CAGAYAN VALLEY ENTERPRISE VS COURT OF APPEALS

179 SCRA 218

[ GR No. 78413, Nov 08, 1989 ]

REGALADO, J.:
This petition for review on certiorari seeks the nullification of the decision of the
Court of Appeals of December 5, 1986 in CA-G.R. CV No. 06685 which reversed the
decision of the trial court, and its resolution dated May 5, 1987 denying petitioner's
motion for reconsideration.
The following antecedent facts generative of the present controversy are not in
dispute.
Sometime in 1953, LaTondena, Inc. (hereafter, LTI for short) registered with the
Philippine Patent Office pursuant to Republic Act No. 623[1] the 350 c.c. white flint
bottles it has been using for its gin popularly known as "Ginebra San Miguel." This
registration was subsequently renewed on December 4, 1974.[2]
On November 10, 1981, LTI filed Civil Case No 2668 for injunction and damages in
the then Branch I, Court of First Instance of Isabela against Cagayan Valley
Enterprises, Inc. (Cagayan, for brevity) for using the 350 ex. white flint bottles with
the mark "La Tondena, Inc." and "Ginebra San Miguel" stamped or blown-in therein
by filling the same with Cagayan's liquor product bearing the label "Sonny Boy" for
commercial sale and distribution, without LTI's written consent and in violation of
Section 2 of Republic Act No. 623, as amended by Republic Act No. 5700. On the
same date, LTI further filed an ex parte petition for the issuance of a writ of
preliminary injunction against the defendant therein. [3] On November 16, 1981, the
court a quo issued a temporary restraining order against Cagayan and its officers and
employees from using the 3 50 c.c. bottles with the marks "La Tondena" and
"Ginebra San Miguel."[4]
Cagayan, in its answer,[5] alleged the following defenses: 

1. LTI has no cause of action due to its failure to comply with Section 21 of
Republic Act No. 166 which, requires the giving of notice that its aforesaid
marks are registered by displaying and printing the words "Registered in the
Phil. Patent Office" or "Reg. Phil. Pat. Off.," hence no suit, civil or criminal,
can be filed against Cagayan;
 
2. LTI is not entitled to any protection under Republic Act No. 623, as amended
by Republic Act No. 5700, because its products, consisting of hard liquor, are
not among those contemplated therein. What is protected under said law are
beverages like Coca-cola, Royal Tru-Orange, Lem-O-Lime and similar
beverages the bottles whereof bear the words "Reg. Phil. Pat. Off.";

3. No reservation of ownership on its bottles was made by LTI in its sales

invoices nor does it require any deposit for the retention of said bottles; and
 4. There was no infringement of the goods or products of LTI since Cagayan uses
its own labels and trade-mark on its product.

In its subsequent pleadings, Cagayan contended that the bottles they are using are
not the registered bottles of LTI since the former was using the bottles marked with
"La Tondena, Inc." and "Ginebra San Miguel" but without the words "property of
indicated in said bottles as stated in the sworn statement attached to the certificate of
registration of LTI for said bottles.
On December 18, 1981, the lower court issued a writ of preliminary injunction, upon
the filing of a bond by LTI in the sum of P50,000.00, enjoining Cagayan, its officers
and agents from using the aforesaid registered bottles of LTI. [6]
After a protracted trial, which entailed five (5) motions for contempt filed by LTI
against Cagayan, the trial court rendered judgment [7] in favor of Cagayan, ruling that
the complaint does not state a cause of action and that Cagayan was not guilty of
contempt. Furthermore, it awarded damages in favor of Cagayan.
LTI appealed to the Court of Appeals which, on December 5, 1986 rendered a
decision in favor of said appellant, the dispositive portion whereof reads: 
"WHEREFORE, the decision appealed from is hereby SET ASIDE and judgment is
rendered permanently enjoining the defendant, its officers and agents from using the
350 c.c. white flint bottles with the marks of ownership 'La Tondefia, Inc.' and
'Ginebra San Miguel,' blown-in or stamped on said bottles as containers for
defendant's products.
"The writ of preliminary injunction issued by the trial court is therefore made
permanent. 
"Defendant is ordered to pay the amounts of:
(1) P15,000.00 as nominal or temperate damages; 
(2) P50,000.00 as exemplary damages; 
(3) P10,000.00 as attorney's fees; and 
(4) Costs of suit."[8]
On December 23, 1986, Cagayan filed a motion for reconsideration which was denied
by the respondent court in its resolution dated May 5, 1987, hence the present
petition, with the following assignment of errors: 
"I. The Court of Appeals gravely erred in the decision granting that 'there is,
therefore, no need for plaintiff to display the words "Reg. Phil. Pat. Off." in order for
it to succeed in bringing any injunction suit against defendant for the illegal use of its
bottles. Rep. Act No. 623, as amended by Rep. Act No. 5700 simply provides and
requires that the marks or names shall be stamped or marked on the containers.' 
"II. The Court of Appeals gravely erred in deciding that 'neither is there a reason to
distinguish between the two (2) sets of marked bottles those which contain the marks
'Property of La Tondeña, Inc., Ginebra San Miguel,' and those simply marked 'La
Tondeña, Inc., Ginebra San Miguel.1 By omitting the words "property of," plaintiff
did not open itself to violation of Republic Act No. 623, as amended, as having
registered its marks or names it is protected under the law.'
"III. The Honorable Court of Appeals gravely erred in deciding that the words 'La
Tondeña, Inc. and Ginebra San Miguel' are sufficient notice to the defendant which
should have inquired from the plaintiff or the Philippine Patent Office, if it was
lawful for it to re-use the empty bottles of the plaintiff. 
"IV. The Honorable Court of Appeals gravely erred in deciding that defendant-
appellee cannot claim good faith from using the bottles of plaintiff with marks 'La
Tondeña, Inc.' alone, short of the description contained in the sworn statement of
Mr. Carlos Palanca, Jr., which was a requisite of its original and renewal
registrations.
"V. The Honorable Court of Appeals gravely erred in accommodating the appeal on
the dismissals of the five (5) contempt charges. 
"VI. The Honorable Court of Appeals gravely erred in deciding that the award of
damages in favor of the defendant-appellee, petitioner herein, is not in order. Instead
it awarded nominal or temperate,- exemplary damages and attorney's fees without
proof of bad faith."9-
The pertinent provisions of Republic Act No. 623, as amended by Republic Act No.
5700, provides: 
"SECTION 1. Persons engaged or licensed to engage in the manufacture, bottling, or
selling of soda water, mineral or aerated waters, cider, milk, cream or other lawful
beverages in bottles, boxes, casks, kegs, or barrels, and other similar containers, or in
the manufacturing, compressing or selling of gases such as oxygen, acytelene,
nitrogen, carbon dioxide ammonia, hydrogen, chloride, helium, sulphur, dioxide,
butane, propane, freon, melthyl chloride or similar gases contained in steel cylinders,
tanks, flasks, accumulators or similar containers, with the names or the names of
their principals or products, or other marks of ownership stamped or marked
thereon, may register with the Philippine Patent Office a description of the names or
marks, and the purpose for which the containers so marked and used by them, under
the same conditions, rules, and regulations, made applicable by law or regulation to
the issuance of trademarks.
"SEC. 2. It shall be unlawful for any person, without the written consent of the
manufacturer, bottler, or seller, who has successfully registered the marks of
ownership in accordance with the provisions of the next preceding section, to fill
such bottles, boxes, kegs, barrels, steel cylinders, tanks, flasks, accumulators or other
similar containers so marked or stamped, for the purpose of sale, or to sell, disposed
of, buyor traffic in, or wantonly destroy the same, whether filled or not, to use the
same, for drinking vessels or glasses or drain pipes, foundation pipes, for any other
purposes than that registered by the manufacturer, bottler or seller. Any violation of
this section shall be punished by a fine of not more than one thousand pesos or
imprisonment of not more than one year or both. 
"SEC. 3. The use by any person other than the registered manufacturer, bottler or
seller, without written permission of the latter of any such bottle, cask, barrel, keg,
box, steel cylinders, tanks, flask, accumulators, or other similar containers, or the
possession thereof without written permission of the manufacturer, by any junk
dealer or dealer in casks, barrels, kegs, boxes, steel cylinders, tanks, flasks,
accumulators or other similar containers, the same being duly marked or stamped
and registered as herein provided, shall give rise to a prima facie presumption that
such use or possession is unlawful."
The above-quoted provisions grant protection to a qualified manufacturer who
successfully registered with the Philippine
Patent Office its duly stamped or marked bottles, boxes, casks and other similar
containers. The mere use of registered bottles or containers without the written
consent of the manufacturer is prohibited, the only exceptions being when they are
used as containers for "sisi,""bagoong" "patis" and similar native products.[10]
It is an admitted fact that herein petitioner Cagayan buys from junk dealers and
retailers bottles which bear the marks or names "La Tondeña, Inc." and "Ginebra San
Miguel" and uses them as containers for its own liquor products. The contention of
Cagayan that the aforementioned bottles without the words "property of indicated
thereon are not the registered bottles of LTI, since they do not conform with the
statement or description in the supporting affidavits attached to the original
registration certificate and renewal, is untenable.
Republic Act No. 623 which governs the registration of marked bottles and
containers merely requires that the bottles, in order to be eligible for registration,
must be stamped or marked with the names of the manufacturers or the names of
their principals or products, or other marks of ownership. No drawings or labels are
required but, instead, two photographs of the container, duly signed by the applicant,
showing clearly and legibly the names and other marks of ownership sought to be
registered and a bottle showing the name or other mark of ownership, irremovably
stamped or marked, shall be submitted.[11]
The term "Name or Other Mark of Ownership" [12] means the name of the applicant or
the name of his principal, or of the product, or other mark of ownership. The second
set of bottles of LTI without the words "property of substantially complied with the
requirements of Republic Act No. 623, as amended, since they bear the name of the
principal, La Tondeña, Inc., and of its product, Ginebra San Miguel. The omitted
words "property of are not of such vital indispensability such that the omission
thereof will remove the bottles from the protection of the law. The owner of a trade-
mark or trade-name, and in this case the marked containers, does not abandon it by
making minor modifications in the mark or name itself. [13] With much more reason
will this be true where what is involved is the mere omission of the words "property
of since even without said words.the ownership of the bottles is easily identifiable.
The words "La Tondeña, Inc." and "Ginebra San Miguel" stamped on the bottles,
even without the words "property of," are sufficient notice to the public that those
bottles so marked are owned by LTI.
The claim of petitioner that hard liquor is not included under the term "other lawful
beverages" as provided in Section 1 of Republic Act No. 623, as amended by Republic
Act No. 5700, is without merit. The title of the law itself, which reads "An Act to
Regulate the Use of Duly Stamped or Marked Bottles, Boxes, Casks, Kegs, Barrels
and Other Similar Containers" clearly shows the legislative intent to give protection
to all marked bottles and containers of all lawful beverages regardless of the nature
of their contents. The words "other lawful beverages" is used in its general sense,
referring to all beverages not prohibited by law. Beverage is defined as a liquor or
liquid for drinking.[14] Hard liquor, although regulated, is not prohibited by law,
hence it is within the purview and coverage of Republic Act No. 623, as amended.
Republic Act No. 623, as amended, has for its purpose the protection of the health of
the general public and the prevention of the spread of contagious diseases. It further
seeks to safeguard the property rights of an important sector of Philippine industry.
[15]

As held by this Court in Destileria Ayala, Inc. vs. Tan Tay & Co., [16] the purpose of
then Act 3070, was to afford a person a means of identifying the containers he uses
in the manufacture, preservation, packing or sale of his products so that he may
secure their registration with the Bureau of Commerce and Industry and thus
prevent other persons from using them. Said Act 3070 was substantially reenacted as
Republic Act No. 623.[17]
The proposition that Republic Act No. 623, as amended, protects only the containers
of the soft drinks enumerated by petitioner and those similar thereto, is unwarranted
and specious. The rule of ejusdem generis cannot be applied in this case. To limit the
coverage of the law only to those enumerated or of the same kind or class as those
specifically mentioned will defeat the very purpose of the law. Such rule of ejusdem
generis is to be resorted to only for the purpose of determining what the intent of the
legislature was in enacting the law. If that intent clearly appears from other parts of
the law, and such intent thus clearly manifested is contrary to the result which would
be reached by the appreciation of the rule of ejusdem generis, the latter must give
way.[18]
Moreover, the above conclusions are supported by the fact that the Philippine Patent
Office, which is the proper and competent government agency vested with the
authority to enforce and implement Republic Act No. 623, registered the bottles of
respondent LTI as containers for gin and issued in its name a certificate of
registration with the following findings: 
"It appearing, upon due examination that the applicant is entitled to have the said
MARKS or NAMES registered under R.A. No. 623, the said marks or names have
been duly registered this day in the PATENT OFFICE under the said Act. for gin,
Ginebra San Miguel.[19]
While executive construction is not necessarily binding upon the courts, it is entitled
to great weight and consideration. The reason for this is that such construction
comes from the particular branch of government called upon to implement the
particular law involved.[20]
Just as impuissant is petitioner's contention that respondent court erred in holding
that there is no need for LTI to display the words "Reg. Phil. Pat. Off." in order to
succeed in its injunction suit against Cagayan for the illegal use of the bottles. To
repeat, Republic Act No. 623 governs the registration of marked bottles and
containers and merely requires that the bottles and/or containers be marked or
stamped by the names of the manufacturer or the names of their principals or
products or other marks of ownership. The owner, upon registration of its marked
bottles, is vested by law with an exclusive right to use the same to the exclusion of
others, except as a container for native products. A violation of said right gives rise to
a cause of action against the violator or infringer.
While Republic Act No. 623, as amended, provides for a criminal action in case of
violation, a civil action for damages is proper under Article 20 of the Civil Code
which provides that every person who, contrary to law, wilfully or negligently causes
damage to another, shall indemnify the latter for the same. This particular provision
of the Civil Case was clearly meant to complement all legal provisions which may
have inadvertently failed to provide for indemnification or reparation of damages
when proper or called for. In the language of the Code Commission "(t)he foregoing
rule pervades the entire legal system, and renders it impossible that a person who
suffers damage because another has violated some legal provisions, should find
himself without relief."[21] Moreover, under Section 23 of Republic Act No. 166, as
amended, a person entitled to the exclusive use of a registered mark or trade-name
may recover damages in a civil action from any person who infringes his rights. He
may also, upon proper showing, be granted injunction.
It is true that the aforesaid law on trade-marks provides: 
"SEC. 21. Requirements of notice of registration of trade-mark. The registrant of a
trade-mark, heretofore registered or registered under the provisions of this Act, shall
give notice that his mark is registered by displaying with the same as used the words
'Registered in the Philippines Patent Office' or 'Reg. Phil. Pat. Off.'; and in any suit
for infringement under this Act by a registrant failing so to mark the goods bearing
the registered trade-mark, no damages shall be recovered under the provisions of
this Act, unless the defendant has actual notice of the registration."
Even assuming that said provision is applicable in this case, the failure of LTI to
make said marking will not bar civil action against petitioner Cagayan. The aforesaid
requirement is not a condition sine qua non for filing of a civil action against the
infringer for other reliefs to which the plaintiff may be entitled. The failure to give
notice of registration will not deprive the aggrieved party of a cause of action against
the infringer but, at the most, such failure may bar recovery of damages but only
under the provisions of Republic Act No. 166.
However, in this case an award of damages to LTI is ineluctably called for. Petitioner
cannot claim good faith. The record shows that it had actual knowledge that the
bottles with the blown-in marks "La Tondeña, Inc." and "Ginebra San Miguel" are
duly registered. In Civil Case No. 102859 of the Court of First Instance of Manila,
entitled "La Tondeña, Inc. versus Diego Lim, doing business under the name and
style 'Cagayan Valley Distillery,'"' a decision was rendered in favor of plaintiff
therein on the basis of the admission and/or acknowledgment made by the
defendant that the bottles marked only with the words "La Tondena, Inc." and
"Ginebra San Miguel" are registered bottles of LTI.[22]
Petitioner cannot avoid the effect of the admission and/or acknowledgment made by
Diego Lim in the said case. While a corporation is an entity separate and distinct
from its stockholders and from other corporations with which it may be connected,
where the discreteness of its personality is used to defeat public convenience, justify
wrong, protect fraud, or defend crime, the law will regard the corporation as an
association of persons, or in the case of two corporations, merge them into one.
When the corporation is the mere alter ego or business conduit of a person, it may be
disregarded.[23]
Petitioner's claim that it is separate and distinct from the former
Cagayan Valley Distillery is belied by the evidence on record. The following facts
warrant the conclusion that petitioner, as a corporate entity, and Cagayan Valley
Distillery are one and the same, to wit: (1) petitioner is being managed by Rogelio
Lim, the son of Diego Lim, the owner and manager of Cagayan Valley Distillery; (2) it
is a family corporation;[24] (3) it is an admitted fact that before petitioner was
incorporated it was under a single proprietorship; [25] (4) petitioner is engaged in the
same business as Cagayan Valley Distillery, the manufacture of wines and liquors;
and (5) the factory of petitioner is located in the same place as the factory of the
former Cagayan Valley Distillery.
It is thus clear that herein petitioner is a mere continuation and successor of Cagayan
Valley Distillery. It is likewise indubitable that the admission made in the former
case, as earlier explained, is binding on it as cogent proof that even before the filing
of this case it had actual knowledge that the bottles in dispute were registered
containers of LTI. As held in La Campana Coffee Factory, Inc., et al. vs. Kaisahan
NgMga Manggagawa sa La Campana (KKM), et al., [26] where the main purpose in
forming the corporation was to evade one's subsidiary liability for damages in a
criminal case, the corporation may not be heard to say that it has a personality
separate and distinct from its members, because to allow it to do so would be to
sanction the use of the fiction of corporate entity as a shield to further an end
subversive of justice.
Anent the several motions of private respondent LTI to have petitioner cited for
contempt, we reject the argument of petitioner that an appeal from a verdict of
acquittal in a contempt proceeding constitutes double jeopardy. A failure to do
something ordered by the court for the benefit of a party constitutes civil contempt.
[27]
 As we held in Converse Rubber Corporation vs. Jacinto Rubber & Plastics Co.,
Inc.: 
"x x x True it is that generally, contempt proceedings are characterized as criminal in
nature, but the more accurate juridical concept is that contempt proceedings may
actually be either civil or criminal, even if the distinction between one and the other
may be so thin as to be almost imperceptible. But it does exist in law. It is criminal
when the purpose is to vindicate the authority of the court and protect its outraged
dignity. It is civil when there is failure to do something ordered by a court to be done
for the benefit of a party. (3 Moran Rules of Court, pp. 343-344, 1970ed.; see
also Perkins vs. Director of Prisons, 58 Phil. 272; Harden vs. Director of Prisons, 81
Phil. 741.) And with this distinction in mind, the fact that the injunction in the
instant case is manifestly for the benefit of plaintiffs makes of the contempt herein
involved civil, not criminal. Accordingly, the conclusion is inevitable that appellees
have been virtually found by the trial court guilty of civil contempt, not criminal
contempt, hence, the rule on double jeopardy may not be invoked." [28]
The contempt involved in this case is civil and constructive in nature, it having arisen
from the act of Cagayan in violating the writ of preliminary injunction of the lower
court which clearly defined the forbidden act, to wit: 
"NOW THEREFORE, pending the resolution of this case by the court, you are
enjoined from using the 350 c.c. white flint bottles with the marks "La Tondeña Inc.,'
and 'Ginebra San Miguel' blown-in or stamped into the bottles as containers for the
defendant's products."[29]
On this incident, two considerations must be borne in mind. Firstly, an injunction
duly issued must be obeyed, however erroneous the action of the court may be, until
its decision is overruled by itself or by a higher court. [30] Secondly, the American rule
that the power to judge a contempt rests exclusively with the court contemned does
not apply in this jurisdiction. The provision of the present Section 4, Rule 71 of the
Rules of Court as to where the charge may be filed is permissive in nature and is
merely declaratory of the inherent power of courts to punish contumacious conduct.
Said rules do not extend to the determination of the jurisdiction of Philippine courts.
  In appropriate cases, therefore, this Court may, in the interest of expedient justice,
[31]

impose sanctions on contemners of the lower courts.

Section 3 of Republic Act No. 623, as amended, creates a prima facie presumption
against Cagayan for its unlawful use of the bottles registered in the name of LTI.
Corollarily, the writ of injunction directing petitioner to desist from using the subject
bottles was properly issued by the trial court. Hence, said writ could not be simply
disregarded by Cagayan without adducing proof sufficient to overcome the aforesaid
presumption. Also, based on the findings of respondent court, and the records before
us being sufficient for arbitrament, without remanding the incident to the court a
quo petitioner can be adjudged guilty of contempt and imposed a sanction in this
appeal since it is a cherished rule of procedure for this Court to always strive to settle
the entire controversy in a single proceeding. [32] We so impose such penalty
concordant with the preservative principle and as demanded by the respect due the
orders, writs and processes of the courts of justice.
WHEREFORE, judgment is hereby rendered DENYING the petition in this case
and AFFIRMING the decision of respondent Court of Appeals. Petitioner is hereby
declared in contempt of court and ORDERED to pay a fine of One Thousand Pesos
(P1,000.00), with costs.
SO ORDERED.
Paras (Acting Chairman), Padilla, and Sarmiento, JJ., concur.
Melencio-Herrera, J., (Chairperson), on leave.