents to require Philippine registrants
of such marks to surrender their certificates of registration.
In the Ongpin Memorandum, the Minister of Trade and Industry did not
enumerate well-known trademarks but laid down guidelines for the Director of
Patents to observe in determining whether a trademark is entitled to protection as

a well-known mark in the Philippines under Article 6bis of the Paris Convention.
This was to be established through Philippine Patent Office procedures in inter
partes and ex parte cases pursuant to the criteria enumerated therein. The
Philippine Patent Office was ordered to refuse applications for, or cancel the
registration of, trademarks which constitute a reproduction, translation or
imitation of a trademark owned by a person who is a citizen of a member of the
Union. All pending applications for registration of world-famous trademarks by
persons other than their original owners were to be rejected forthwith. The
Ongpin Memorandum was issued pursuant to Executive Order No. 913 dated
October 7, 1983 of then President Marcos which strengthened the rule-making
and adjudicatory powers of the Minister of Trade and Industry for the effective
protection of consumers and the application of swift solutions to problems in
trade and industry. 59
Both the Villafuerte and Ongpin Memoranda were sustained by the Supreme
Court in the 1984 landmark case of La Chemise Lacoste, S.A. v. Fernandez. 60
This court ruled therein that under the provisions of Article 6bis of the Paris
Convention, the Minister of Trade and Industry was the "competent authority" to
determine whether a trademark is well-known in this country. 61
The Villafuerte Memorandum was issued in 1980, i.e., fifteen (15) years after the
adoption of the Paris Convention in 1965. In the case at bar, the first inter partes
case, IPC No. 686, was filed in 1970, before the Villafuerte Memorandum but
five (5) years after the effectivity of the Paris Convention. Article 6bis was
already in effect five years before the first case was instituted. Private
respondent, however, did not cite the protection of Article 6bis, neither did it
mention the Paris Convention at all. It was only in 1981 when IPC No. 2049 was
instituted that the Paris Convention and the Villafuerte Memorandum, and,
during the pendency of the case, the 1983 Ongpin Memorandum were invoked
by private respondent.
The Solicitor General argues that the issue of whether the protection of Article
6bis of the Convention and the two Memoranda is barred by res judicata has
already been answered in Wolverine Worldwide, Inc. v. Court of
Appeals. 62 In this case, petitioner Wolverine, a foreign corporation, filed with the
Philippine Patent Office a petition for cancellation of the registration certificate
of private respondent, a Filipino citizen, for the trademark "Hush Puppies" and
"Dog Device." Petitioner alleged that it was the registrant of the internationallyknown trademark in the United States and other countries, and cited protection
under the Paris Convention and the Ongpin Memorandum. The petition was
dismissed by the Patent Office on the ground of res judicata. It was found that in

1973 petitioner's predecessor-in-interest filed two petitions for cancellation of the

same trademark against respondent's predecessor-in-interest. The Patent Office
dismissed the petitions, ordered the cancellation of registration of petitioner's
trademark, and gave due course to respondent's application for registration. This
decision was sustained by the Court of Appeals, which decision was not elevated
to us and became final and
executory. 63
Wolverine claimed that while its previous petitions were filed under R.A. No.
166, the Trademark Law, its subsequent petition was based on a new cause of
action, i.e., the Ongpin Memorandum and E.O. No. 913 issued in 1983, after
finality of the previous decision. We held that the said Memorandum and E.O.
did not grant a new cause of action because it did "not amend the Trademark
Law," . . . "nor did it indicate a new policy with respect to the registration in the
Philippines of world-famous trademarks." 64 This conclusion was based on the
finding that Wolverine's two previous petitions and subsequent petition dealt
with the same issue of ownership of the trademark. 65 In other words, since the
first and second cases involved the same issue of ownership, then the first case
was a bar to the second case.
In the instant case, the issue of ownership of the trademark "Barbizon" was not
raised in IPC No. 686. Private respondent's opposition therein was merely
anchored on:
(a) "confusing similarity" of its trademark with that of
Escobar's;
(b) that the registration of Escobar's similar trademark will
cause damage to private respondent's business reputation and
goodwill; and
(c) that Escobar's use of the trademark amounts to an unlawful
appropriation of a mark previously used in the Philippines
which act is penalized under Section 4 (d) of the Trademark
Law.
In IPC No. 2049, private respondent's opposition set forth several issues
summarized as follows:

(a) as early as 1933, it adopted the word "BARBIZON" as

trademark on its products such as robes, pajamas, lingerie,
nightgowns and slips;
(b) that the trademark "BARBIZON" was registered with the
United States Patent Office in 1934 and 1949; and that
variations of the same trademark, i.e., "BARBIZON" with Bee
design and "BARBIZON" with the representation of a woman
were also registered with the U.S. Patent Office in 1961 and
1976;
(c) that these marks have been in use in the Philippines and in
many countries all over the world for over forty years.
"Barbizon" products have been advertised in international
publications and the marks registered in 36 countries
worldwide;
(d) Escobar's registration of the similar trademark
"BARBIZON" in 1974 was based on fraud; and this fraudulent
registration was cancelled in 1979, stripping Escobar of
whatsoever right she had to the said mark;
(e) Private respondent's trademark is entitled to protection as a
well-known mark under Article 6bis of the Paris Convention,
Executive Order No. 913, and the two Memoranda dated
November 20, 1980 and October 25, 1983 of the Minister of
Trade and Industry to the Director of Patents;
(f) Escobar's trademark is identical to private respondent's and
its use on the same class of goods as the latter's amounts to a
violation of the Trademark Law and Article 189 of the Revised
Penal Code.
IPC No. 2049 raised the issue of ownership of the trademark, the first
registration and use of the trademark in the United States and other
countries, and the international recognition and reputation of the
trademark established by extensive use and advertisement of private
respondent's products for over forty years here and abroad. These are
different from the issues of confusing similarity and damage in IPC No.
686. The issue of prior use may have been raised in IPC No. 686 but this
claim was limited to prior use in the Philippines only. Prior use in IPC

No. 2049 stems from private respondent's claim as originator of the

word and symbol "Barbizon," 66 as the first and registered user of the
mark attached to its products which have been sold and advertised
worldwide for a considerable number of years prior to petitioner's first
application for registration of her trademark in the Philippines. Indeed,
these are substantial allegations that raised new issues and necessarily
gave private respondent a new cause of action. Res judicata does not
apply to rights, claims or demands, although growing out of the same
subject matter, which constitute separate or distinct causes of action and
were not put in issue in the former action. 67
Respondent corporation also introduced in the second case a fact that did not
exist at the time the first case was filed and terminated. The cancellation of
petitioner's certificate of registration for failure to file the affidavit of use arose
only after IPC No. 686. It did not and could not have occurred in the first case,
and this gave respondent another cause to oppose the second application. Res
judicata extends only to facts and conditions as they existed at the time judgment
was rendered and to the legal rights and relations of the parties fixed by the facts
so determined. 68 When new facts or conditions intervene before the second suit,
furnishing a new basis for the claims and defenses of the parties, the issues are
no longer the same, and the former judgment cannot be pleaded as a bar to the
subsequent action. 69
It is also noted that the oppositions in the first and second cases are based on
different laws. The opposition in IPC No. 686 was based on specific provisions
of the Trademark Law, i.e., Section 4 (d) 70 on confusing similarity of trademarks
and Section 8 71 on the requisite damage to file an opposition to a petition for
registration. The opposition in IPC No. 2049 invoked the Paris Convention,
particularly Article 6bis thereof, E.O. No. 913 and the two Memoranda of the
Minister of Trade and Industry. This opposition also invoked Article 189 of the
Revised Penal Code which is a statute totally different from the Trademark Law.
72
Causes of action which are distinct and independent from each other, although
arising out of the same contract, transaction, or state of facts, may be sued on
separately, recovery on one being no bar to subsequent actions on others. 73 The
mere fact that the same relief is sought in the subsequent action will not render
the judgment in the prior action operative as res judicata, such as where the two
actions are based on different statutes. 74 Res judicata therefore does not apply to
the instant case and respondent Court of Appeals did not err in so ruling.
Intellectual and industrial property rights cases are not simple property cases.
Trademarks deal with the psychological function of symbols and the effect of

these symbols on the public at large. 75 Trademarks play a significant role in

communication, commerce and trade, and serve valuable and interrelated
business functions, both nationally and internationally. For this reason, all
agreements concerning industrial property, like those on trademarks and
tradenames, are intimately connected with economic development. 76 Industrial
property encourages investments in new ideas and inventions and stimulates
creative efforts for the satisfaction of human needs. They speed up transfer of
technology and industrialization, and thereby bring about social and economic
progress. 77 These advantages have been acknowledged by the Philippine
government itself. The Intellectual Property Code of the Philippines declares that
"an effective intellectual and industrial property system is vital to the
development of domestic and creative activity, facilitates transfer of technology,
it attracts foreign investments, and ensures market access for our products." 78
The Intellectual Property Code took effect on January 1, 1998 and by its express
provision, 79 repealed the Trademark Law, 80 the Patent Law, 81 Articles 188 and
189 of the Revised Penal Code, the Decree on Intellectual Property, 82 and the
Decree on Compulsory Reprinting of Foreign Textbooks. 83 The Code was
enacted to strengthen the intellectual and industrial property system in the
Philippines as mandated by the country's accession to the Agreement
Establishing the World Trade Organization (WTO). 84
The WTO is a common institutional framework for the conduct of trade relations
among its members in matters related to the multilateral and plurilateral trade
agreements annexed to the WTO Agreement. 85 The WTO framework ensures a
"single undertaking approach" to the administration and operation of all
agreements and arrangements attached to the WTO Agreement. Among those
annexed is the Agreement on Trade-Related Aspects of Intellectual Property
Rights or TRIPs. 86 Members to this Agreement "desire to reduce distortions and
impediments to international trade, taking into account the need to promote
effective and adequate protection of intellectual property rights, and to ensure
that measures and procedures to enforce intellectual property rights do not
themselves become barriers to legitimate trade." To fulfill these objectives, the
members have agreed to adhere to minimum standards of protection set by
several Conventions. 87 These Conventions are: the Berne Convention for the
Protection of Literary and Artistic Works (1971), the Rome Convention or the
International Convention for the Protection of Performers, Producers of
Phonograms and Broadcasting Organisations, the Treaty on Intellectual Property
in Respect of Integrated Circuits, and the Paris Convention (1967), as revised in
Stockholm on July 14, 1967. 88

A major proportion of international trade depends on the protection of

intellectual property rights. 89 Since the late 1970's, the unauthorized
counterfeiting of industrial property and trademarked products has had a
considerable adverse impact on domestic and international trade revenues. 90 The
TRIPs Agreement seeks to grant adequate protection of intellectual property
rights by creating a favorable economic environment to encourage the inflow of
foreign investments, and strengthening the multi-lateral trading system to bring
about economic, cultural and technological independence. 91
The Philippines and the United States of America have acceded to the WTO
Agreement. This Agreement has revolutionized international business and
economic relations among states, and has propelled the world towards trade
liberalization and economic globalization. 92 Protectionism and isolationism
belong to the past. Trade is no longer confined to a bilateral system. There is now
"a new era of global economic cooperation, reflecting the widespread desire to
operate in a fairer and more open multilateral trading system." 93 Conformably,
the State must reaffirm its commitment to the global community and take part in
evolving a new international economic order at the dawn of the new millenium.
IN VIEW WHEREOF, the petition is denied and the Decision and Resolution of
the Court of Appeals in CA-G.R. SP No. 28415 are affirmed.
SO ORDERED.

[G.R. No. 127768. November 19, 1999]

UNITED AIRLINES, petitioner, vs. WILLIE J. UY, respondent.
DECISION
BELLOSILLO, J.:
UNITED AIRLINES assails in this petition for review on certiorari under Rule
45 the 29 August 1995 Decision of the Court of Appeals in CA-G.R. CV No.
39761 which reversed the 7 August 1992 order issued by the trial court in Civil
Case No. Q-92-12410i[1] granting petitioner's motion to dismiss based on
prescription of cause of action. The issues sought to be resolved are whether the

notice of appeal to the appellate court was timely filed, and whether Art. 29 of
the Warsaw Conventionii[2] should apply to the case at bar.
On 13 October 1989 respondent Willie J. Uy, a revenue passenger on United
Airlines Flight No. 819 for the San Francisco - Manila route, checked in together
with his luggage one piece of which was found to be overweight at the airline
counter. To his utter humiliation, an employee of petitioner rebuked him saying
that he should have known the maximum weight allowance to be 70 kgs. per bag
and that he should have packed his things accordingly. Then, in a loud voice in
front of the milling crowd, she told respondent to repack his things and transfer
some of them from the overweight luggage to the lighter ones. Not wishing to
create further scene, respondent acceded only to find his luggage still
overweight. The airline then billed him overweight charges which he offered to
pay with a miscellaneous charge order (MCO) or an airline pre-paid credit.
However, the airlines employee, and later its airport supervisor, adamantly
refused to honor the MCO pointing out that there were conflicting figures listed
on it. Despite the explanation from respondent that the last figure written on the
MCO represented his balance, petitioners employees did not accommodate him.
Faced with the prospect of leaving without his luggage, respondent paid the
overweight charges with his American Express credit card.
Respondents troubles did not end there. Upon arrival in Manila, he discovered
that one of his bags had been slashed and its contents stolen. He particularized
his losses to be around US $5,310.00. In a letter dated 16 October 1989
respondent bewailed the insult, embarrassment and humiliating treatment he
suffered in the hands of United Airlines employees, notified petitioner of his loss
and requested reimbursement thereof. Petitioner United Airlines, through Central
Baggage Specialist Joan Kroll, did not refute any of respondents allegations and
mailed a check representing the payment of his loss based on the maximum
liability of US $9.70 per pound. Respondent, thinking the amount to be grossly
inadequate to compensate him for his losses, as well as for the indignities he was
subjected to, sent two (2) more letters to petitioner airline, one dated 4 January
1990 through a certain Atty. Pesigan, and another dated 28 October 1991 through
Atty. Ramon U. Ampil demanding an out-of-court settlement of P1,000,000.00.
Petitioner United Airlines did not accede to his demands.
Consequently, on 9 June 1992 respondent filed a complaint for damages against
United Airlines alleging that he was a person of good station, sitting in the board
of directors of several top 500 corporations and holding senior executive
positions for such similar firms;iii[3] that petitioner airline accorded him ill and
shabby treatment to his extreme embarrassment and humiliation; and, as such he
should be paid moral damages of at least P1,000,000.00, exemplary damages of
at least P500,000.00, plus attorney's fees of at least P50,000.00. Similarly, he

alleged that the damage to his luggage and its stolen contents amounted to
around $5,310.00, and requested reimbursement therefor.
United Airlines moved to dismiss the complaint on the ground that respondents
cause of action had prescribed, invoking Art. 29 of the Warsaw Convention
which provides Art. 29 (1) The right to damages shall be extinguished if an action is not brought
within two (2) years, reckoned from the date of arrival at the destination, or from
the date on which the aircraft ought to have arrived, or from the date on which
the transportation stopped.
(2) The method of calculating the period of limitation shall be determined by the
law of the court to which the case is submitted.
Respondent countered that par. (1) of Art. 29 of the Warsaw Convention must be
reconciled with par. (2) thereof which states that "the method of calculating the
period of limitation shall be determined by the law of the court to which the case
is submitted." Interpreting thus, respondent noted that according to Philippine
laws the prescription of actions is interrupted "when they are filed before the
court, when there is a written extrajudicial demand by the creditors, and when
there is any written acknowledgment of the debt by the debtor."iv[4] Since he
made several demands upon United Airlines: first, through his personal letter
dated 16 October 1989; second, through a letter dated 4 January 1990 from Atty.
Pesigan; and, finally, through a letter dated 28 October 1991 written for him by
Atty. Ampil, the two (2)-year period of limitation had not yet been exhausted.
On 2 August 1992 the trial court ordered the dismissal of the action holding that
the language of Art. 29 is clear that the action must be brought within two (2)
years from the date of arrival at the destination. It held that although the second
paragraph of Art. 29 speaks of deference to the law of the local court in
"calculating the period of limitation," the same does not refer to the local forums
rules in interrupting the prescriptive period but only to the rules of determining
the time in which the action may be deemed commenced, and within our
jurisdiction the action shall be deemed "brought" or commenced by the filing of
a complaint. Hence, the trial court concluded that Art. 29 excludes the
application of our interruption rules.
Respondent received a copy of the dismissal order on 17 August 1992. On 31
August 1992, or fourteen (14) days later, he moved for the reconsideration of the
trial courts order. The trial court denied the motion and respondent received copy
of the denial order on 28 September 1992. Two (2) days later, on 1 October 1992
respondent filed his notice of appeal.

United Airlines once again moved for the dismissal of the case this time pointing
out that respondents fifteen (15)-day period to appeal had already elapsed.
Petitioner argued that having used fourteen (14) days of the reglementary period
for appeal, respondent Uy had only one (1) day remaining to perfect his appeal,
and since he filed his notice of appeal two (2) days later, he failed to meet the
deadline.
In its questioned Decision dated 29 August 1995v[5] the appellate court gave due
course to the appeal holding that respondents delay of two (2) days in filing his
notice of appeal did not hinder it from reviewing the appealed order of dismissal
since jurisprudence dictates that an appeal may be entertained despite procedural
lapses anchored on equity and justice.
On the applicability of the Warsaw Convention, the appellate court ruled that the
Warsaw Convention did not preclude the operation of the Civil Code and other
pertinent laws. Respondents failure to file his complaint within the two (2)-year
limitation provided in the Warsaw Convention did not bar his action since he
could still hold petitioner liable for breach of other provisions of the Civil Code
which prescribe a different period or procedure for instituting an action. Further,
under Philippine laws, prescription of actions is interrupted where, among
others, there is a written extrajudicial demand by the creditors, and since
respondent Uy sent several demand letters to petitioner United Airlines, the
running of the two (2)-year prescriptive period was in effect suspended. Hence,
the appellate court ruled that respondents cause of action had not yet prescribed
and ordered the records remanded to the Quezon City trial court for further
proceedings.
Petitioner now contends that the appellate court erred in assuming jurisdiction
over respondent's appeal since it is clear that the notice of appeal was filed out of
time. It argues that the courts relax the stringent rule on perfection of appeals
only when there are extraordinary circumstances, e.g., when the Republic stands
to lose hundreds of hectares of land already titled and used for educational
purposes; when the counsel of record was already dead; and wherein appellant
was the owner of the trademark for more than thirty (30) years, and the
circumstances of the present case do not compare to the above exceptional
cases.vi[6]
Section 1 of Rule 45 of the 1997 Rules of Civil Procedure provides that "a party
may appeal by certiorari, from a judgment of the Court of Appeals, by filing with
the Supreme Court a petition for certiorari, within fifteen (15) days from notice
of judgment or of the denial of his motion for reconsideration filed in due time x
x x x" This Rule however should not be interpreted as "to sacrifice the
substantial right of the appellant in the sophisticated altar of technicalities with
impairment of the sacred principles of justice."vii[7] It should be borne in mind

that the real purpose behind the limitation of the period of appeal is to forestall or
avoid an unreasonable delay in the administration of justice. Thus, we have ruled
that delay in the filing of a notice of appeal does not justify the dismissal of the
appeal where the circumstances of the case show that there is no intent to delay
the administration of justice on the part of appellant's counsel,viii[8] or when there
are no substantial rights affected,ix[9] or when appellant's counsel committed a
mistake in the computation of the period of appeal, an error not attributable to
negligence or bad faith.x[10]
In the instant case, respondent filed his notice of appeal two (2) days later than
the prescribed period. Although his counsel failed to give the reason for the
delay, we are inclined to give due course to his appeal due to the unique and
peculiar facts of the case and the serious question of law it poses. In the now
almost trite but still good principle, technicality, when it deserts its proper office
as an aid to justice and becomes its great hindrance and chief enemy, deserves
scant consideration.xi[11]
Petitioner likewise contends that the appellate court erred in ruling that
respondent's cause of action has not prescribed since delegates to the Warsaw
Convention clearly intended the two (2)-year limitation incorporated in Art. 29
as an absolute bar to suit and not to be made subject to the various tolling
provisions of the laws of the forum. Petitioner argues that in construing the
second paragraph of Art. 29 private respondent cannot read into it Philippine
rules on interruption of prescriptive periods and state that his extrajudicial
demand has interrupted the period of prescription.xii[12] American jurisprudence
has declared that "Art. 29 (2) was not intended to permit forums to consider local
limitation tolling provisions but only to let local law determine whether an action
had been commenced within the two-year period, since the method of
commencing a suit varies from country to country." xiii[13]
Within our jurisdiction we have held that the Warsaw Convention can be applied,
or ignored, depending on the peculiar facts presented by each case.xiv[14] Thus,
we have ruled that the Convention's provisions do not regulate or exclude
liability for other breaches of contract by the carrier or misconduct of its officers
and employees, or for some particular or exceptional type of damage.xv[15]
Neither may the Convention be invoked to justify the disregard of some
extraordinary sort of damage resulting to a passenger and preclude recovery
therefor beyond the limits set by said Convention.xvi[16] Likewise, we have held
that the Convention does not preclude the operation of the Civil Code and other
pertinent laws.xvii[17] It does not regulate, much less exempt, the carrier from
liability for damages for violating the rights of its passengers under the contract
of carriage, especially if willful misconduct on the part of the carrier's employees
is found or established.xviii[18]

Respondent's complaint reveals that he is suing on two (2) causes of action: (a)
the shabby and humiliating treatment he received from petitioner's employees at
the San Francisco Airport which caused him extreme embarrassment and social
humiliation; and, (b) the slashing of his luggage and the loss of his personal
effects amounting to US $5,310.00.
While his second cause of action - an action for damages arising from theft or
damage to property or goods - is well within the bounds of the Warsaw
Convention, his first cause of action -an action for damages arising from the
misconduct of the airline employees and the violation of respondent's rights as
passenger - clearly is not.
Consequently, insofar as the first cause of action is concerned, respondent's
failure to file his complaint within the two (2)-year limitation of the Warsaw
Convention does not bar his action since petitioner airline may still be held liable
for breach of other provisions of the Civil Code which prescribe a different
period or procedure for instituting the action, specifically, Art. 1146 thereof
which prescribes four (4) years for filing an action based on torts.
As for respondent's second cause of action, indeed the travaux preparatories of
the Warsaw Convention reveal that the delegates thereto intended the two (2)year limitation incorporated in Art. 29 as an absolute bar to suit and not to be
made subject to the various tolling provisions of the laws of the forum. This
therefore forecloses the application of our own rules on interruption of
prescriptive periods. Article 29, par. (2), was intended only to let local laws
determine whether an action had been commenced within the two (2)-year
period, and within our jurisdiction an action shall be deemed commenced upon
the filing of a complaint. Since it is indisputable that respondent filed the present
action beyond the two (2)-year time frame his second cause of action must be
barred. Nonetheless, it cannot be doubted that respondent exerted efforts to
immediately convey his loss to petitioner, even employed the services of two (2)
lawyers to follow up his claims, and that the filing of the action itself was
delayed because of petitioner's evasion.
In this regard, Philippine Airlines, Inc. v. Court of Appealsxix[19] is instructive. In
this case of PAL, private respondent filed an action for damages against
petitioner airline for the breakage of the front glass of the microwave oven which
she shipped under PAL Air Waybill No. 0-79-1013008-3. Petitioner averred that,
the action having been filed seven (7) months after her arrival at her port of
destination, she failed to comply with par. 12, subpar. (a) (1), of the Air Waybill
which expressly provided that the person entitled to delivery must make a
complaint to the carrier in writing in case of visible damage to the goods,
immediately after discovery of the damage and at the latest within 14 days from
receipt of the goods. Despite non-compliance therewith the Court held that by

private respondent's immediate submission of a formal claim to petitioner, which

however was not immediately entertained as it was referred from one employee
to another, she was deemed to have substantially complied with the requirement.
The Court noted that with private respondent's own zealous efforts in pursuing
her claim it was clearly not her fault that the letter of demand for damages could
only be filed, after months of exasperating follow-up of the claim, on 13 August
1990, and that if there was any failure at all to file the formal claim within the
prescriptive period contemplated in the Air Waybill, this was largely because of
the carrier's own doing, the consequences of which could not in all fairness be
attributed to private respondent.
In the same vein must we rule upon the circumstances brought before us. Verily,
respondent filed his complaint more than two (2) years later, beyond the period
of limitation prescribed by the Warsaw Convention for filing a claim for
damages. However, it is obvious that respondent was forestalled from
immediately filing an action because petitioner airline gave him the runaround,
answering his letters but not giving in to his demands. True, respondent should
have already filed an action at the first instance when his claims were denied by
petitioner but the same could only be due to his desire to make an out-of-court
settlement for which he cannot be faulted. Hence, despite the express mandate of
Art. 29 of the Warsaw Convention that an action for damages should be filed
within two (2) years from the arrival at the place of destination, such rule shall
not be applied in the instant case because of the delaying tactics employed by
petitioner airline itself. Thus, private respondent's second cause of action cannot
be considered as time-barred under Art. 29 of the Warsaw Convention.
WHEREFORE, the assailed Decision of the Court of Appeals reversing and
setting aside the appealed order of the trial court granting the motion to dismiss
the complaint, as well as its Resolution denying reconsideration, is AFFIRMED.
Let the records of the case be remanded to the court of origin for further
proceedings taking its bearings from this disquisition.
SO ORDERED.

i
ii

[G.R. No. 116044-45. March 9, 2000]

AMERICAN AIRLINES, petitioner, vs. COURT OF APPEALS, HON. BERNARDO LL. SALAS and
DEMOCRITO MENDOZA, respondents. Oldmis o
DECISION
GONZAGA_REYES, J.:
Before us is a petition for review of the decision dated December 24, 1993 rendered by the Court of Appeals in the
consolidated cases docketed as CA-G.R. SP nos. 30946 and 31452 entitled American Airlines vs. The Presiding Judge
Branch 8 of the Regional Trial Court of Cebu and Democrito Mendoza, petitions for certiorari and prohibition. In SP
no. 30946, the petitioner assails the trial courts order denying the petitioners motion to dismiss the action for damages
filed by the private respondent for lack of jurisdiction under section 28 (1) of the Warsaw Convention; and in SP No.
31452 the petitioner challenges the validity of the trial courts order striking off the record the deposition of the
petitioners security officer taken in Geneva, Switzerland for failure of the said security officer to answer the cross
interrogatories propounded by the private respondent. Ncm
The sole issue raised in SP No. 30946 is the questioned jurisdiction of the Regional Trial Court of Cebu to take
cognizance of the action for damages filed by the private respondent against herein petitioner in view of Art 28 (1) of
the Warsaw Convention.[1] It is undisputed that the private respondent purchased from Singapore Airlines in Manila
conjunction tickets for Manila - Singapore - Athens - Larnaca - Rome - Turin - Zurich - Geneva - Copenhagen - New

York. The petitioner was not a participating airline in any of the segments in the itinerary under the said conjunction
tickets. In Geneva the petitioner decided to forego his trip to Copenhagen and to go straight to New York and in the
absence of a direct flight under his conjunction tickets from Geneva to New York, the private respondent on June 7,
1989 exchanged the unused portion of the conjunction ticket for a one-way ticket from Geneva to New York from the
petitioner airline. Petitioner issued its own ticket to the private respondent in Geneva and claimed the value of the
unused portion of the conjunction ticket from the IATA[2] clearing house in Geneva. Ncmmis
In September 1989, private respondent filed an action for damages before the regional trial court of Cebu for the
alleged embarassment and mental anguish he suffered at the Geneva Airport when the petitioners security officers
prevented him from boarding the plane, detained him for about an hour and allowed him to board the plane only after
all the other passengers have boarded. The petitioner filed a motion to dismiss for lack of jurisdiction of Philippine
courts to entertain the said proceedings under Art. 28 (1) of the Warsaw Convention. The trial court denied the motion.
The order of denial was elevated to the Court of Appeals which affirmed the ruling of the trial court. Both the trial and
that appellate courts held that the suit may be brought in the Philippines under the pool partnership agreement among
the IATA members, which include Singapore Airlines and American Airlines, wherein the members act as agents of
each other in the issuance of tickets to those who may need their services. The contract of carriage perfected in Manila
between the private respondent and Singapore Airlines binds the petitioner as an agent of Singapore Airlines and
considering that the petitioner has a place of business in Manila, the third option of the plaintiff under the Warsaw
Convention i.e. the action may be brought in the place where the contract was perfected and where the airline has a
place of business, is applicable. Hence this petition assailing the order upholding the jurisdiction of Philippine courts
over the instant action. Scnc m
Both parties filed simultaneous memoranda pursuant to the resolution of this Court giving due course to the petition.
The petitioners theory is as follows: Under Art 28 (1) of the Warsaw convention an action for damages must be
brought at the option of the plaintiff either before the court of the 1) domicile of the carrier; 2) the carriers principal
place of business; 3) the place where the carrier has a place of business through which the contract was made; 4) the
place of destination. The petitioner asserts that the Philippines is neither the domicile nor the principal place of
business of the defendant airline; nor is it the place of destination. As regards the third option of the plaintiff, the
petitioner contends that since the Philippines is not the place where the contract of carriage was made between the
parties herein, Philippine courts do not have jurisdiction over this action for damages. The issuance of petitioners own
ticket in Geneva in exchange for the conjunction ticket issued by Singapore Airlines for the final leg of the private
respondents trip gave rise to a separate and distinct contract of carriage from that entered into by the private
respondent with Singapore Airlines in Manila. Petitioner lays stress on the fact that the plane ticket for a direct flight
from Geneva to New York was purchased by the private respondent from the petitioner by "exchange and cash" which
signifies that the contract of carriage with Singapore Airlines was terminated and a second contract was perfected.
Moreover, the second contract of carriage cannot be deemed to have been an extension of the first as the petitioner
airline is not a participating airline in any of the destinations under the first contract. The petitioner claims that the
private respondents argument that the petitioner is bound under the IATA Rules as agent of the principal airline is
irrelevant and the alleged bad faith of the airline does not remove the case from the applicability of the Warsaw
Convention. Further, the IATA Rule cited by the private respondent which is admittedly printed on the ticket issued by
the petitioner to him which states, "An air carrier issuing a ticket for carriage over the lines of another carrier does so
only as its agent" does not apply herein, as neither Singapore Airlines nor the petitioner issued a ticket to the private
respondent covering the route of the other. Since the conjunction tickets issued by Singapore Airlines do not include
the route covered by the ticket issued by the petitioner, the petitioner airline submits that it did not act as an agent of
Singapore Airlines. Sdaa miso
Private respondent controverts the applicability of the Warsaw Convention in this case. He posits that under Article 17
of the Warsaw Convention[3] a carrier may be held liable for damages if the "accident" occurred on board the airline
or in the course of "embarking or disembarking" from the carrier and that under Article 25 (1)[4] thereof the
provisions of the convention will not apply if the damage is caused by the "willful misconduct" of the carrier. He

argues that his cause of action is based on the incident at the pre-departure area of the Geneva airport and not during
the process of embarking nor disembarking from the carrier and that security officers of the petitioner airline acted in
bad faith. Accordingly, this case is released from the terms of the Convention. Private respondent argues that assuming
that the convention applies, his trip to nine cities in different countries performed by different carriers under the
conjunction tickets issued in Manila by Singapore Airlines is regarded as a single transaction; as such the final leg of
his trip from Geneva to New York with the petitioner airline is part and parcel of the original contract of carriage
perfected in Manila. Thus, the third option of the plaintiff under Art. 28 (1) e.g., where the carrier has a place of
business through which the contract of carriage was made, applies herein and the case was properly filed in the
Philippines. The private respondent seeks affirmance of the ruling of the lower courts that the petitioner acted as an
agent of Singapore Airlines under the IATA Rules and as an agent of the principal carrier the petitioner may be held
liable under the contract of carriage perfected in Manila, citing the judicial admission made by the petitioner that it
claimed the value of the unused portion of the private respondents conjunction tickets from the IATA Clearing House
in Geneva where the accounts of both airlines are respectively credited and debited. Accordingly, the petitioner cannot
now deny the contract of agency with Singapore Airlines after it honored the conjunction tickets issued by the latter.
Sdaad
The petition is without merit.
The Warsaw Convention to which the Republic of the Philippines is a party and which has the force and effect of law
in this country applies to all international transportation of persons, baggage or goods performed by an aircraft
gratuitously or for hire.[5] As enumerated in the Preamble of the Convention, one of the objectives is "to regulate in a
uniform manner the conditions of international transportation by air".[6] The contract of carriage entered into by the
private respondent with Singapore Airlines, and subsequently with the petitioner, to transport him to nine cities in
different countries with New York as the final destination is a contract of international transportation and the
provisions of the Convention automatically apply and exclusively govern the rights and liabilities of the airline and its
passengers.[7] This includes section 28 (1) which enumerates the four places where an action for damages may be
brought. Scs daad
The threshold issue of jurisdiction of Philippine courts under Art 28 (1) must first be resolved before any
pronouncements may be made on the liability of the carrier thereunder.[8] The objections raised by the private
respondent that this case is released from the terms of the Convention because the incident on which this action is
predicated did not occur in the process of embarking and disembarking from the carrier under Art 17[9] and that the
employees of the petitioner airline acted with malice and bad faith under Art 25 (1)[10] pertain to the merits of the
case which may be examined only if the action has first been properly commenced under the rules on jurisdiction set
forth in Art. 28 (1).
Art (28) (1) of the Warsaw Convention states: Sup rema
Art 28 (1) An action for damages must be brought at the option of the plaintiff, in the territory of one
of the High Contracting Parties, either before the court of the domicile of the carrier or of his
principal place of business or where he has a place of business through which the contract has been
made, or before the court at the place of destination.
There is no dispute that petitioner issued the ticket in Geneva which was neither the domicile nor the principal place
of business of petitioner nor the respondents place of destination.
The question is whether the contract of transportation between the petitioner and the private respondent would be
considered as a single operation and part of the contract of transportation entered into by the latter with Singapore
Airlines in Manila.

Petitioner disputes the ruling of the lower court that it is. Petitioners main argument is that the issuance of a new ticket
in Geneva created a contract of carriage separate and distinct from that entered by the private respondent in Manila.
We find the petitioners argument without merit. Juris
Art 1(3) of the Warsaw Convention which states:
"Transportation to be performed by several successive carriers shall be deemed, for the purposes of
this convention, to be one undivided transportation, if it has been regarded by the parties as a single
operation, whether it has been agreed upon under the form of a single contract or a series of
contracts, and it shall not lose its international character merely because one contract or series of
contracts is to be performed entirely within the territory subject of the sovereignty, suzerainty,
mandate or authority of the same High contracting Party." Sc juris
The contract of carriage between the private respondent and Singapore Airlines although performed by different
carriers under a series of airline tickets, including that issued by petitioner, constitutes a single operation. Members of
the IATA are under a general pool partnership agreement wherein they act as agent of each other in the issuance of
tickets[11] to contracted passengers to boost ticket sales worldwide and at the same time provide passengers easy
access to airlines which are otherwise inaccessible in some parts of the world. Booking and reservation among airline
members are allowed even by telephone and it has become an accepted practice among them.[12] A member airline
which enters into a contract of carriage consisting of a series of trips to be performed by different carriers is
authorized to receive the fare for the whole trip and through the required process of interline settlement of accounts by
way of the IATA clearing house an airline is duly compensated for the segment of the trip serviced.[13] Thus, when
the petitioner accepted the unused portion of the conjunction tickets, entered it in the IATA clearing house and
undertook to transport the private respondent over the route covered by the unused portion of the conjunction tickets,
i.e., Geneva to New York, the petitioner tacitly recognized its commitment under the IATA pool arrangement to act as
agent of the principal contracting airline, Singapore Airlines, as to the segment of the trip the petitioner agreed to
undertake. As such, the petitioner thereby assumed the obligation to take the place of the carrier originally designated
in the original conjunction ticket. The petitioners argument that it is not a designated carrier in the original conjunction
tickets and that it issued its own ticket is not decisive of its liability. The new ticket was simply a replacement for the
unused portion of the conjunction ticket, both tickets being for the same amount of US$ 2,760 and having the same
points of departure and destination.[14] By constituting itself as an agent of the principal carrier the petitioners
undertaking should be taken as part of a single operation under the contract of carriage executed by the private
respondent and Singapore Airlines in Manila.
The quoted provisions of the Warsaw Convention Art. 1(3) clearly states that a contract of air transportation is taken
as a single operation whether it is founded on a single contract or a series of contracts. The number of tickets issued
does not detract from the oneness of the contract of carriage as long as the parties regard the contract as a single
operation. The evident purpose underlying this Article is to promote international air travel by facilitating the
procurement of a series of contracts for air transportation through a single principal and obligating different airlines to
be bound by one contract of transportation. Petitioners acquiescence to take the place of the original designated carrier
binds it under the contract of carriage entered into by the private respondent and Singapore Airlines in Manila. Juris sc
The third option of the plaintiff under Art 28 (1) of the Warsaw Convention e.g., to sue in the place of business of the
carrier wherein the contract was made, is therefore, Manila, and Philippine courts are clothed with jurisdiction over
this case. We note that while this case was filed in Cebu and not in Manila the issue of venue is no longer an issue as
the petitioner is deemed to have waived it when it presented evidence before the trial court.
The issue raised in SP No. 31452 which is whether or not the trial court committed grave abuse of discretion in
ordering the deposition of the petitioners security officer taken in Geneva to be stricken off the record for failure of

the said security officer to appear before the Philippine consul in Geneva to answer the cross-interrogatories filed by
the private respondent does not have to be resolved. The subsequent appearance of the said security officer before the
Philippine consul in Geneva on September 19, 1994 and the answer to the cross-interrogatories propounded by the
private respondent was transmitted to the trial court by the Philippine consul in Geneva on September 23, 1994[15]
should be deemed as full compliance with the requisites of the right of the private respondent to cross-examine the
petitioners witness. The deposition filed by the petitioner should be reinstated as part of the evidence and considered
together with the answer to the cross-interrogatories.
WHEREFORE, the judgment of the appellate court in CA-G.R. SP No. 30946 is affirmed. The case is ordered
remanded to the court of origin for further proceedings. The decision of the appellate court in CA-G.R. SP. No. 31452
is set aside. The deposition of the petitioners security officer is reinstated as part of the evidence. Misj uris
SO ORDERED.

iii
iv

v[G.R. No. 128845. June 1, 2000]INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE),

petitioner, vs. HON. LEONARDO A. QUISUMBING in his capacity as the Secretary of Labor and
Employment; HON. CRESENCIANO B. TRAJANO in his capacity as the Acting Secretary of Labor and
Employment; DR. BRIAN MACCAULEY in his capacity as the Superintendent of International SchoolManila; and INTERNATIONAL SCHOOL, INC., respondents.
DECISION
KAPUNAN, J.:
Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent School, mostly
Filipinos, cry discrimination. We agree. That the local-hires are paid more than their colleagues in other schools is, of
course, beside the point. The point is that employees should be given equal pay for work of equal value. That is a
principle long honored in this jurisdiction. That is a principle that rests on fundamental notions of justice. That is the
principle we uphold today.
Private respondent International School, Inc. (the School, for short), pursuant to Presidential Decree 732, is a domestic
educational institution established primarily for dependents of foreign diplomatic personnel and other temporary
residents.[1] To enable the School to continue carrying out its educational program and improve its standard of
instruction, Section 2(c) of the same decree authorizes the School to
employ its own teaching and management personnel selected by it either locally or abroad, from
Philippine or other nationalities, such personnel being exempt from otherwise applicable laws and
regulations attending their employment, except laws that have been or will be enacted for the
protection of employees.
Accordingly, the School hires both foreign and local teachers as members of its faculty, classifying the same into two:
(1) foreign-hires and (2) local-hires. The School employs four tests to determine whether a faculty member should be

classified as a foreign-hire or a local hire:

a.....What is one's domicile?
b.....Where is one's home economy?
c.....To which country does one owe economic allegiance?
d.....Was the individual hired abroad specifically to work in the School and was the School
responsible for bringing that individual to the Philippines?[2]
Should the answer to any of these queries point to the Philippines, the faculty member is classified as a local hire;
otherwise, he or she is deemed a foreign-hire.
The School grants foreign-hires certain benefits not accorded local-hires. These include housing, transportation,
shipping costs, taxes, and home leave travel allowance. Foreign-hires are also paid a salary rate twenty-five percent
(25%) more than local-hires. The School justifies the difference on two "significant economic disadvantages" foreignhires have to endure, namely: (a) the "dislocation factor" and (b) limited tenure. The School explains:
A foreign-hire would necessarily have to uproot himself from his home country, leave his family and
friends, and take the risk of deviating from a promising career path-all for the purpose of pursuing
his profession as an educator, but this time in a foreign land. The new foreign hire is faced with
economic realities: decent abode for oneself and/or for one's family, effective means of
transportation, allowance for the education of one's children, adequate insurance against illness and
death, and of course the primary benefit of a basic salary/retirement compensation.
Because of a limited tenure, the foreign hire is confronted again with the same economic reality after
his term: that he will eventually and inevitably return to his home country where he will have to
confront the uncertainty of obtaining suitable employment after a long period in a foreign land.
The compensation scheme is simply the School's adaptive measure to remain competitive on an
international level in terms of attracting competent professionals in the field of international
education.[3]
When negotiations for a new collective bargaining agreement were held on June 1995, petitioner International School
Alliance of Educators, "a legitimate labor union and the collective bargaining representative of all faculty
members"[4] of the School, contested the difference in salary rates between foreign and local-hires. This issue, as well
as the question of whether foreign-hires should be included in the appropriate bargaining unit, eventually caused a
deadlock between the parties.
On September 7, 1995, petitioner filed a notice of strike. The failure of the National Conciliation and Mediation Board
to bring the parties to a compromise prompted the Department of Labor and Employment (DOLE) to assume
jurisdiction over the dispute. On June 10, 1996, the DOLE Acting Secretary, Crescenciano B. Trajano, issued an Order
resolving the parity and representation issues in favor of the School. Then DOLE Secretary Leonardo A. Quisumbing
subsequently denied petitioner's motion for reconsideration in an Order dated March 19, 1997. Petitioner now seeks
relief in this Court.
Petitioner claims that the point-of-hire classification employed by the School is discriminatory to Filipinos and that
the grant of higher salaries to foreign-hires constitutes racial discrimination.

The School disputes these claims and gives a breakdown of its faculty members, numbering 38 in all, with
nationalities other than Filipino, who have been hired locally and classified as local hires.[5]The Acting Secretary of
Labor found that these non-Filipino local-hires received the same benefits as the Filipino local-hires:
The compensation package given to local-hires has been shown to apply to all, regardless of race. Truth to tell, there
are foreigners who have been hired locally and who are paid equally as Filipino local hires.[6]
The Acting Secretary upheld the point-of-hire classification for the distinction in salary rates:
The principle "equal pay for equal work" does not find application in the present case. The
international character of the School requires the hiring of foreign personnel to deal with different
nationalities and different cultures, among the student population.
We also take cognizance of the existence of a system of salaries and benefits accorded to foreign
hired personnel which system is universally recognized. We agree that certain amenities have to be
provided to these people in order to entice them to render their services in the Philippines and in the
process remain competitive in the international market.
Furthermore, we took note of the fact that foreign hires have limited contract of employment unlike
the local hires who enjoy security of tenure. To apply parity therefore, in wages and other benefits
would also require parity in other terms and conditions of employment which include the
employment contract.
A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions for salary and
professional compensation wherein the parties agree as follows:
All members of the bargaining unit shall be compensated only in accordance with
Appendix C hereof provided that the Superintendent of the School has the
discretion to recruit and hire expatriate teachers from abroad, under terms and
conditions that are consistent with accepted international practice.
Appendix C of said CBA further provides:
The new salary schedule is deemed at equity with the Overseas Recruited Staff
(OSRS) salary schedule. The 25% differential is reflective of the agreed value of
system displacement and contracted status of the OSRS as differentiated from the
tenured status of Locally Recruited Staff (LRS).
To our mind, these provisions demonstrate the parties' recognition of the difference in the status of
two types of employees, hence, the difference in their salaries.
The Union cannot also invoke the equal protection clause to justify its claim of parity. It is an
established principle of constitutional law that the guarantee of equal protection of the laws is not
violated by legislation or private covenants based on reasonable classification. A classification is
reasonable if it is based on substantial distinctions and apply to all members of the same class. Verily,
there is a substantial distinction between foreign hires and local hires, the former enjoying only a
limited tenure, having no amenities of their own in the Philippines and have to be given a good
compensation package in order to attract them to join the teaching faculty of the School.[7]
We cannot agree.

That public policy abhors inequality and discrimination is beyond contention. Our Constitution and laws reflect the
policy against these evils. The Constitution[8] in the Article on Social Justice and Human Rights exhorts Congress to
"give highest priority to the enactment of measures that protect and enhance the right of all people to human dignity,
reduce social, economic, and political inequalities." The very broad Article 19 of the Civil Code requires every person,
"in the exercise of his rights and in the performance of his duties, [to] act with justice, give everyone his due, and
observe honesty and good faith."
International law, which springs from general principles of law,[9] likewise proscribes discrimination. General
principles of law include principles of equity,[10] i.e., the general principles of fairness and justice, based on the test
of what is reasonable.[11] The Universal Declaration of Human Rights,[12] the International Covenant on Economic,
Social, and Cultural Rights,[13] the International Convention on the Elimination of All Forms of Racial
Discrimination,[14] the Convention against Discrimination in Education,[15] the Convention (No. 111) Concerning
Discrimination in Respect of Employment and Occupation[16] - all embody the general principle against
discrimination, the very antithesis of fairness and justice. The Philippines, through its Constitution, has incorporated
this principle as part of its national laws.
In the workplace, where the relations between capital and labor are often skewed in favor of capital, inequality and
discrimination by the employer are all the more reprehensible.
The Constitution[17] specifically provides that labor is entitled to "humane conditions of work." These conditions are
not restricted to the physical workplace - the factory, the office or the field - but include as well the manner by which
employers treat their employees.
The Constitution[18] also directs the State to promote "equality of employment opportunities for all." Similarly, the
Labor Code[19] provides that the State shall "ensure equal work opportunities regardless of sex, race or creed." It
would be an affront to both the spirit and letter of these provisions if the State, in spite of its primordial obligation to
promote and ensure equal employment opportunities, closes its eyes to unequal and discriminatory terms and
conditions of employment.[20]
Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article 135, for example, prohibits
and penalizes[21] the payment of lesser compensation to a female employee as against a male employee for work of
equal value. Article 248 declares it an unfair labor practice for an employer to discriminate in regard to wages in order
to encourage or discourage membership in any labor organization.
Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7 thereof, provides:
The States Parties to the present Covenant recognize the right of everyone to the enjoyment of just
and favourable conditions of work, which ensure, in particular:
a.....Remuneration which provides all workers, as a minimum, with:
i.....Fair wages and equal remuneration for work of equal value without distinction
of any kind, in particular women being guaranteed conditions of work not inferior
to those enjoyed by men, with equal pay for equal work;
x x x.
The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism of "equal pay
for equal work." Persons who work with substantially equal qualifications, skill, effort and responsibility, under
similar conditions, should be paid similar salaries.[22] This rule applies to the School, its "international character"

notwithstanding.
The School contends that petitioner has not adduced evidence that local-hires perform work equal to that of foreignhires.[23] The Court finds this argument a little cavalier. If an employer accords employees the same position and
rank, the presumption is that these employees perform equal work. This presumption is borne by logic and human
experience. If the employer pays one employee less than the rest, it is not for that employee to explain why he
receives less or why the others receive more. That would be adding insult to injury. The employer has discriminated
against that employee; it is for the employer to explain why the employee is treated unfairly.
The employer in this case has failed to discharge this burden. There is no evidence here that foreign-hires perform
25% more efficiently or effectively than the local-hires. Both groups have similar functions and responsibilities, which
they perform under similar working conditions.
The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the distinction in salary
rates without violating the principle of equal work for equal pay.
"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services performed."
Similarly, the Philippine Legal Encyclopedia states that "salary" is the "[c]onsideration paid at regular intervals for
the rendering of services." In Songco v. National Labor Relations Commission,[24] we said that:
"salary" means a recompense or consideration made to a person for his pains or industry in another
man's business. Whether it be derived from "salarium," or more fancifully from "sal," the pay of the
Roman soldier, it carries with it the fundamental idea of compensation for services rendered.
(Emphasis supplied.)
While we recognize the need of the School to attract foreign-hires, salaries should not be used as an enticement to the
prejudice of local-hires. The local-hires perform the same services as foreign-hires and they ought to be paid the same
salaries as the latter. For the same reason, the "dislocation factor" and the foreign-hires' limited tenure also cannot
serve as valid bases for the distinction in salary rates. The dislocation factor and limited tenure affecting foreign-hires
are adequately compensated by certain benefits accorded them which are not enjoyed by local-hires, such as housing,
transportation, shipping costs, taxes and home leave travel allowances.
The Constitution enjoins the State to "protect the rights of workers and promote their welfare,"[25] "to afford labor
full protection."[26] The State, therefore, has the right and duty to regulate the relations between labor and capital.[27]
These relations are not merely contractual but are so impressed with public interest that labor contracts, collective
bargaining agreements included, must yield to the common good.[28] Should such contracts contain stipulations that
are contrary to public policy, courts will not hesitate to strike down these stipulations.
In this case, we find the point-of-hire classification employed by respondent School to justify the distinction in the
salary rates of foreign-hires and local hires to be an invalid classification. There is no reasonable distinction between
the services rendered by foreign-hires and local-hires. The practice of the School of according higher salaries to
foreign-hires contravenes public policy and, certainly, does not deserve the sympathy of this Court.
We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-hires.
A bargaining unit is "a group of employees of a given employer, comprised of all or less than all of the entire body of
employees, consistent with equity to the employer indicate to be the best suited to serve the reciprocal rights and
duties of the parties under the collective bargaining provisions of the law."[29] The factors in determining the
appropriate collective bargaining unit are (1) the will of the employees (Globe Doctrine); (2) affinity and unity of the
employees' interest, such as substantial similarity of work and duties, or similarity of compensation and working

conditions (Substantial Mutual Interests Rule); (3) prior collective bargaining history; and (4) similarity of
employment status.[30] The basic test of an asserted bargaining unit's acceptability is whether or not it is
fundamentally the combination which will best assure to all employees the exercise of their collective bargaining
rights.[31]
It does not appear that foreign-hires have indicated their intention to be grouped together with local-hires for purposes
of collective bargaining. The collective bargaining history in the School also shows that these groups were always
treated separately. Foreign-hires have limited tenure; local-hires enjoy security of tenure. Although foreign-hires
perform similar functions under the same working conditions as the local-hires, foreign-hires are accorded certain
benefits not granted to local-hires. These benefits, such as housing, transportation, shipping costs, taxes, and home
leave travel allowance, are reasonably related to their status as foreign-hires, and justify the exclusion of the former
from the latter. To include foreign-hires in a bargaining unit with local-hires would not assure either group the exercise
of their respective collective bargaining rights.
WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby GRANTED IN PART. The Orders of
the Secretary of Labor and Employment dated June 10, 1996 and March 19, 1997, are hereby REVERSED and SET
ASIDE insofar as they uphold the practice of respondent School of according foreign-hires higher salaries than localhires.
SO ORDERED.

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