G.R. No. L-47701 JUNE 27, 1941 Issue: W/N Mentholatum Co.
is transacting business in the Philippines
THE MENTHOLATUM CO., INC., ET AL., petitioners vs. ANACLETO
MANGALIMAN, ET. AL., respondents
Topic: Foreign Corporations
Facts:
1. Mentholitum Co. is a Kansas corporation which manufactures
Mentholatum, a medicament and salve adapted for the treatment of
colds, nasal irritations, chapped skin, insect bites and other ailments.
2. Philippine-American Drug Co. is its exclusive distributing agent in the
Philippines authorized to protect Mentholitum Co.s interests.
3. June 26 1919 & Jan. 21 1921: Mentholitum Co. registered with the
Bureau of Commerce and Industry the word Mentholatum as trade
mark for its products.
4. Mentholatum Co. alleged that the Managlimans prepared the same
product which they named Mentholiman and which they sold in a
packing container of the same size, color and shape as
Mentholatum.
5. Oct. 1 1935: Mentholatum Co., Inc., and the Philippine-American
Drug Co. instituted an action against Anacleto Mangaliman,
Florencio Mangaliman and the Director of the Bureau of Commerce
for infringement of trade mark and unfair competition.
6. Mentholatum Co. prayed for an order restraining the Mangalimans
from selling the Mangalimans product Mentholiman, and directing
them to render accounting, and to pay damages.
7. CFI ruled in favor of Mentholatum Co. but the CA reversed the CFI
ruling. CA held that, according to Sec. 69 of the Corp. Law,
Metholatum Co. cannot maintain the present suit as they were
engaging in business in the PH (having sold products in the PH since
1929) but it failed to secure the license as required under Sec. 68 of
the Corporation Law.
8. Hence, this petition for review on certiorari. Petitioners argue that:
a. Mentholatum Co. has not sold any of its products in the
Philippines
b. Philippine-American Drug Co., together with other local
entities, was merely an importer and that its sales were its
own and not for Mentholatum Co.
9. The Mangalimans, however, contend that:
a. Philippine-American Drug Co. is the exclusive distributing
agent of Mentholatum Co.
b. Because of such agency agreement, Mentholatum Co. is
engaged in business, and not having acquired the license
under Sec. 68 of the Corp. Law, neither Mentholatum Co.
nor Phillipine-American Drug Co. can prosecute the present
action.
Held: Yes!
[DOCTRINE] Test for transacting business
1. No general rule or governing principle can be laid down as to what
constitutes "doing" or "engaging in" or "transacting" business. Each
case must be judged in the light of its peculiar circumstances.
2. The true test, however, seems to be whether the foreign
corporation is continuing the body or substance of the
business for which it was organized, or whether it has
substantially retired from it and turned it over to another.
3. Transacting business implies a continuity of commercial dealings
and arrangements, and contemplates the performance of acts or
works, or the exercise of some of the functions normally incident to,
and in progressive prosecution of, the purpose and object of its
organization.
4. In this case, the complaint filed by Mentholatum Co. in the CFI
clearly stated that Philippine-American Drug Co. was their exclusive
distributing agent in the Philippines of their product Mentholatum.
5. A party cannot subsequently take a position contradictory or
inconsistent with such complaint, as the facts therein are admitted to
be true for the purpose of the action.
6. Hence, it follows that whatever transactions the Philippine-American
Drug Co. had executed, in view of the law, it is as if Mentholatum Co.
did it itself.
7. Since Mentholatum Co. has been established as a foreign
corporation doing business in the Philippines without the license
required by section 68 of the Corporation Law, it may not prosecute
this action for violation of trade mark and unfair competition.
8. Neither may the Philippine-American Drug Co., Inc., maintain the
action here for the reason that the distinguishing features of the
agent being his representative character and derivative authority, it
cannot now, to the advantage of its principal, claim an independent
standing in court.
9. The right of the petitioner to protect its rights under Sec. 69 of the
Corp. Law is hereby reserved, condition upon compliance with the
requirements of the same Section.
HENCE, the writ prayed for is DENIED. Petition is DISMISSED.
Dissenting Opinion Moran, J.
- Sec. 69 of the Corp. Law, as held in Western Equipment & Supply
Company vs. Reyes (51 Phil., 115), does not apply to suits for
infringement of trade marks and unfair competition, the theory being
that "the right to the use of the corporate and trade name of a foreign
corporation is a property right, a right in rem, which it may assert and
protect in any of the courts of the world even in countries where it
does not personally transact any business," and that "trade mark
does not acknowledge any territorial boundaries but extends to every
mark where the traders' goods have become known and identified by
the use of the mark."
Notes:
Section 69 of Act No. 1459 (Corp. Law):
SEC. 69. No foreign corporation or corporation formed, organized, or existing
under any laws other than those of the Philippine Islands shall be permitted
to transact business in the Philippine Islands or maintain by itself or assignee
any suit for the recovery of any debt, claim, or demand whatever, unless it
shall have the license prescribed in the section immediately preceding. Any
officer, or agent of the corporation or any person transacting business for any
foreign corporation not having the license prescribed shall be punished by
imprisonment for not less than six months nor more than two years or by a
fine of not less than two hundred pesos nor more than one thousand pesos,
or by both such imprisonment and fine, in the discretion of the court.