Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No.

L-41518 June 30, 1976 GUERRERO'S TRANSPORT SERVICES, INC., petitioner, vs. BLAYLOCK TRANSPORTATION SERVICES EMPLOYEES ASSOCIATIONKILUSAN (BTEA-KILUSAN), LABOR ARBITER FRANCISCO M. DE LOS REYES and JOSE CRUZ, respondents. Eladio B. Samson petitioner. Francisco Angeles for private respondents. ANTONIO, J.: Certiorari and prohibition with preliminary injunction to annul the Orders of the National Labor Relations Commission, of March 26, June 20 and September 25, 1975, as well as the Writ of Execution of September 26, 1975, issued in NLRC Case No. 214, and to restrain respondent Deputy Sheriff of Manila from implementing said writ. On June 1, 1972, the United states Naval Base authorities at Subic, Zambales, conducted a public bidding for a five-year contract for the right to operate and/or manage the transportation services inside the naval base. This bidding was won by Santiago Guerrero, owner- operator of Guerrero's Transport Services, Inc., herein petitioner, over Concepcion F. Blaylock, the then incumbent concessionaire doing business under the name of "Blaylock Transport Services", whose 395 employees are members of respondent union BTEA-KILUSAN. When petitioner, after the commencement of its operation on January 1, 1973, refused to employ the members 1 of the respondent union, the latter. On January, 12, 1975, filed a complaint with the 2 National Labor Relations Commission docketed as NLRC Case No. 214, against Guerrero's Transport Services, Inc. and Santiago Guerrero, to compel them to employ its members pursuant to Article 1, Section 2 of the RP-US Base Agreement dated 3 May 27, 1968. This case was dismissed by the National Labor Relations Commission on March 13, 1973, upon petitioner's motion to dismiss on jurisdictional grounds, there being no employer-employee relationship between the 4 parties. Respondent union then appealed said Order on March 26,1973 to the Secretary of the Department of Labor, who, instead of deciding the appeal, remanded the case for review to the NLRC which, subsequently, summoned both parties to a series of conferences. Thereafter, or on October .11, 1973, the NLRC issue a 5 Resolution ordering petitioner, among others, "to absorb all the complainants who filed their applications on or before the deadline" set by petitioner "on 15 November 1972 except those who may have derogatory records with the U.S. Naval Authorities in Subic, Zambales" and directing the Officer-in-charge of the provincial office of the Department of Labor in Olongapo City to "oversee the preparation of the list of those qualified for absorption in accordance with this resolution." Petitioner appealed to Secretary of Labor Blas F. Ople who, in turn, rendered a 6 Decision on December 27, 1973, affirming said Resolution. On January 22, 1974, 7 Santiago A. Guerrero) appealed the decision to the President of the Philippines, but on July 9, 1974, the President, through Assistant Executive Secretary Ronaldo B. Zamora, returned the case to the Secretary of Labor for appropriate action on the 8 appeal, it appearing, that the same does not involve national interest.

In the meantime, the Provincial Director of the Labor Office in Zambales furnished, on 9 August 2, 1974, petitioner a list of forty-six (46) members of respondent union BTEA10 KILUSAN and former drivers of the Blaylock Transport Service, who are within the coverage of the decision of the Secretary of Labor, and requesting petitioner to report its action on the matter directly to the Chairman, NLRC, Manila. Subsequently, 11 Santiago A. Guerrero received a letter dated September 24, 1974 from Col. Levi L. Basilla, PC (GSC) Camp Olivas, San Fernando, Pampanga, requesting compliance with the Order dated July 19, 1974 of the NLRC in NLRC Case No. 214. In his reply letter dated October 4, 1974, Guerrero informed Col. Basilia that he had substantially complied with the decision of the Secretary of Labor affirming the NLRC Resolution of October 31, 1974 in NLRC Case No. 214, and that any apparent non-compliance therewith was attributable to the individual complainants who failed to submit themselves for processing and examination as requested by the authorities of the U.S. Naval Base in Subic, Zambales, preparatory to their absorption by petitioner. On January 18, 1975, Acting Executive Secretary Roberto V. Reyes, pursuant to Section 10 of Presidential Decree No. 21, directed the Chief of Constabulary to arrest 12 the executive officers of petitioner. On February 20, 1975, petitioner informed Secretary Reyes that it has substantially complied with the NLRC Resolution of October 31, 1975 as out of those listed by the Regional Labor Director, only a few passed the examination given and some of those who passed failed to comply with the final requirements of the U.S. Naval Base Authority; that only those who passed and complied with the requirements of the U.S. Naval Base Authority were extended appointments as early as December 16, 1974, but none of them, for evident lack of 13 interest, has reported for work. In his 1st endorsement dated March 26, 1975, Secretary Zamora required the Secretary of Labor to verify petitioner's 14 allegations. On the same date, respondent Labor Arbiter Francisco M. de los Reyes, upon a motion for execution filed by respondent union, issued an Order stating that "upon the finality thereof and by way of implementing any writ of execution that might be issued in this case, further hearings shall be held to determine the members of respondent union who are entitled to reinstatement in accordance with 15 the basic guidelines finally determined in this case." On June 20, 1975, respondent Labor Arbiter De los Reyes ordered the reinstatement of 129 individuals "to their former or substantially equivalent positions without loss of 16 seniority and other rights and privileges". On July 16,1975, respondent BTEA-KILUSAN filed a Motion for Issuance of Writ of 17 Execution with respondent Labor Arbiter, but this was objected to by petitioner contending that the Labor Arbiter has no jurisdiction over NLRC Case No. 214 and, 18 therefore, his proceedings and orders resulting therefrom are null and void. On September 1, 1975, the Provincial Director of the Zambales Labor Office, 19 pursuant to the directive of the Secretary of Labor, and the NLRC Resolution dated 20 October 21, 1975 submitted a detailed information to the Assistant Secretary of the Department of Labor on petitioner's compliance, "to enable the Department of Labor 21 to formally close" NLRC Case No. 214. On September 25, 1975, respondent Labor Arbiter, acting on the motion for execution filed by respondent union BTEA-KILUSAN, and finding that both the Orders, dated March 26 and June 20, 1975, have not been appealed pursuant to Article 223 of the Labor Code, declared said Orders final and executory and directed petitioner Guerrero's Transport Services, Inc. to reinstate the 129 complainants and to pay them the amount of P4,290.00 each, or a total of P592,110.00 as back wages covering the 22 period from August 22, 1974 to September 20, 1975. On September 26, 1975, respondent Labor Arbiter issued a writ directing the respondent Deputy Sheriff of Manila levy on the moneys and/or properties of

petitioner, and on the same date respondent Sheriff immediately serve said writ on petitioner who was given a period of five (5) days within which to comply therewith. It was on this factual environment that petitioner instituted the present petition for certiorari and prohibition with preliminary injunction on October 6, 1975. Petitioner asserts that the afore-mentioned Orders were issued by respondent Labor Arbiter without jurisdiction. As prayed for, this Court, on October 6, 1975, issued a temporary restraining order and required the respondents to file an answer within ten (10) days from notice. On October 11, 1975, respondent Labor Arbiter De los Reyes and Sheriff Jose Cruz filed their Comment by way of answer to the petition, explaining the legal justifications of their action on the premises. Upon motion filed on October 11, 1975 by respondent union BTEA-KILUSAN for reconsideration and to lift the temporary restraining order of October 6, 1975, this Court, on October 15, 1975, lifted said restraining order and set the case for hearing on Monday, October 20, 1975 at 3:00 p.m. At the hearing of this case on October 20, 1975, a Compromise Agreement was arrived at by the parties wherein they agreed to submit to the Office of t he Secretary of Labor the determination of members of the respondent union BTEA-KILUSAN who shall be reinstated or absorbed by the herein petitioner in the transportation service inside the naval base, which determination shall be considered final. This Court approved this agreement and enjoined "all the parties to strictly observe the terms thereof." This agreement is deemed to have superseded the Resolution of the National Labor Relations Commission of October 31, 1973, as affirmed by the Secretary of Labor on December 27, 1973. Pursuant to this agreement which was embodied in the Resolution of this Court of October 24, 1975, Secretary of Labor Blas F. Ople issued an Order dated November 13, 1975, the pertinent portion of which reads as follows: The issue submitted for resolution hinges on the credibility of the alleged applications. Considering that the employees are economically dependent on their jobs, they have all the reasons and zealousness to pursue their jobs within the legitimate framework of our laws. The applicant are no strangers to the pains and difficulties of unemployment. Because of these factors we cannot ignore the affidavits of proof presented by the employees concerned as against the declaration of the herein respondent. Firmly entrenched is the rule in this jurisdiction that doubts arising from labor disputes must be construed and interpreted in favor of the workers. RESPONSIVE TO THE FOREGOING, the National Labor Relations Commission through Arbiter Francisco delos Reyes is hereby directed to implement the absorption of the 175 members of the Blaylock Transport Employees Association (BTEA-KILUSAN) into the Guerrero Transport Services, subject to the following terms and conditions: 1) that they were bona fide employees of the Blaybock Transportation Service at the time its concession expired: 2) that the appellants shall pass final screening and approval by the appropriate authorities of the U.S. Base concerned. The applicants to be processed for absorption shall be those in the list of 46 submitted by OIC Liberator (Carino on 2 August 1974, and the list of 129 determined by Arbiter de los Reyes as embodied in the Writ of Execution issued on 25 September 1975.

23

The Regional Director of Regional Office No. II, San Fernando, Pampanga, shall make available to the parties the facilities of that 24 Office in the implementation of the aforesaid absorption process. On November 24, 1975, in compliance with the aforesaid directive of the Secretary of Labor, Labor Arbiter Francisco M. delos Reyes conducted a hearing to receive evidence as to who were the bona fide employees of the former concessionaire at the "time of its concession expire". Thereafter, Labor Arbiter De los Reyes issued an Order, dated November 25, 1975, listing in Annex "A" thereof, 174 employees who were bona fide employees of the private respondent, and transmitting a copy of said Order to the Base Commander, U.S. Naval Base, Olongapo City, with the request for the immediate screening and approval of their applications in accordance with applicable rules of said command. The pertinent portion of said Order reads as follows: As far as this Labor Arbiter is concerned, his only participation in this case refers to that portion of the Secretary of Labor's Order directing him to implement "* * * the absorption of the 175 members of the Blaylock Transport Employees Association (BTEA-KILUSAN) into the Guerrero Transport Services," subject to certain terms and conditions. Hence, any question of "prematurity" as espoused by respondent's counsel may not he entertained by this Labor Arbiter. Going now to the applicants who should be entitled to absorption, the Honorable Secretary of Labor specified that the same should be composed of the 46 submitted by OIC Liberator Carino on 2 August 1974 and the 129 applicants determined by this Labor Arbiter. Of the latter, only 128 will be named. A perusal of said list show that the name "Renato Carriaga" has been doubly listed. For convenience, these two listings have now been consolidated and alphabetically arranged and as an integral part of this Order has been made as Annex "A" (pp 1 to 6). For purposes of implementation, the initial step to be undertaken is for the submission of the name of the applicants to the U.S. Navy authorities concerned, which means the U. S. Naval Base at Olongapo City for the screening and approval by the appropriate authorities. Regarding the determination of whether the applicants are bona fide employees of the Blaylock Transportation Service at the time its concession expired, the parties appear to be in agreement that the records of this case will eventually show whether the applicants are such employees. Further, we feel that such employment will likewise appear in the records of the U. S. Naval Base at Olongapo City since persons connected with the Base like the applicants, have to undergo processing by naval authority. WHEREFORE, in view of the foregoing considerations, copies of this Order together with Annex "A" hereof are hereby transmitted to the Base Commander, U. S. Naval Base , Olongapo City with the request for the immediate screening and approval of said 25 applicants, in accordance with applicable rules of that command. Pursuant to Section 6 of Article I of the Philippine-U S. Labor Agreement of May 27, 1968, the United States Armed Forces undertook, consistent with military requirements, "to provide security for employment, and, in the event certain services are contracted out, the United States Armed Forces shall require the contractor or

concessionerto give priority consideration to affected employees for employment. (Emphasis supplied.) A treaty has two (2) aspects as an international agreement between states, and as municipal law for the people of each state to observe. As part of the municipal law, the aforesaid provision of the treaty enters into and forms part of the contract between petitioner and the U.S. Naval Base authorities. In view of said stipulation, the new contractor is, therefore, bound to give "priority" to the employment of the qualified employees of the previous contractor. It is obviously in recognition of such obligation that petitioner entered into the afore-mentioned Compromise Agreement. As above indicated, under the Compromise Agreement as embodied in the Resolution of this Court dated October 24, 1975, the parties agreed to submit to the Secretary of Labor the determination as to who of the members of the respondent union BTEA-KILUSAN shall be absorbed or employed by the herein petitioner Guerrero's Transport Services, Inc., and that such determination shall be considered as final. In connection therewith, the Secretary of Labor issued an Order dated November 13, 1975, directing the National Labor Relations Commission, through Labor Arbiter Francisco de los Reyes, to implement the absorption of the 175 26 members into the Guerrero's Transport Services, subject to the following conditions, viz.: (a) that they were bona fideemployees of the Blaylock Transport Service at the time its concession expired; and (b) that they should pass final screening and approval by the appropriate authorities of the U.S. Naval Base concerned. According to private respondent, however, Commander Vertplaetse of the U.S. Navy Exchange declined to implement the order of the Labor Arbiter, as it is the petitioner who should request for the screening and approval of the applicants. Considering that the afore-mentioned Compromise-Agreement of the parties, as approved by this Court, is more than a mere contract and has the force and effect of any other judgment, it is, therefore, conclusive upon the [parties and their 27 privies. For it is settled that a compromise has, upon the parties, the effect and authority ofres judicata and is enforceable by execution upon approval by the 28 court. Since the resolution of the NLRC of October 31, 1973 required the absorption of the applicants subject to the conditions therein contained, and there being no showing that such conditions were complied with, the Labor Arbiter exceeded his authority in awarding back wages to the 129 complainants. ACCORDINGLY, judgment is hereby rendered ordering petitioner to employ members of respondent labor union BTEA-KILUSAN referred to in the Order of the Secretary of Labor dated November 13, 1975 who satisfy the criteria enunciated viz.: (a) those who were bona fide employees of the Blaylock Transport Services at the time its concession expired; and (b) those who pass the final screening and approval by the appropriate authorities of the U.S. Naval Base. For this purpose, petitioner is hereby ordered to submit to and secure from the appropriate authorities of the U.S. naval Base at Subic, Zambales the requisite screening and approval, the names of the afore-mentioned members of respondent union. The Order dated September 25, 1975 of respondent Labor Arbiter Francisco M. de los Reyes, awarding back wages to the 129 complainants in the total amount of P592,110.00, is hereby set aside. No pronouncement as to costs. Barredo, Aquino and Martin, JJ., concur. Concepcion, Jr., J., is on leave.

The opinion of the Court penned by Justice Antonio in his usual comprehensive and lucid manner manifests fealty to the mandates of the law. It is entitled to full concurrence. The parties, duly represented by counsel, entered on a compromise. Its terms are thus binding on them. They should be adhered to. Accordingly, there must be compliance with what was ordained by the Secretary of Labor in his order of November 13, 1975. So it has been decided by us. We have no choice on the matter. Unfortunately for respondent Labor Union, no provision was made for backpay. That was an omission that ought to have been remedied before the compromise was entered into. This Court, however sympathetic it may be to the claims of labor, cannot go further than what was assented to by the parties themselves. So the law prescribes. Nontheless, the writer is impelled to write this brief concurrence because of his belief that while this Court is precluded from granting additional relief to the members of respondent Labor Union who, in the meanwhile, had been laid off, still their situation is not necessarily devoid of any hope for improvement. The present Labor Code stresses administrative rather than judicial redress. It has the advantage of greater flexibility, of more discretion on the part of the Secretary of Labor. That could be utilized on their behalf. Certainly, from what appears of record, the course of conduct pursued by petitioner left much to be desired, and not only from their standpoint. It yields the impression, to me at least, that there was no fidelity to the basic policy on labor as prescribed by the present Constitution. Petitioner commenced its operation on January 1, 1973. It refused to employ the members of respondent Union, prompting the latter to file a complaint with the National Labor Relations Court against it and one Santiago Guerrero to compel them to employ its members pursuant to Article 1, Section 2 of the RP-US Bases Agreement dated May 27, 1968. Five days thereafter, or on January 17, 1973, the present Constitution came into effect. Time and time again, this Court has correctly stressed how far the present Constitution has gone in seeing to it that the welfare of the economically underprivileged receive full attention. All that has to be done is to refer to the expanded scope of social 1 2 justice and the specific guarantees intended to vitalize the rights of labor. Security of tenure is one of the basic features. Had that provision been lived up to, the members of respondent Labor Union would not be in the sad plight they are in at present. It is to be admitted that what complicated matters is that the service to be rendered is inside the U.S. Naval Base of Olongapo City. Accordingly, the intervention of the authorities therein cannot be avoided. That is quite understandable. At the same time, in line with what was held in Reagan v. Commissioner of Internal 3 4 Revenue andPeople v. Gozo, the jurisdiction vested in this government over every inch of soil of its territory compels the conclusion that its laws are operative even inside a military base or naval reservation except as limited by the Military Bases Agreement. Moreover, the interpretation of such a provision should be most restrictive to assure that there be the least derogation of the rights of the territorial 5 sovereign. The thought cannot be entertained that the naval authorities concerned would be insensible to the fundamental public policy of according the utmost consideration to the claims of labor. This observation is made with the hope that if paid attention to, respondent Labor Union, through the efforts of the administrative officials, could still reasonably hope that the financial burden long sustained by its members could be eased all in accordance with law. Separate Opinions FERNANDO, J., concurring:

Separate Opinions FERNANDO, J., concurring:

The opinion of the Court penned by Justice Antonio in his usual comprehensive and lucid manner manifests fealty to the mandates of the law. It is entitled to full concurrence. The parties, duly represented by counsel, entered on a compromise. Its terms are thus binding on them. They should be adhered to. Accordingly, there must be compliance with what was ordained by the Secretary of Labor in his order of November 13, 1975. So it has been decided by us. We have no choice on the matter. Unfortunately for respondent Labor Union, no provision was made for backpay. That was an omission that ought to have been remedied before the compromise was entered into. This Court, however sympathetic it may be to the claims of labor, cannot go further than what was assented to by the parties themselves. So the law prescribes. Nontheless, the writer is impelled to write this brief concurrence because of his belief that while this Court is precluded from granting additional relief to the members of respondent Labor Union who, in the meanwhile, had been laid off, still their situation is not necessarily devoid of any hope for improvement. The present Labor Code stresses administrative rather than judicial redress. It has the advantage of greater flexibility, of more discretion on the part of the Secretary of Labor. That could be utilized on their behalf. Certainly, from what appears of record, the course of conduct pursued by petitioner left much to be desired, and not only from their standpoint. It yields the impression, to me at least, that there was no fidelity to the basic policy on labor as prescribed by the present Constitution. Petitioner commenced its operation on January 1, 1973. It refused to employ the members of respondent Union, prompting the latter to file a complaint with the National Labor Relations Court against it and one Santiago Guerrero to compel them to employ its members pursuant to Article 1, Section 2 of the RP-US Bases Agreement dated May 27, 1968. Five days thereafter, or on January 17, 1973, the present Constitution came into effect. Time and time again, this Court has correctly stressed how far the present Constitution has gone in seeing to it that the welfare of the economically underprivileged receive full attention. All that has to be done is to refer to the expanded scope of social 1 2 justice and the specific guarantees intended to vitalize the rights of labor. Security of tenure is one of the basic features. Had that provision been lived up to, the members of respondent Labor Union would not be in the sad plight they are in at present. It is to be admitted that what complicated matters is that the service to be rendered is inside the U.S. Naval Base of Olongapo City. Accordingly, the intervention of the authorities therein cannot be avoided. That is quite understandable. At the same time, in line with what was held in Reagan v. Commissioner of nternal 3 4 Revenue andPeople v. Gozo, the jurisdiction vested in this government over every inch of soil of its territory compels the conclusion that its laws are operative even inside a military base or naval reservation except as limited by the Military Bases Agreement. Moreover, the interpretation of such a provision should be most restrictive to assure that there be the least derogation of the rights of the territorial 5 sovereign. The thought cannot be entertained that the naval authorities concerned would be insensible to the fundamental public policy of according the utmost consideration to the claims of labor. This observation is made with the hope that if paid attention to, respondent Labor Union, through the efforts of the administrative officials, could still reasonably hope that the financial burden long sustained by its members could be eased all in accordance with law. Footnotes 1 Appendix "A", Petition, SC Rollo, pp. 19-20. 2 Created under the provisions of Presidential Decree No. 21, effective October 15, 1972.

3 Article I, Section 6, of the RP-US Base Labor Agreement provides: "Consistent with their military requirements, the United States Armed Forces shall endeavor to provide security for employment and, in the event certain activities or services are contracted out, the United States Armed Forces shall require the contractor or concessionaire to give priority consideration to affected employees for employment." 4 Appendix "B", Petition, SC Rollo, pp. 22-23. 5 Appendix "C", Ibid, pp. 24-26. 6 Appendix "D", Ibid, pp. 27-31. 7 Appendix "E", Ibid, 32-40. 8 Appendix "F", Ibid., p. 41. 9 Appendix "H", Ibid., p. 44, 10 Appendix "H-1", Ibid., p. 45. 11 Appendix "I", Ibid, p. 46. 12 Appendix "K", Ibid, p. 69. 13 Appendix "L", Ibid., pp. 70-72. 14 Appendix "M", Ibid., p. 73. 15 Appendix "N", Ibid., pp. 74-79. 16 Appendix "P", Ibid., pp. 81-85. 17 Appendix "Q", Ibid., pp. 86-88. 18 Appendix "R", Ibid., pp. 89-94. 19 Appendix "O", Ibid., p. 80. 20 Appendix "C", Ibid., pp. 24-26. 21 Appendices "S", "S-1", Ibid., pp. 95-100. 22 Appendix "T", Ibid., pp. 101-106-A. 23 Appendix "U", Ibid., pp. 107-110. 24 SC Rollo, pp. 194-196. 25 Ibid., pp. 200-207. 26 Actually 174, for the name of "RENATO CARRIAGA" has been doubly listed. 27 Piano v. Cayanong, et al. 117 Phil. 415-420. 28 Article 2037, Civil Code; Republic v. Estenzo, 25 SCRA 122; Serrano v. Miave, et al., 13 SCRA 461. Fernando, J., concurring: 1 According to Article II, Section 6 of the present Constitution "The State shall promote social justice to ensure the dignity, welfare, and security of all the people. Towards this end, the State shall regulate the acquisition, ownership, use, enjoyment, and disposition of private property, and equitably diffuse property ownership and profits." 2 According to Article II, Section 9 of the present Constitution: "The State shall afford protection to labor, promote full employment and equality in employment, ensue equal work opportunities regardless of sex, race or creed, and regulate the relations between workers and employers. The State shall assure the rights of workers to selforganization, collective bargaining, security of tenure, and just and humane conditions of work. The State may provide for compulsory arbitration." 3 L-26379, December 27, 1969, 30 SCRA 968. 4 L-36409, October 25, 1973, 53 SCRA 476.

5 Cf. commissioner of Internal Revenue v. Guerrero, L-20812, September 22, 1967, 21 SCRA 180.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-10500 June 30, 1959

On July 26, 1941, foreseeing the War in the Pacific, President Franklin D. Roosevelt, called into the service of the Armed Forces of the United States, for the duration of the emergency, all the organized military forces of the Philippine Commonwealth. His order was published here by Proclamation No. 740 of President Quezon on August 10, 1941. In October 1941, by two special orders, General Douglas MacArthur, Commanding General of the United States Army Forces in the Far East (known as USAFFE) placed under his command all the Philippine Army units including the Philippine Constabulary, about 100,000 officers and soldiers. For the expenses incident to such incorporation, mobilization and activities, the Congress of the United States provided in its Appropriation Act of December 17, 1941 (Public Law No. 353, 77th Congress) as follows: For all expenses necessary for the mobilization, operation and maintenance of the Army of the Philippines, including expenses connected with calling into the service of the armed forces of the United States the organized military forces of the Government of the Commonwealth of the Philippines, . . . but shall be expanded and accounted for in the manner prescribed by the President of the United States, S269,000.00; to remain available until June 30, 1943, which shall be available for payment to the Government of the Commonwealth of the Philippines upon its written request, either in advance of or in reimbursement for all or any part of the estimated or actual costs, as authorized by the Commanding General, United States Army Forces in the Far East, of necessary expenses for the purposes aforesaid. . . . (Emphasis Ours.) In subsequent Acts, the U.S. Congress appropriated moneys in language identical to the above: S28,313,000.00 for the fiscal year ending June 30, 1943; and S100,000,000 each year, for the fiscal years ending June 30, 1944, June 30, 1945, 1 and June 30, 1946. The last pertinent appropriation was Public law No. 301 (79th Congress) known as the Rescission Act. It simply set aside 200 million dollars for the Army for the fiscal year ending June 30, 1946. Now, pursuant to the power reserved to him under Public Law 353 above-quoted, President Roosevelt issued on January 3, 1942, his executive Order No. 9011 prescribing partly as follows: 2. (a) Necessary expenditures from funds in the Philippine Treasury for the purposes authorized by the Act of December 17, 1941, will be made by disbursing officers of the Army of the Philippines on the approval of authority of the Commanding General, United States Army Forces in the Far East, and such purposes as he may deem proper, and his determination thereon shall be final and conclusive upon the accounting officers of the Philippine Government, and such expenditures will be accounted for in accordance with procedures established by the Philippine Commonwealth Laws and regulations. (Emphasis Ours.) Out of the total amounts thus appropriated by the United States Congress as above itemized, P570,863,000.00 was transferred directly to the Philippines Armed Forces by means of vouchers which stated "Advance of Funds under Public law 353-77th

USAFFE VETERANS ASSOCIATION, INC., plaintiff-appellant, vs. THE TREASURER OF THE PHILIPPINES, ET AL., defendants-appellees. Lorenzo B. Camins, Castor C. Ames and Alberto M. K. Jamir for appellant. Office of the Solicitor General Ambrosio Padilla, Assistant Solicitor General Jose P. Alejandro and Solicitor Jorge R. Coquia for appellees. BENGZON, J.: The central issue in this litigation concerns the validity of the Romulo-Snyder Agreement (1950) whereby the Philippine Government undertook to return to the United States Government in ten annual installments, a total of about 35-million dollars advanced by the United States to, but unexpanded by, the National Defense Forces of the Philippines. In October 1954, the USAFFE Veterans Associations Inc., hereafter called Usaffe Veterans, for itself and for many other Filipino veterans of World War II, ex-members of the United States Armed Forces in the Far East (USAFFE) prayed in its complaint before the Manila court of first instance that said Agreement be annulled, that payments thereunder be declared illegal and that defendants as officers of the Philippine Republic be restrained from disbursing any funds in the National Treasury in pursuance of said Agreement. Said Usaffe Veterans further asked that the moneys available, instead of being remitted to the United States, should be turned over to the Finance Service of the Armed Forces of the Philippines for the payment of all pending claims of the veterans represented by plaintiff. The complaint rested on plaintiff's three propositions: first, that the funds to be "returned" under the Agreement were funds appropriated by the American Congress for the Philippine army, actually delivered to the Philippine Government and actually owned by said Government; second, that U.S. Secretary Snyder of the Treasury, had no authority to retake such funds from the P.I. Government; and third, that Philippine foreign Secretary Carlos P. Romulo had no authority to return or promise to return the aforesaid sums of money through the so-called Romulo-Snyder Agreement. The defendants moved to dismiss, alleging Governmental immunity from suit. But the court required an answer, and then heard the case merits. Thereafter, it dismissed the complaint, upheld the validity of the Agreement and dissolved the preliminary injunction i had previously issued. The plaintiff appealed.

Congress and Executive Order No. 9011". This amount was used (mostly) to discharge in the Philippine Islands the monetary obligations assumed by the U.S. Government as a result of the induction of the Philippine Armed Forces into the U.S. Army, and of its operations beginning in 1941. Part of these obligations consisted in the claims of Filipino USAFFE soldiers for arrears in pay and in the charges for supplies used by them and the guerrillas. Of the millions so transferred, there remained unexpended and uncommitted in the possession of the Philippine Armed Forces as of December 31, 1949 about 35 million dollars. As at that time, the Philippine Government badly needed funds for its activities, President Quirino, through Governor Miguel Cuaderno of the Central Bank proposed to the corresponding officials of the U.S. Government the retention of the 35-million dollars as a loan, and for its repayment in ten annual installments. After protracted negotiations the deal was concluded, and the Romulo-Snyder Agreement was signed in Washington on November 6, 1950, by the then Philippine Secretary of Foreign Affairs, Carlos P. Romulo, and the then American Secretary of the Treasury, John W. Snyder. Principal stipulation therein was this paragraph: 3. The Government of the Republic of the Philippines further agrees to pay the dollar amount payable hereunder to the Secretary of the Treasury of the United States in ten annual installments, the first nine payments to be in the amount of S3,500,000.00 and the final residual payment to be in the amount determined by deducting the total of the previous principal payments from the total amount of dollars to be paid to the Secretary of the Treasury of the United States, the latter amount to be determined as provided in Article II hereof. . . . It should be added that the agreement, made on the basis of the parties' belief that S35-million was the outstanding balance, provided in its article II for an audit by appropriate officers to compute the exact amount due. In compliance with the Agreement, this Government has appropriated by law and paid to the United States up to and including 1954, yearly installments totaling of P33,187,663.24. There is no reason to doubt that subsequent budgets failed to make the corresponding appropriations for other installments. In this appeal, the Usaffe Veterans reiterated with extended arguments, their basic propositions. They insists: first, the money delivered to the U.S. to the Armed Forces of the Philippine Island were straight payments for military services; ownership thereof vested in the Philippine Government upon delivery, and consequently, there was nothing to return, nothing to consider as a loan; and second, the Romulo-Snyder Agreement was void because it was not binding on the Philippine Government for lack of authority of the officers who concluded the same. With regard to the first point, it must be remembered that the first Congressional Act of December 17, 1941 (Public Law No. 353) appropriating S269-million expressly said the amount "shall be available for payment to the Government of the Commonwealth

of the Philippines upon its written request, either in advance of or in reimbursement for all or any part of the estimated or actual costs" of operation, mobilization and maintenance of the Philippine Army. Note carefully, the money is to handled to the Philippine Government either in advance of expenditures or in reimbursement thereof. All the vouchers signed upon receipt of the money state clearly, " Advance of funds under Public law 353-7th Congress and Executive Order No. 9011". In any system of accounting, advances of funds for expenditures contemplate disbursements to be reported, and credited if approved, against such advances, the unexpended sums to be returned later. In fact, the Congressional law itself required accounting "in the manner prescribed by the President of the U.S." and said President in his Executive Order No. 9011, outlined the procedure whereby advanced funds shall be accounted for. Furthermore, it requires as a condition sine qua non that all expenditures shall first be approved by the Commanding General, United States Army Forces Army Forces in the Far East. Now, these ideas of "funds advanced" to meet such expenditures of the Philippine Army as may be approved by the USAFFE Commanding-General, in connection with the requirement of accounting therefor evidently contradict appellant's thesis that the moneys represented straight payments to the Philippine Government for its armed services, and passed into the absolute control of such Government. In fact, the respective army officers of both nations, who are presumed to know their business, have consistently regarded the money as funds advanced, to be subsequently accounted for which means submission of expenditures, and if approved, return of unexpended balance. Now then, it is undeniable that upon a final rendition of accounts by the Philippine Government, a superabit resulted of at least 35 million dollars in favor of the U. S. Instead of returning such amount in one lump sum, our Executive Department arranged for its repayment in ten annual installments. Prima facie such arrangement should raise no valid objection, given the obligation to return-which we know exists. Yet plaintiff attempts to block such repayment because many alleged claims of veterans have not been processed and paid, December 31, 1949, having been fixed as the deadline for the presentation and/or payment of such claims. Plaintiff obviously calculates that if the return is prevented and the money kept here, it might manage to persuade the powers-that-be extend the deadline anew. Hence the two-pronged attack: (a) no obligation to repay; (b) the officers who promised to repay had no authority to bind this Government. The first ground has proved untenable. On the second, there is no doubt that President Quirino approved the negotiations. And he had power to contract budgetary loans under Republic Act No. 213, amending the Republic Act No. 16. The most important argument, however, rests on the lack of ratification of the Agreement by the Senate of the Philippines to make it binding on this Government. On this matter, the defendants explain as follows:
2

That the agreement is not a "treaty" as that term is used in the Constitution, is conceded. The agreement was never submitted to the Senate for concurrence (Art. VII, Sec. 10 (7). However, it must be noted that treaty is not the only form that an international agreement may assume. For the grant of the treaty-making power to the Executive and the Senate does not exhaust the power of the government over international relations. Consequently, executive agreements may be entered with other states and are effective even without the concurrence of the Senate (Sinco, Philippine Political Law, 10th ed., 303; Taada and Fernando, Constitution of the Philippines, 4th ed., Vol. II, 1055). It is observed in this connection that from the point of view of the international law, there is no difference between treaties and executive agreements in their binding effect upon states concerned as long as the negotiating functionaries have remained within their powers (Hackworth, Digest of International Law, Vol. 5, 395, citing U. S. vs. Belmont, 301 U. S. 342, State of Russia vs. National City Bank of New York, 69 F. (2d) 44; United States vs. Pink, 315 U. S. 203; Altman & Co., vs. United States, 224 U. S. 583. See also McDougal and Lans, "Treaties and Executive Agreements 54 Yale Law Journal 181, 318, et seg.; and Sinco; Op. cit. 305) "The distinction between so-called executive agreements" and "treaties" is purely a constitutional one and has no international legal significance" (Research in International Law Draft Convention on the Law of Treaties (Harvard Law School), Comment, 29 Am. J. Int.) Law Supp. 653, 897. See also Hackworth, op. cit. 391). There are now various forms of such pacts or agreements entered into by and between sovereign states which do not necessarily come under the strict sense of a treaty and which do not require ratification or consent of the legislative body of the State, but nevertheless, are considered valid international agreements. In a survey of the practice of States made by Harvard Research in the Draft Convention in the Law of Treaties (1935, pp. 711-713) it has been shown that there had been more executive agreements entered into by States than treaties (Hudson, International Legislation, I, p. ixii-xcvii). In the leading case of Altman vs, U. S., 224, U. S. 583, it was held that "an international compact negotiated between the representatives of two sovereign nations and made in the name and or behalf of the contracting parties and dealing with important commercial relations between the two countries, is a treaty both internationally although as an executive agreement it is not technically a treaty requiring the advice and consent of the Senate. (Herbert Briggs, The Law of Nations, 1947 ed., p. 489). Nature of Executive Agreements. Executive Agreements fall into two classes: (1) agreements made purely as executive acts affecting external relations and independent of or without legislative authorization, which may be termed as presidential agreements and (2) agreements entered into in pursuants of acts of Congress, which have been designated as Congressional-Executive Agreements

(Sinco, supra, 304; Hackworth, supra, 390; McDougal and Lans, supra, 204205; Hyke, International Law, 2nd ed., Vol. II; et seq.) The Romulo-Snyder Agreement may fall under any of these two classes, for precisely on September 18, 1946, Congress of the Philippines specifically authorized the President of the Philippines to obtain such loans or incur such indebtedness with the Government of the United States, its agencies or instrumentalities (Republic Act No. 16, September 18, 1946, amended by Republic Act No. 213, June 1, 1948). . . . Even granting, arguendo, that there was no legislative authorization, it is hereby maintained that the Romulo-Snyder Agreement was legally and validly entered into to conform to the second category, namely, "agreements entered into purely as executive acts without legislative authorization." This second category usually includes money agreements relating to the settlement of pecuniary claims of citizens. It may be said that this method of settling such claims has come to be the usual way of dealing with matters of this kind (Memorandum of the Solicitor of the Department of State (Nielson) sent to Senator Lodge by the Under-Secretary of State (Philip), August 23, 1922, MS Dept. of State, file 711.00/98a). Such considerations seems persuasive; indeed, the Agreement was not submitted to the U.S. Senate either; but we do not stop to check the authorities above listed nor test the conclusions derived therefrom in order to render a definite pronouncement, 3 for the reason that our Senate Resolution No. 15 practically admits the validity and binding force of such Agreement. Furthermore, the acts of Congress Appropriating funds for the yearly installments necessary to comply with such Agreements constitute a ratification thereof, which places the question the validity out of the Court's reach, no constitutional principle having been invoked to restrict Congress' plenary power to appropriate funds-loan or no loan. In conclusion, plaintiff, to say the least, failed to make a clear case for the relief demanded; its petition was therefore, properly denied. Paras, C.J., Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion, Endencia and Barrera, JJ., concur.

Footnotes
1

Public Laws 649 (77th Congress), 108 (78th Congress), 374 (78th Congress), and 126 (79th Congress).
2

The Commanding General, United States Forces Philippines-Ryukus Command and the Chief of Staff, Philippine Army. See their agreements of June 30, 1948 and July 29, 1949.

Dated May 19, 1954.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-31092 February 27, 1987 COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. JOHN GOTAMCO & SONS, INC. and THE COURT OF TAX APPEALS, respondents.

and that therefore their bids "must take this into account and should not include items for such taxes, licenses and other payments to Government agencies." The construction contract was awarded to respondent John Gotamco & Sons, Inc. (Gotamco for short) on February 10, 1958 for the stipulated price of P370,000.00, but when the building was completed the price reached a total of P452,544.00. Sometime in May 1958, the WHO received an opinion from the Commissioner of the Bureau of Internal Revenue stating that "as the 3% contractor's tax is an indirect tax on the assets and income of the Organization, the gross receipts derived by contractors from their contracts with the WHO for the construction of its new building, are exempt from tax in accordance with . . . the Host Agreement." Subsequently, however, on June 3, 1958, the Commissioner of Internal Revenue reversed his opinion and stated that "as the 3% contractor's tax is not a direct nor an indirect tax on the WHO, but a tax that is primarily due from the contractor, the same is not covered by . . . the Host Agreement." On January 2, 1960, the WHO issued a certification state 91 inter alia,:

YAP, J.: The question involved in this petition is whether respondent John Gotamco & Sons, Inc. should pay the 3% contractor's tax under Section 191 of the National Internal Revenue Code on the gross receipts it realized from the construction of the World Health Organization office building in Manila. The World Health Organization (WHO for short) is an international organization which has a regional office in Manila. As an international organization, it enjoys privileges and immunities which are defined more specifically in the Host Agreement entered into between the Republic of the Philippines and the said Organization on July 22, 1951. Section 11 of that Agreement provides, inter alia, that "the Organization, its assets, income and other properties shall be: (a) exempt from all direct and indirect taxes. It is understood, however, that the Organization will not claim exemption from taxes which are, in fact, no more than charges for public utility services; . . . When the WHO decided to construct a building to house its own offices, as well as the other United Nations offices stationed in Manila, it entered into a further agreement with the Govermment of the Republic of the Philippines on November 26, 1957. This agreement contained the following provision (Article III, paragraph 2): The Organization may import into the country materials and fixtures required for the construction free from all duties and taxes and agrees not to utilize any portion of the international reserves of the Government. Article VIII of the above-mentioned agreement referred to the Host Agreement concluded on July 22, 1951 which granted the Organization exemption from all direct and indirect taxes. In inviting bids for the construction of the building, the WHO informed the bidders that the building to be constructed belonged to an international organization with diplomatic status and thus exempt from the payment of all fees, licenses, and taxes,

When the request for bids for the construction of the World Health Organization office building was called for, contractors were informed that there would be no taxes or fees levied upon them for their work in connection with the construction of the building as this will be considered an indirect tax to the Organization caused by the increase of the contractor's bid in order to cover these taxes. This was upheld by the Bureau of Internal Revenue and it can be stated that the contractors submitted their bids in good faith with the exemption in mind. The undersigned, therefore, certifies that the bid of John Gotamco & Sons, made under the condition stated above, should be exempted from any taxes in connection with the construction of the World Health Organization office building. On January 17, 1961, the Commissioner of Internal Revenue sent a letter of demand to Gotamco demanding payment of P 16,970.40, representing the 3% contractor's tax plus surcharges on the gross receipts it received from the WHO in the construction of the latter's building. Respondent Gotamco appealed the Commissioner's decision to the Court of Tax Appeals, which after trial rendered a decision, in favor of Gotamco and reversed the Commissioner's decision. The Court of Tax Appeal's decision is now before us for review on certiorari. In his first assignment of error, petitioner questions the entitlement of the WHO to tax exemption, contending that the Host Agreement is null and void, not having been ratified by the Philippine Senate as required by the Constitution. We find no merit in this contention. While treaties are required to be ratified by the Senate under the Constitution, less formal types of international agreements may be entered into by the

Chief Executive and become binding without the concurrence of the legislative 1 body. The Host Agreement comes within the latter category; it is a valid and binding international agreement even without the concurrence of the Philippine Senate. The privileges and immunities granted to the WHO under the Host Agreement have 2 been recognized by this Court as legally binding on Philippine authorities. Petitioner maintains that even assuming that the Host Agreement granting tax exemption to the WHO is valid and enforceable, the 3% contractor's tax assessed on Gotamco is not an "indirect tax" within its purview. Petitioner's position is that the contractor's tax "is in the nature of an excise tax which is a charge imposed upon the performance of an act, the enjoyment of a privilege or the engaging in an occupation. . . It is a tax due primarily and directly on the contractor, not on the owner of the building. Since this tax has no bearing upon the WHO, it cannot be deemed an indirect taxation upon it." We agree with the Court of Tax Appeals in rejecting this contention of the petitioner. Said the respondent court: In context, direct taxes are those that are demanded from the very person who, it is intended or desired, should pay them; while indirect taxes are those that are demanded in the first instance from one person in the expectation and intention that he can shift the burden to someone else. (Pollock vs. Farmers, L & T Co., 1957 US 429, 15 S. Ct. 673, 39 Law. Ed. 759.) The contractor's tax is of course payable by the contractor but in the last analysis it is the owner of the building that shoulders the burden of the tax because the same is shifted by the contractor to the owner as a matter of self-preservation. Thus, it is an indirect tax. And it is an indirect tax on the WHO because, although it is payable by the petitioner, the latter can shift its burden on the WHO. In the last analysis it is the WHO that will pay the tax indirectly through the contractor and it certainly cannot be said that 'this tax has no bearing upon the World Health Organization. Petitioner claims that under the authority of the Philippine Acetylene Company versus 3 Commissioner of Internal Revenue, et al., the 3% contractor's tax fans directly on Gotamco and cannot be shifted to the WHO. The Court of Tax Appeals, however, held that the said case is not controlling in this case, since the Host Agreement specifically exempts the WHO from "indirect taxes." We agree. The Philippine Acetylene case involved a tax on sales of goods which under the law had to be paid by the manufacturer or producer; the fact that the manufacturer or producer might have added the amount of the tax to the price of the goods did not make the sales tax "a tax on the purchaser." The Court held that the sales tax must be paid by the manufacturer or producer even if the sale is made to tax-exempt entities like the National Power Corporation, an agency of the Philippine Government, and to the Voice of America, an agency of the United States Government. The Host Agreement, in specifically exempting the WHO from "indirect taxes," contemplates taxes which, although not imposed upon or paid by the Organization

directly, form part of the price paid or to be paid by it. This is made clear in Section 12 of the Host Agreement which provides: While the Organization will not, as a general rule, in the case of minor purchases, claim exemption from excise duties, and from taxes on the sale of movable and immovable property which form part of the price to be paid, nevertheless, when the Organization is making important purchases for official use of property on which such duties and taxes have been charged or are chargeable the Government of the Republic of the Philippines shall make appropriate administrative arrangements for the remission or return of the amount of duty or tax. (Emphasis supplied). The above-quoted provision, although referring only to purchases made by the WHO, elucidates the clear intention of the Agreement to exempt the WHO from "indirect" taxation. The certification issued by the WHO, dated January 20, 1960, sought exemption of the contractor, Gotamco, from any taxes in connection with the construction of the WHO office building. The 3% contractor's tax would be within this category and should be viewed as a form of an "indirect tax" On the Organization, as the payment thereof or its inclusion in the bid price would have meant an increase in the construction cost of the building. Accordingly, finding no reversible error committed by the respondent Court of Tax Appeals, the appealed decision is hereby affirmed. SO ORDERED. Narvasa, Melencio-Herrera, Cruz, Feliciano, Gancayco and Sarmiento, JJ., concur.

Footnotes 1 Usaffe Veterans Association, Inc. vs. Treasurer of the Philippines, et. al., 105 Phil. 1030. 2 World Health Organization and Dr. Leonce Verstuyft v. Hon. Benjamin Aquino, etc., et al., 48 SCRA 242. 3 127 Phil. 461.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-14279 October 31, 1961

consideration are required by Central Bank Circulars Nos. 44 and 45, the latter are null and void; and that the seizure and forfeiture of the goods imported from Japan 1 cannot be justified under Executive Order No. 328, not only because the same seeks 2 3 to implement an executive agreement extending the effectivity of our Trades and 4 Financial Agreements with Japan which (executive agreement), it believed, is of dubious validity, but, also, because there is no governmental agency authorized to issue the import license required by the aforementioned executive order. The authority of the Central Bank to regulate no-dollar imports and the validity of the aforementioned Circulars Nos. 44, and 45 have already been passed upon and repeatedly upheld by this Court (Pascual vs. Commissioner of Customs, L-10979 [June 30, 1959]; Acting Commissioner of Customs vs. Leuterio, L-9142 [October 17, 1959] Commissioner of Customs vs. Pascual, L-9836 [November 18, 1959]; Commissioner of Customs vs. Serree Investment Co., L-12007 [May 16, 1960]; Commissioner of Customs vs. Serree Investment Co., L-14274 [November 29, 1960]), for the reason that the broad powers of the Central Bank, under its charter, to maintain our monetary stability and to preserve the international value of our currency, under section 2 of Republic Act No. 265, in relation to section 14 of said Act authorizing the bank to issue such rules and regulations as it may consider necessary for the effective discharge of the responsibilities and the exercise of the powers assigned to the Monetary Board and to the Central Bank connote the authority to regulate no-dollar imports, owing to the influence and effect that the same may and do have upon the stability of our peso and its international value. The Court of Tax Appeals entertained doubts on the legality of the executive agreement sought to be implemented by Executive Order No. 328, owing to the fact that our Senate had not concurred in the making of said executive agreement. The concurrence of said House of Congress is required by our fundamental law in the making of "treaties" (Constitution of the Philippines, Article VII, Section 10[7]), which are, however, distinct and different from "executive agreements," which may be validly entered into without such concurrence. Treaties are formal documents which require ratification with the approval of two thirds of the Senate. Executive agreements become binding through executive action without the need of a vote by the Senate or by Congress. xxx xxx xxx

THE COMMISSIONER OF CUSTOMS and THE COLLECTOR OF CUSTOMS, petitioners, vs. EASTERN SEA TRADING, respondent. Office of the Solicitor General for petitioners. Valentin Gutierrez for respondent. CONCEPCION, J.: Petition for review of a judgment of the Court of Tax Appeals reversing a decision of the Commissioner of Customs. Respondent Eastern Sea Trading was the consignee of several shipments of onion and garlic which arrived at the Port of Manila from August 25 to September 7, 1954. Some shipments came from Japan and others from Hong Kong. In as much as none of the shipments had the certificate required by Central Bank Circulars Nos. 44 and 45 for the release thereof, the goods thus imported were seized and subjected to forfeiture proceedings for alleged violations of section 1363(f) of the Revised Administrative Code, in relation to the aforementioned circulars of the Central Bank. In due course, the Collector of Customs of Manila rendered a decision on September 4, 1956, declaring said goods forfeited to the Government and the goods having been, in the meantime, released to the consignees on surety bonds, filed by the same, as principal, and the Alto Surety & Insurance Co., Inc., as surety, in compliance with orders of the Court of First Instance of Manila, in Civil Cases Nos. 23942 and 23852 thereof directing that the amounts of said bonds be paid, by said principal and surety, jointly and severally, to the Bureau of Customs, within thirty (30) days from notice. On appeal taken by the consignee, said decision was affirmed by the Commissioner of Customs on December 27, 1956. Subsequently, the consignee sought a review of the decision of said two (2) officers by the Court of Tax Appeals, which reversed the decision of the Commissioner of Customs and ordered that the aforementioned bonds be cancelled and withdrawn. Hence, the present petition of the Commissioner of Customs for review of the decision of the Court of Tax Appeals. The latter is based upon the following premises, namely: that the Central Bank has no authority to regulate transactions not involving foreign exchange; that the shipments in question are in the nature of "no-dollar" imports; that, as such, the aforementioned shipments do not involve foreign exchange; that, insofar as a Central Bank license and a certificate authorizing the importation or release of the goods under

. . . the right of the Executive to enter into binding agreements without the necessity of subsequent Congressional approval has been confirmed by long usage. From the earliest days of our history we have entered into executive agreements covering such subjects as commercial and consular relations, most-favored-nation rights, patent rights, trademark and copyright protection, postal and navigation arrangements and the settlement of claims. The validity of these has never been seriously questioned by our courts. xxx xxx xxx

Agreements with respect to the registration of trade-marks have been concluded by the Executive with various countries under the Act of Congress of March 3, 1881 (21 Stat. 502). Postal conventions regulating the reciprocal treatment of mail matters, money orders, parcel post, etc., have been concluded by the Postmaster General with various countries under authorization by Congress beginning with the Act of February 20, 1792 (1 Stat. 232, 239). Ten executive agreements were concluded by the President pursuant to the McKinley Tariff Act of 1890 (26 Stat. 567, 612), and nine such agreements were entered into under the Dingley Tariff Act 1897 (30 Stat. 151, 203, 214). A very much larger number of agreements, along the lines of the one with Rumania previously referred to, providing for mostfavored-nation treatment in customs and related matters have been entered into since the passage of the Tariff Act of 1922, not by direction of the Act but in harmony with it. xxx xxx xxx

International agreements involving political issues or changes of national policy and those involving international arrangements of a permanent character usually take the form of treaties. But international agreements embodying adjustments of detail carrying out well-established national policies and traditions and those involving arrangements of a more or less temporary nature usually take the form of executive agreements. xxx xxx xxx

undertake to discuss here the large variety of executive agreements as such, concluded from time to time. Hundreds of executive agreements, other than those entered into under the trade-agreements act, have been negotiated with foreign governments. . . . It would seem to be sufficient, in order to show that the trade agreements under the act of 1934 are not anomalous in character, that they are not treaties, and that they have abundant precedent in our history, to refer to certain classes of agreements heretofore entered into by the Executive without the approval of the Senate. They cover such subjects as the inspection of vessels, navigation dues, income tax on shipping profits, the admission of civil aircraft, customs matters, and commercial relations generally, international claims, postal matters, the registration of trademarks and copyrights, etcetera. Some of them were concluded not by specific congressional authorization but in conformity with policies declared in acts of Congress with respect to the general subject matter, such as tariff acts; while still others, particularly those with respect of the settlement of claims against foreign governments, were concluded independently of any legislation." (39 Columbia Law Review, pp. 651, 755.) The validity of the executive agreement in question is thus patent. In fact, the socalled Parity Rights provided for in the Ordinance Appended to our Constitution were, prior thereto, the subject of an executive agreement, madewithout the concurrence of two-thirds (2/3) of the Senate of the United States. Lastly, the lower court held that it would be unreasonable to require from respondentappellee an import license when the Import Control Commission was no longer in existence and, hence, there was, said court believed, no agency authorized to issue the aforementioned license. This conclusion is untenable, for the authority to issue the aforementioned licenses was not vested exclusively upon the Import Control Commission or Administration. Executive Order No. 328 provided for export or import licenses "from the Central Bank of the Philippines or the Import Control Administration" or Commission. Indeed, the latter was created only to perform the task of implementing certain objectives of the Monetary Board and the Central Bank, which otherwise had to be undertaken by these two (2) agencies. Upon the abolition of said Commission, the duty to provide means and ways for the accomplishment of said objectives had merely to be discharged directly by the Monetary Board and the Central Bank, even if the aforementioned Executive Order had been silent thereon. WHEREFORE, the decision appealed from is hereby reversed and another one shall be entered affirming that of the Commissioner of Customs, with cost against respondents defendant-appellee, Eastern Sea Trading. It is so ordered. Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Paredes, Dizon and De Leon, JJ., concur. Barrera, J., took no part.

Furthermore, the United States Supreme Court has expressly recognized the validity and constitutionality of executive agreements entered into without Senate approval. (39 Columbia Law Review, pp. 753-754) (See, also, U.S. vs. Curtis-Wright Export Corporation, 299 U.S. 304, 81 L. ed. 255; U.S. vs. Belmont, 301 U.S. 324, 81 L. ed. 1134; U.S. vs. Pink, 315 U.S. 203, 86 L. ed. 796; Ozanic vs. U.S., 188 F. 2d. 288; Yale Law Journal, Vol. 15, pp. 1905-1906; California Law Review, Vol. 25, pp. 670-675; Hyde on International Law [Revised Edition], Vol. 2, pp. 1405, 1416-1418; Willoughby on the U.S. Constitutional Law, Vol. I [2d ed.], pp. 537-540; Moore, International Law Digest, Vol. V, pp. 210-218; Hackworth, International Law Digest, Vol. V, pp. 390-407). (Emphasis supplied.) In this connection, Francis B. Sayre, former U.S. High Commissioner to the Philippines, said in his work on "The Constitutionality of Trade Agreement Acts": Agreements concluded by the President which fall short of treaties are commonly referred to as executive agreements and are no less common in our scheme of government than are the more formal instruments treaties and conventions. They sometimes take the form of exchanges of notes and at other times that of more formal documents denominated "agreements" time or "protocols". The point where ordinary correspondence between this and other governments ends and agreements whether denominated executive agreements or exchanges of notes or otherwise begin, may sometimes be difficult of ready ascertainment. It would be useless to

Footnotes
1

Dated June 22, 1950. It provides, inter alia, that from and after said date, no commodity may be exported to or imported from Occupied Japan without an export or import license from the Central Bank of the Philippines or the Import Control Administration, and that the annual exports and imports to the Philippines and from Occupied Japan, as contained in the Trade Plan shall be allocated and the licenses therefor shall be issued only to bona fide Philippine exporters and importers, subject to the provisions of section 9 of said Executive Order and to such rules and regulations as may be prescribed by the Import Control Administration and the Central Bank of the Philippines.
2

According to a communication dated April 24, 1957 of the then Acting Secretary of Foreign Affairs (Exhibit F), Japan was subrogated into the rights, obligations and interests of the SCAP and Japan on March 19, 1952, and since then the agreements have been extended mutatis mutandis 18 times, the current one to expire at the end of April, 1957.
3

The Trade Agreement, dated May 18, 1950, provides, inter alia, for the adoption of a trade plan, on an annual basis, between the Philippines and Occupied Japan; that, subject to exceptions, all trade shall be conducted in accordance with the Financial Agreement between the two countries, and through specified channels; that subject to exchange, import and export control restrictions, both countries would permit the importation from and exportation to each other of the commodities specified in the trade plan, within specified limits; that consultations would be held for necessary modifications of the trade plan; that a machinery would be established to ensure accurate and up-to-date information regarding the operation of the agreement and to insure the implementation of the trade plan; and that the parties would do everything feasible to ensure compliance with the exportimport control, exchange control and such other controls pertaining to international trade as may be in force in their respective territories from time to time. The agreement, likewise, specifies the method of revision or cancellation thereof, the procedure for the review of the trading position between the parties and the time of its effectivity (upon "exchange of formal ratification", pending which, "it shall take effect upon signature by authorized representatives as modus vivendi between the parties").
4

The Financial Agreement, dated May 18, 1950, provides, inter alia, that all transactions covered by the Trade Agreement shall be invoiced in U.S.A. dollars and shall be entered into the account of each party to be maintained in the books of the principal financial agent banks designated by each party; that debits and credits shall be offset against each other in said accounts and payments shall be made on the net balance only; that the Agreement may be revised in the manner therein stated; that the representatives of both parties may negotiate and conclude of the agreement; and that the same shall be effective upon exchange of formal ratification, pending which it shall take effect upon signature of the agreement as a modus vivendibetween the parties.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 89651 November 10, 1989 DATU FIRDAUSI I.Y. ABBAS, DATU BLO UMPAR ADIONG, DATU MACALIMPOWAC DELANGALEN, CELSO PALMA, ALI MONTANA BABAO, JULMUNIR JANNARAL, RASHID SABER, and DATU JAMAL ASHLEY ABBAS, representing the other taxpayers of Mindanao, petitioners, vs. COMMISSION ON ELECTIONS, and HONORABLE GUILLERMO C. CARAGUE, DEPARTMENT SECRETARY OF BUDGET AND MANAGEMENT, respondents. G.R. No. 89965 November 10, 1989 ATTY. ABDULLAH D. MAMA-O, petitioner, vs. HON. GUILLERMO CARAGUE, in his capacity as the Secretary of the Budget, and the COMMISSION ON ELECTIONS, respondents. Abbas, Abbas, Amora, Alejandro-Abbas & Associates for petitioners in G.R. Nos. 89651 and 89965. Abdullah D. Mama-o for and in his own behalf in 89965. CORTES, J.: The present controversy relates to the plebiscite in thirteen (13) provinces and nine 1 (9) cities in Mindanao and Palawan, scheduled for November 19, 1989, in implementation of Republic Act No. 6734, entitled "An Act Providing for an Organic Act for the Autonomous Region in Muslim Mindanao." These consolidated petitions pray that the Court: (1) enjoin the Commission on Elections (COMELEC) from conducting the plebiscite and the Secretary of Budget and Management from releasing funds to the COMELEC for that purpose; and (2) declare R.A. No. 6734, or parts thereof, unconstitutional . After a consolidated comment was filed by Solicitor General for the respondents, which the Court considered as the answer, the case was deemed submitted for decision, the issues having been joined. Subsequently, petitioner Mama-o filed a "Manifestation with Motion for Leave to File Reply on Respondents' Comment and to Open Oral Arguments," which the Court noted. The arguments against R.A. 6734 raised by petitioners may generally be categorized into either of the following: (a) that R.A. 6734, or parts thereof, violates the Constitution, and (b) that certain provisions of R.A. No. 6734 conflict with the Tripoli Agreement. The Tripoli Agreement, more specifically, the Agreement Between the government of the Republic of the Philippines of the Philippines and Moro National Liberation Front with the Participation of the Quadripartie Ministerial Commission Members of the Islamic Conference and the Secretary General of the Organization of Islamic Conference" took effect on December 23, 1976. It provided for "[t]he establishment of Autonomy in the southern Philippines within the realm of the sovereignty and territorial integrity of the Republic of the Philippines" and enumerated the thirteen (13) 2 provinces comprising the "areas of autonomy." In 1987, a new Constitution was ratified, which the for the first time provided for regional autonomy, Article X, section 15 of the charter provides that "[t]here shall be created autonomous regions in Muslim Mindanao and in the Cordilleras consisting of provinces, cities, municipalities, and geographical areas sharing common and distinctive historical and cultural heritage, economic and social structures, and other

relevant characteristics within the framework of this Constitution and the national sovereignty as well as territorial integrity of the Republic of the Philippines." To effectuate this mandate, the Constitution further provides: Sec. 16. The President shall exercise general supervision over autonomous regions to ensure that the laws are faithfully executed. Sec. 17. All powers, functions, and responsibilities not granted by this Constitution or by law to the autonomous regions shall be vested in the National Government. Sec. 18. The Congress shall enact an organic act for each autonomous region with the assistance and participation of the regional consultative commission composed of representatives appointed by the President from a list of nominees from multisectoral bodies. The organic act shall define the basic structure of government for the region consisting of the executive and representative of the constituent political units. The organic acts shall likewise provide for special courts with personal, family, and property law jurisdiction consistent with the provisions of this Constitution and national laws. The creation of the autonomous region shall be effective when approved by majority of the votes cast by the constituent units in a plebiscite called for the purpose, provided that only the provinces, cities, and geographic areas voting favorably in such plebiscite shall be included in the autonomous region. Sec. 19 The first Congress elected under this Constitution shall, within eighteen months from the time of organization of both Houses, pass the organic acts for the autonomous regions in Muslim Mindanao and the Cordilleras. Sec. 20. Within its territorial jurisdiction and subject to the provisions of this Constitution and national laws, the organic act of autonomous regions shall provide for legislative powers over: (1) Administrative organization; (2) Creation of sources of revenues; (3) Ancestral domain and natural resources; (4) Personal, family, and property relations; (5) Regional urban and rural planning development; (6) Economic, social and tourism development; (7) Educational policies; (8) Preservation and development of the cultural heritage; and (9) Such other matters as may be authorized by law for the promotion of the general welfare of the people of the region. Sec. 21. The preservation of peace and order within the regions shall be the responsibility of the local police agencies which shall be organized, maintained, supervised, and utilized in accordance with applicable laws. The defense and security of the region shall be the responsibility of the National Government. Pursuant to the constitutional mandate, R.A. No. 6734 was enacted and signed into law on August 1, 1989.

1. The Court shall dispose first of the second category of arguments raised by petitioners, i.e. that certain provisions of R.A. No. 6734 conflict with the provisions of the Tripoli Agreement. Petitioners premise their arguments on the assumption that the Tripoli Agreement is part of the law of the land, being a binding international agreement . The Solicitor General asserts that the Tripoli Agreement is neither a binding treaty, not having been entered into by the Republic of the Philippines with a sovereign state and ratified according to the provisions of the 1973 or 1987 Constitutions, nor a binding international agreement. We find it neither necessary nor determinative of the case to rule on the nature of the Tripoli Agreement and its binding effect on the Philippine Government whether under public international or internal Philippine law. In the first place, it is now the Constitution itself that provides for the creation of an autonomous region in Muslim Mindanao. The standard for any inquiry into the validity of R.A. No. 6734 would therefore be what is so provided in the Constitution. Thus, any conflict between the provisions of R.A. No. 6734 and the provisions of the Tripoli Agreement will not have the effect of enjoining the implementation of the Organic Act. Assuming for the sake of argument that the Tripoli Agreement is a binding treaty or international agreement, it would then constitute part of the law of the land. But as internal law it would not be superior to R.A. No. 6734, an enactment of the Congress of the Philippines, rather it would be in the same class as the latter [SALONGA, PUBLIC INTERNATIONAL LAW 320 (4th ed., 1974), citing Head Money Cases, 112 U.S. 580 (1884) and Foster v. Nelson, 2 Pet. 253 (1829)]. Thus, if at all, R.A. No. 6734 would be amendatory of the Tripoli Agreement, being a subsequent law. Only a determination by this Court that R.A. No. 6734 contravened the Constitution would result in the granting of the reliefs 3 sought. 2. The Court shall therefore only pass upon the constitutional questions which have been raised by petitioners. Petitioner Abbas argues that R.A. No. 6734 unconditionally creates an autonomous region in Mindanao, contrary to the aforequoted provisions of the Constitution on the autonomous region which make the creation of such region dependent upon the outcome of the plebiscite. In support of his argument, petitioner cites Article II, section 1(1) of R.A. No. 6734 which declares that "[t]here is hereby created the Autonomous Region in Muslim Mindanao, to be composed of provinces and cities voting favorably in the plebiscite called for the purpose, in accordance with Section 18, Article X of the Constitution." Petitioner contends that the tenor of the above provision makes the creation of an autonomous region absolute, such that even if only two provinces vote in favor of autonomy, an autonomous region would still be created composed of the two provinces where the favorable votes were obtained. The matter of the creation of the autonomous region and its composition needs to be clarified. Firs, the questioned provision itself in R.A. No. 6734 refers to Section 18, Article X of the Constitution which sets forth the conditions necessary for the creation of the autonomous region. The reference to the constitutional provision cannot be glossed over for it clearly indicates that the creation of the autonomous region shall take place only in accord with the constitutional requirements. Second, there is a specific provision in the Transitory Provisions (Article XIX) of the Organic Act, which incorporates substantially the same requirements embodied in the Constitution and fills in the details, thus: SEC. 13. The creation of the Autonomous Region in Muslim Mindanao shall take effect when approved by a majority of the

votes cast by the constituent units provided in paragraph (2) of Sec. 1 of Article II of this Act in a plebiscite which shall be held not earlier than ninety (90) days or later than one hundred twenty (120) days after the approval of this Act: Provided, That only the provinces and cities voting favorably in such plebiscite shall be included in the Autonomous Region in Muslim Mindanao. The provinces and cities which in the plebiscite do not vote for inclusion in the Autonomous Region shall remain the existing administrative determination, merge the existing regions. Thus, under the Constitution and R.A. No 6734, the creation of the autonomous region shall take effect only when approved by a majority of the votes cast by the constituent units in a plebiscite, and only those provinces and cities where a majority vote in favor of the Organic Act shall be included in the autonomous region. The provinces and cities wherein such a majority is not attained shall not be included in the autonomous region. It may be that even if an autonomous region is created, not all of the thirteen (13) provinces and nine (9) cities mentioned in Article II, section 1 (2) of R.A. No. 6734 shall be included therein. The single plebiscite contemplated by the Constitution and R.A. No. 6734 will therefore be determinative of (1) whether there shall be an autonomous region in Muslim Mindanao and (2) which provinces and cities, among those enumerated in R.A. No. 6734, shall compromise it. [See III RECORD OF THE CONSTITUTIONAL COMMISSION 482-492 (1986)]. As provided in the Constitution, the creation of the Autonomous region in Muslim Mindanao is made effective upon the approval "by majority of the votes cast by the constituent units in a plebiscite called for the purpose" [Art. X, sec. 18]. The question has been raised as to what this majority means. Does it refer to a majority of the total votes cast in the plebiscite in all the constituent units, or a majority in each of the constituent units, or both? We need not go beyond the Constitution to resolve this question. If the framers of the Constitution intended to require approval by a majority of all the votes cast in the plebiscite they would have so indicated. Thus, in Article XVIII, section 27, it is provided that "[t]his Constitution shall take effect immediately upon its ratification by a majority of the votes cast in a plebiscite held for the purpose ... Comparing this with the provision on the creation of the autonomous region, which reads: The creation of the autonomous region shall be effective when approved by majority of the votes cast by the constituent units in a plebiscite called for the purpose, provided that only provinces, cities and geographic areas voting favorably in such plebiscite shall be included in the autonomous region. [Art. X, sec, 18, para, 2]. it will readily be seen that the creation of the autonomous region is made to depend, not on the total majority vote in the plebiscite, but on the will of the majority in each of the constituent units and the proviso underscores this. for if the intention of the framers of the Constitution was to get the majority of the totality of the votes cast, they could have simply adopted the same phraseology as that used for the ratification of the Constitution, i.e. "the creation of the autonomous region shall be effective when approved by a majority of the votes cast in a plebiscite called for the purpose." It is thus clear that what is required by the Constitution is a simple majority of votes approving the organic Act in individual constituent units and not a double majority of the votes in all constituent units put together, as well as in the individual constituent units.

More importantly, because of its categorical language, this is also the sense in which the vote requirement in the plebiscite provided under Article X, section 18 must have been understood by the people when they ratified the Constitution. Invoking the earlier cited constitutional provisions, petitioner Mama-o, on the other hand, maintains that only those areas which, to his view, share common and distinctive historical and cultural heritage, economic and social structures, and other relevant characteristics should be properly included within the coverage of the autonomous region. He insists that R.A. No. 6734 is unconstitutional because only the provinces of Basilan, Sulu, Tawi-Tawi, Lanao del Sur, Lanao del Norte and Maguindanao and the cities of Marawi and Cotabato, and not all of the thirteen (13) provinces and nine (9) cities included in the Organic Act, possess such concurrence in historical and cultural heritage and other relevant characteristics. By including areas which do not strictly share the same characteristics. By including areas which do not strictly share the same characteristic as the others, petitioner claims that Congress has expanded the scope of the autonomous region which the constitution itself has prescribed to be limited. Petitioner's argument is not tenable. The Constitution lays down the standards by which Congress shall determine which areas should constitute the autonomous region. Guided by these constitutional criteria, the ascertainment by Congress of the areas that share common attributes is within the exclusive realm of the legislature's discretion. Any review of this ascertainment would have to go into the wisdom of the law. This the Court cannot do without doing violence to the separation of governmental powers. [Angara v. Electoral Commission, 63 Phil 139 (1936); Morfe v. Mutuc, G.R. No. L-20387, January 31, 1968, 22 SCRA 424]. After assailing the inclusion of non-Muslim areas in the Organic Act for lack of basis, petitioner Mama-o would then adopt the extreme view that other non-Muslim areas in Mindanao should likewise be covered. He argues that since the Organic Act covers several non-Muslim areas, its scope should be further broadened to include the rest of the non-Muslim areas in Mindanao in order for the other non-Muslim areas denies said areas equal protection of the law, and therefore is violative of the Constitution. Petitioner's contention runs counter to the very same constitutional provision he had earlier invoked. Any determination by Congress of what areas in Mindanao should compromise the autonomous region, taking into account shared historical and cultural heritage, economic and social structures, and other relevant characteristics, would necessarily carry with it the exclusion of other areas. As earlier stated, such determination by Congress of which areas should be covered by the organic act for the autonomous region constitutes a recognized legislative prerogative, whose wisdom may not be inquired into by this Court. Moreover, equal protection permits of reasonable classification [People v. Vera, 65 Phil. 56 (1963); Laurel v. Misa, 76 Phil. 372 (1946); J.M. Tuason and Co. v. Land tenure Administration, G.R. No. L-21064, February 18, 1970, 31 SCRA 413]. In Dumlao v. Commission on Elections G.R. No. 52245, January 22, 1980, 95 SCRA 392], the Court ruled that once class may be treated differently from another where the groupings are based on reasonable and real distinctions. The guarantee of equal protection is thus not infringed in this case, the classification having been made by Congress on the basis of substantial distinctions as set forth by the Constitution itself. Both petitions also question the validity of R.A. No. 6734 on the ground that it violates the constitutional guarantee on free exercise of religion [Art. III, sec. 5]. The objection centers on a provision in the Organic Act which mandates that should there be any conflict between the Muslim Code [P.D. No. 1083] and the Tribal Code (still be enacted) on the one had, and the national law on the other hand, the Shari'ah courts created under the same Act should apply national law. Petitioners maintain that the

islamic law (Shari'ah) is derived from the Koran, which makes it part of divine law. Thus it may not be subjected to any "man-made" national law. Petitioner Abbas supports this objection by enumerating possible instances of conflict between provisions of the Muslim Code and national law, wherein an application of national law might be offensive to a Muslim's religious convictions. As enshrined in the Constitution, judicial power includes the duty to settle actual controversies involving rights which are legally demandable and enforceable. [Art. VIII, Sec. 11. As a condition precedent for the power to be exercised, an actual controversy between litigants must first exist [Angara v. Electoral Commission, supra; Tan v. Macapagal, G.R. No. L-34161, February 29, 1972, 43 SCRA 677]. In the present case, no actual controversy between real litigants exists. There are no conflicting claims involving the application of national law resulting in an alleged violation of religious freedom. This being so, the Court in this case may not be called upon to resolve what is merely a perceived potential conflict between the provisions the Muslim Code and national law. Petitioners also impugn the constitutionality of Article XIX, section 13 of R.A. No. 6734 which, among others, states: . . . Provided, That only the provinces and cities voting favorably in such plebiscite shall be included in the Autonomous Region in Muslim Mindanao. The provinces and cities which in the plebiscite do not vote for inclusion in the Autonomous Region shall remain in the existing administrative regions:Provided, however, that the President may, by administrative determination, merge the existing regions. According to petitioners, said provision grants the President the power to merge regions, a power which is not conferred by the Constitution upon the President. That the President may choose to merge existing regions pursuant to the Organic Act is challenged as being in conflict with Article X, Section 10 of the Constitution which provides: No province, city, municipality, or barangay may be created, divided, merged, abolished, or its boundary substantially altered, except in accordance with the criteria established in the local government code and subject to approval by a majority of the votes cast in a plebiscite in the political units directly affected. It must be pointed out that what is referred to in R.A. No. 6734 is the merger of administrative regions, i.e. Regions I to XII and the National Capital Region, which are mere groupings of contiguous provinces for administrative purposes [Integrated Reorganization Plan (1972), which was made as part of the law of the land by Pres. dec. No. 1, Pres. Dec. No. 742]. Administrative regions are not territorial and political subdivisions like provinces, cities, municipalities and barangays [see Art. X, sec. 1 of the Constitution]. While the power to merge administrative regions is not expressly provided for in the Constitution, it is a power which has traditionally been lodged with the President to facilitate the exercise of the power of general supervision over local governments [see Art. X, sec. 4 of the Constitution]. There is no conflict between the power of the President to merge administrative regions with the constitutional provision requiring a plebiscite in the merger of local government units because the requirement of a plebiscite in a merger expressly applies only to provinces, cities, municipalities or barangays, not to administrative regions. Petitioners likewise question the validity of provisions in the Organic Act which create an Oversight Committee to supervise the transfer to the autonomous region of the powers, appropriations, and properties vested upon the regional government by the organic Act [Art. XIX, Secs. 3 and 4]. Said provisions mandate that the transfer of

certain national government offices and their properties to the regional government shall be made pursuant to a schedule prescribed by the Oversight Committee, and that such transfer should be accomplished within six (6) years from the organization of the regional government. It is asserted by petitioners that such provisions are unconstitutional because while the Constitution states that the creation of the autonomous region shall take effect upon approval in a plebiscite, the requirement of organizing an Oversight committee tasked with supervising the transfer of powers and properties to the regional government would in effect delay the creation of the autonomous region. Under the Constitution, the creation of the autonomous region hinges only on the result of the plebiscite. if the Organic Act is approved by majority of the votes cast by constituent units in the scheduled plebiscite, the creation of the autonomous region immediately takes effect delay the creation of the autonomous region. Under the constitution, the creation of the autonomous region hinges only on the result of the plebiscite. if the Organic Act is approved by majority of the votes cast by constituent units in the scheduled plebiscite, the creation of the autonomous region immediately takes effect. The questioned provisions in R.A. No. 6734 requiring an oversight Committee to supervise the transfer do not provide for a different date of effectivity. Much less would the organization of the Oversight Committee cause an impediment to the operation of the Organic Act, for such is evidently aimed at effecting a smooth transition period for the regional government. The constitutional objection on this point thus cannot be sustained as there is no bases therefor. Every law has in its favor the presumption of constitutionality [Yu Cong Eng v. Trinidad, 47 Phil. 387 (1925); Salas v. Jarencio, G.R. No. L-29788, August 30, 1979, 46 SCRA 734; Morfe v. Mutuc, supra; Peralta v. COMELEC, G.R. No. L-47771, March 11, 1978, 82 SCRA 30]. Those who petition this Court to declare a law, or parts thereof, unconstitutional must clearly establish the basis for such a declaration. otherwise, their petition must fail. Based on the grounds raised by petitioners to challenge the constitutionality of R.A. No. 6734, the Court finds that petitioners have failed to overcome the presumption. The dismissal of these two petitions is, therefore, inevitable. WHEREFORE, the petitions are DISMISSED for lack of merit. SO ORDERED. Fernan, C.J., Narvasa, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento, Grio-Aquino, Medialdea and Regalado, JJ., concur. Melencio-Herrera, J., is on leave. Footnotes 1 Art. II, Sec 1(2) of R.A. No. 6734 provides that "[t]he plebiscite shall be conducted in the provinces of Basilan, Cotabato, Davao del Sur, Lanao del Norte, Lanao del Sur, Maguindanao, Palawan, South Cotabato, Sultan Kudarat, Sulu, Tawi-Tawi, Zamboanga del Norte, and Zamboanga del Sur, and the cities of Cotabato, Dapitan, Dipolog, General Santos, Iligan, Marawi, Pagadian, Puerto Princesa, and Zamboanga." 2 The provinces enumerated in the Tripoli Agreement are the same ones mentioned in R.A. No. 6734. 3 With regard to the controversy regarding the alleged inconsistencies between R.A. No. 6734 and the Tripoli Agreement, it may be enlightening to quote from the statement of Senator Aquilino Pimentel, Jr., the principal sponsor of R.A. No. 6734: xxx xxx xxx

The assertion that the organic Act is a "betrayal" of the Tripoli Agreement is actually misplaced, to say the least. Misplaced because it overlooks the fact that the Organic Act incorporates, at least, 99 percent of the provisions of the Tripoli Agreement. Misplaced, again, because it gratuitously assumes that the Tripoli Agreement can bring more benefits to the people of Mulim Mindanao than the Organic Act. The truth of the matter is that the Organic Act addresses the basis demands of the Muslim, tribal and Christian populations of the proposed area of autonomy in a far more reasonable, realistic and immediate manner than the Tripoli Agreement ever sought to do. The Organic Act is, therefore, a boon to, not a betrayal, of the interest of the people of Muslim Mindanao. xxx xxx xxx [Consolidated Comment, p. 26].

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-7995 May 31, 1957 LAO H. ICHONG, in his own behalf and in behalf of other alien residents, corporations and partnerships adversely affected. by Republic Act No. 1180, petitioner, vs. JAIME HERNANDEZ, Secretary of Finance, and MARCELINO SARMIENTO, City Treasurer of Manila,respondents. Ozaeta, Lichauco and Picazo and Sycip, Quisumbing, Salazar and Associates for petitioner. Office of the Solicitor General Ambrosio Padilla and Solicitor Pacifico P. de Castro for respondent Secretary of Finance. City Fiscal Eugenio Angeles and Assistant City Fiscal Eulogio S. Serrano for respondent City Treasurer. Dionisio Reyes as Amicus Curiae. Marcial G. Mendiola as Amicus Curiae. Emiliano R. Navarro as Amicus Curiae. LABRADOR, J.: I. The case and issue, in general This Court has before it the delicate task of passing upon the validity and constitutionality of a legislative enactment, fundamental and far-reaching in significance. The enactment poses questions of due process, police power and equal protection of the laws. It also poses an important issue of fact, that is whether the conditions which the disputed law purports to remedy really or actually exist. Admittedly springing from a deep, militant, and positive nationalistic impulse, the law purports to protect citizen and country from the alien retailer. Through it, and within the field of economy it regulates, Congress attempts to translate national aspirations for economic independence and national security, rooted in the drive and urge for national survival and welfare, into a concrete and tangible measures designed to free the national retailer from the competing dominance of the alien, so that the country and the nation may be free from a supposed economic dependence and bondage. Do the facts and circumstances justify the enactment? II. Pertinent provisions of Republic Act No. 1180 Republic Act No. 1180 is entitled "An Act to Regulate the Retail Business." In effect it nationalizes the retail trade business. The main provisions of the Act are: (1) a prohibition against persons, not citizens of the Philippines, and against associations, partnerships, or corporations the capital of which are not wholly owned by citizens of the Philippines, from engaging directly or indirectly in the retail trade; (2) an exception from the above prohibition in favor of aliens actually engaged in said business on May 15, 1954, who are allowed to continue to engaged therein, unless their licenses are forfeited in accordance with the law, until their death or voluntary retirement in case of natural persons, and for ten years after the approval of the Act or until the expiration of term in case of juridical persons; (3) an exception therefrom in favor of citizens and juridical entities of the United States; (4) a provision for the forfeiture of licenses (to engage in the retail business) for violation of the laws on nationalization, control weights and measures and labor and other laws relating to trade, commerce and industry; (5) a prohibition against the establishment or opening by aliens actually engaged in the retail business of additional stores or branches of retail business, (6) a

provision requiring aliens actually engaged in the retail business to present for registration with the proper authorities a verified statement concerning their businesses, giving, among other matters, the nature of the business, their assets and liabilities and their offices and principal offices of judicial entities; and (7) a provision allowing the heirs of aliens now engaged in the retail business who die, to continue such business for a period of six months for purposes of liquidation. III. Grounds upon which petition is based-Answer thereto Petitioner, for and in his own behalf and on behalf of other alien residents corporations and partnerships adversely affected by the provisions of Republic Act. No. 1180, brought this action to obtain a judicial declaration that said Act is unconstitutional, and to enjoin the Secretary of Finance and all other persons acting under him, particularly city and municipal treasurers, from enforcing its provisions. Petitioner attacks the constitutionality of the Act, contending that: (1) it denies to alien residents the equal protection of the laws and deprives of their liberty and property without due process of law ; (2) the subject of the Act is not expressed or comprehended in the title thereof; (3) the Act violates international and treaty obligations of the Republic of the Philippines; (4) the provisions of the Act against the transmission by aliens of their retail business thru hereditary succession, and those requiring 100% Filipino capitalization for a corporation or entity to entitle it to engage in the retail business, violate the spirit of Sections 1 and 5, Article XIII and Section 8 of Article XIV of the Constitution. In answer, the Solicitor-General and the Fiscal of the City of Manila contend that: (1) the Act was passed in the valid exercise of the police power of the State, which exercise is authorized in the Constitution in the interest of national economic survival; (2) the Act has only one subject embraced in the title; (3) no treaty or international obligations are infringed; (4) as regards hereditary succession, only the form is affected but the value of the property is not impaired, and the institution of inheritance is only of statutory origin. IV. Preliminary consideration of legal principles involved a. The police power. There is no question that the Act was approved in the exercise of the police power, but petitioner claims that its exercise in this instance is attended by a violation of the constitutional requirements of due process and equal protection of the laws. But before proceeding to the consideration and resolution of the ultimate issue involved, it would be well to bear in mind certain basic and fundamental, albeit preliminary, considerations in the determination of the ever recurrent conflict between police power and the guarantees of due process and equal protection of the laws. What is the scope of police power, and how are the due process and equal protection clauses related to it? What is the province and power of the legislature, and what is the function and duty of the courts? These consideration must be clearly and correctly understood that their application to the facts of the case may be brought forth with clarity and the issue accordingly resolved. It has been said the police power is so far - reaching in scope, that it has become almost impossible to limit its sweep. As it derives its existence from the very existence of the State itself, it does not need to be expressed or defined in its scope; it is said to be co-extensive with self-protection and survival, and as such it is the most positive and active of all governmental processes, the most essential, insistent and illimitable. Especially is it so under a modern democratic framework where the demands of society and of nations have multiplied to almost unimaginable proportions; the field and scope of police power has become almost boundless, just as the fields of public interest and public welfare have become almost all-embracing and have transcended human foresight. Otherwise stated, as we cannot foresee the needs and demands of

public interest and welfare in this constantly changing and progressive world, so we cannot delimit beforehand the extent or scope of police power by which and through which the State seeks to attain or achieve interest or welfare. So it is that Constitutions do not define the scope or extent of the police power of the State; what they do is to set forth the limitations thereof. The most important of these are the due process clause and the equal protection clause. b. Limitations on police power. The basic limitations of due process and equal protection are found in the following provisions of our Constitution: SECTION 1.(1) No person shall be deprived of life, liberty or property without due process of law, nor any person be denied the equal protection of the laws. (Article III, Phil. Constitution) These constitutional guarantees which embody the essence of individual liberty and freedom in democracies, are not limited to citizens alone but are admittedly universal in their application, without regard to any differences of race, of color, or of nationality. (Yick Wo vs. Hopkins, 30, L. ed. 220, 226.) c. The, equal protection clause. The equal protection of the law clause is against undue favor and individual or class privilege, as well as hostile discrimination or the oppression of inequality. It is not intended to prohibit legislation, which is limited either in the object to which it is directed or by territory within which is to operate. It does not demand absolute equality among residents; it merely requires that all persons shall be treated alike, under like circumstances and conditions both as to privileges conferred and liabilities enforced. The equal protection clause is not infringed by legislation which applies only to those persons falling within a specified class, if it applies alike to all persons within such class, and reasonable grounds exists for making a distinction between those who fall within such class and those who do not. (2 Cooley, Constitutional Limitations, 824-825.) d. The due process clause. The due process clause has to do with the reasonableness of legislation enacted in pursuance of the police power. Is there public interest, a public purpose; is public welfare involved? Is the Act reasonably necessary for the accomplishment of the legislature's purpose; is it not unreasonable, arbitrary or oppressive? Is there sufficient foundation or reason in connection with the matter involved; or has there not been a capricious use of the legislative power? Can the aims conceived be achieved by the means used, or is it not merely an unjustified interference with private interest? These are the questions that we ask when the due process test is applied. The conflict, therefore, between police power and the guarantees of due process and equal protection of the laws is more apparent than real. Properly related, the power and the guarantees are supposed to coexist. The balancing is the essence or, shall it be said, the indispensable means for the attainment of legitimate aspirations of any democratic society. There can be no absolute power, whoever exercise it, for that would be tyranny. Yet there can neither be absolute liberty, for that would mean license and anarchy. So the State can deprive persons of life, liberty and property, provided there is due process of law; and persons may be classified into classes and groups, provided everyone is given the equal protection of the law. The test or standard, as always, is reason. The police power legislation must be firmly grounded on public interest and welfare, and a reasonable relation must exist between purposes and means. And if distinction and classification has been made, there must be a reasonable basis for said distinction. e. Legislative discretion not subject to judicial review.

Now, in this matter of equitable balancing, what is the proper place and role of the courts? It must not be overlooked, in the first place, that the legislature, which is the constitutional repository of police power and exercises the prerogative of determining the policy of the State, is by force of circumstances primarily the judge of necessity, adequacy or reasonableness and wisdom, of any law promulgated in the exercise of the police power, or of the measures adopted to implement the public policy or to achieve public interest. On the other hand, courts, although zealous guardians of individual liberty and right, have nevertheless evinced a reluctance to interfere with the exercise of the legislative prerogative. They have done so early where there has been a clear, patent or palpable arbitrary and unreasonable abuse of the legislative prerogative. Moreover, courts are not supposed to override legitimate policy, and courts never inquire into the wisdom of the law. V. Economic problems sought to be remedied With the above considerations in mind, we will now proceed to delve directly into the issue involved. If the disputed legislation were merely a regulation, as its title indicates, there would be no question that it falls within the legitimate scope of legislative power. But it goes further and prohibits a group of residents, the aliens, from engaging therein. The problem becomes more complex because its subject is a common, trade or occupation, as old as society itself, which from the immemorial has always been open to residents, irrespective of race, color or citizenship. a. Importance of retail trade in the economy of the nation. In a primitive economy where families produce all that they consume and consume all that they produce, the dealer, of course, is unknown. But as group life develops and families begin to live in communities producing more than what they consume and needing an infinite number of things they do not produce, the dealer comes into existence. As villages develop into big communities and specialization in production begins, the dealer's importance is enhanced. Under modern conditions and standards of living, in which man's needs have multiplied and diversified to unlimited extents and proportions, the retailer comes as essential as the producer, because thru him the infinite variety of articles, goods and needed for daily life are placed within the easy reach of consumers. Retail dealers perform the functions of capillaries in the human body, thru which all the needed food and supplies are ministered to members of the communities comprising the nation. There cannot be any question about the importance of the retailer in the life of the community. He ministers to the resident's daily needs, food in all its increasing forms, and the various little gadgets and things needed for home and daily life. He provides his customers around his store with the rice or corn, the fish, the salt, the vinegar, the spices needed for the daily cooking. He has cloths to sell, even the needle and the thread to sew them or darn the clothes that wear out. The retailer, therefore, from the lowly peddler, the owner of a small sari-sari store, to the operator of a department store or, a supermarket is so much a part of day-to-day existence. b. The alien retailer's trait. The alien retailer must have started plying his trades in this country in the bigger centers of population (Time there was when he was unknown in provincial towns and villages). Slowly but gradually be invaded towns and villages; now he predominates in the cities and big centers of population. He even pioneers, in far away nooks where the beginnings of community life appear, ministering to the daily needs of the residents and purchasing their agricultural produce for sale in the towns. It is an undeniable fact that in many communities the alien has replaced the native retailer. He has shown in this trade, industry without limit, and the patience and forbearance of a slave.

Derogatory epithets are hurled at him, but he laughs these off without murmur; insults of ill-bred and insolent neighbors and customers are made in his face, but he heeds them not, and he forgets and forgives. The community takes note of him, as he appears to be harmless and extremely useful. c. Alleged alien control and dominance. There is a general feeling on the part of the public, which appears to be true to fact, about the controlling and dominant position that the alien retailer holds in the nation's economy. Food and other essentials, clothing, almost all articles of daily life reach the residents mostly through him. In big cities and centers of population he has acquired not only predominance, but apparent control over distribution of almost all kinds of goods, such as lumber, hardware, textiles, groceries, drugs, sugar, flour, garlic, and scores of other goods and articles. And were it not for some national corporations like the Naric, the Namarco, the Facomas and the Acefa, his control over principal foods and products would easily become full and complete. Petitioner denies that there is alien predominance and control in the retail trade. In one breath it is said that the fear is unfounded and the threat is imagined; in another, it is charged that the law is merely the result of radicalism and pure and unabashed nationalism. Alienage, it is said, is not an element of control; also so many unmanageable factors in the retail business make control virtually impossible. The first argument which brings up an issue of fact merits serious consideration. The others are matters of opinion within the exclusive competence of the legislature and beyond our prerogative to pass upon and decide. The best evidence are the statistics on the retail trade, which put down the figures in black and white. Between the constitutional convention year (1935), when the fear of alien domination and control of the retail trade already filled the minds of our leaders with fears and misgivings, and the year of the enactment of the nationalization of the retail trade act (1954), official statistics unmistakably point out to the ever-increasing dominance and control by the alien of the retail trade, as witness the following tables: Assets Gross Sales Year and Retailers Nationality 1941: Filipino .......... Chinese ........... Others ............ 1947: Filipino .......... Chinese ........... Others ........... 1948: (Census) Filipino .......... Chinese .......... Others .......... 1949: Filipino .......... 113,659 213,451,602 60.89 462,532,901 113,631 12,087 422 213,342,264 93,155,459 10,514,675 67.30 29.38 3.32 467,161,667 294,894,227 9,995,402 111,107 13,774 354 208,658,946 106,156,218 8,761,260 65.05 33.56 .49 279,583,333 205,701,134 4,927,168 106,671 15,356 1,646 200,323,138 118,348,692 40,187,090 55.82 32.98 11.20 174,181,924 148,813,239 13,630,239 No.Establishments Pesos Per cent Distribution Pesos

Chinese .......... Others .......... 1951: Filipino ......... Chinese .......... Others ..........

16,248 486 119,352 17,429 347

125,223,336 12,056,365 224,053,620 134,325,303 8,614,025

35.72 3.39 61.09 36.60 2.31

392,414,875 10,078,364 466,058,052 404,481,384 7,645,327

AVERAGE ASSETS AND GROSS SALES PER ESTABLISHMENT Year and Retailer's Nationality 1941: Filipino ............................................. Chinese .............................................. Others ............................................... 1947: Filipino ............................................. Chinese ........................................... Others .............................................. (Census) Filipino ............................................. Chinese ............................................. 57.03 41.96 1949: 1.01 Filipino ............................................. 60.51 38.20 1.29 1951: 53.47 Others .............................................. 24,807 20,737 Chinese .............................................. 1,878 7,707 4,069 24,152 Others .............................................. 1,878 7,707 24,916 4,111 24,398 23,686 1,878 7,707 24,749 2,516 14,934 13,919 1,878 7,707 24,415 1,633 9,691 8,281 Item Assets (Pesos) Gross Sales (Pesos)

Per cent Distribution 1948: 51.74 44.21 4.05

Filipino ............................................. Chinese ............................................. Others ...............................................

1,877 7,707 24,824

3,905 33,207 22,033

(Estimated Assets and Gross Sales of Retail Establishments, By Year and Nationality of Owners, Benchmark: 1948 Census, issued by the Bureau of Census and Statistics, Department of Commerce and Industry; pp. 18-19 of Answer.) The above statistics do not include corporations and partnerships, while the figures on Filipino establishments already include mere market vendors, whose capital is necessarily small.. The above figures reveal that in percentage distribution of assests and gross sales, alien participation has steadily increased during the years. It is true, of course, that Filipinos have the edge in the number of retailers, but aliens more than make up for the numerical gap through their assests and gross sales which average between six and seven times those of the very many Filipino retailers. Numbers in retailers, here, do not imply superiority; the alien invests more capital, buys and sells six to seven times more, and gains much more. The same official report, pointing out to the known predominance of foreign elements in the retail trade, remarks that the Filipino retailers were largely engaged in minor retailer enterprises. As observed by respondents, the native investment is thinly spread, and the Filipino retailer is practically helpless in matters of capital, credit, price and supply. d. Alien control and threat, subject of apprehension in Constitutional convention. It is this domination and control, which we believe has been sufficiently shown to exist, that is the legislature's target in the enactment of the disputed nationalization would never have been adopted. The framers of our Constitution also believed in the existence of this alien dominance and control when they approved a resolution categorically declaring among other things, that "it is the sense of the Convention that the public interest requires the nationalization of the retail trade; . . . ." (II Aruego, The Framing of the Philippine Constitution, 662-663, quoted on page 67 of Petitioner.) That was twenty-two years ago; and the events since then have not been either pleasant or comforting. Dean Sinco of the University of the Philippines College of Law, commenting on the patrimony clause of the Preamble opines that the fathers of our Constitution were merely translating the general preoccupation of Filipinos "of the dangers from alien interests that had already brought under their control the commercial and other economic activities of the country" (Sinco, Phil. Political Law, 10th ed., p. 114); and analyzing the concern of the members of the constitutional convention for the economic life of the citizens, in connection with the nationalistic provisions of the Constitution, he says: But there has been a general feeling that alien dominance over the economic life of the country is not desirable and that if such a situation should remain, political independence alone is no guarantee to national stability and strength. Filipino private capital is not big enough to wrest from alien hands the control of the national economy. Moreover, it is but of recent formation and hence, largely inexperienced, timid and hesitant. Under such conditions, the government as the instrumentality of the national will, has to step in and assume the initiative, if not the leadership, in the struggle for the economic freedom of the nation in somewhat the same way that it did in the crusade for political freedom. Thus . . . it (the Constitution) envisages an organized movement for the protection of the nation not only against the

possibilities of armed invasion but also against its economic subjugation by alien interests in the economic field. (Phil. Political Law by Sinco, 10th ed., p. 476.) Belief in the existence of alien control and predominance is felt in other quarters. Filipino businessmen, manufacturers and producers believe so; they fear the dangers coming from alien control, and they express sentiments of economic independence. Witness thereto is Resolution No. 1, approved on July 18, 1953, of the Fifth National convention of Filipino Businessmen, and a similar resolution, approved on March 20, 1954, of the Second National Convention of Manufacturers and Producers. The man in the street also believes, and fears, alien predominance and control; so our newspapers, which have editorially pointed out not only to control but to alien stranglehold. We, therefore, find alien domination and control to be a fact, a reality proved by official statistics, and felt by all the sections and groups that compose the Filipino community. e. Dangers of alien control and dominance in retail. But the dangers arising from alien participation in the retail trade does not seem to lie in the predominance alone; there is a prevailing feeling that such predominance may truly endanger the national interest. With ample capital, unity of purpose and action and thorough organization, alien retailers and merchants can act in such complete unison and concert on such vital matters as the fixing of prices, the determination of the amount of goods or articles to be made available in the market, and even the choice of the goods or articles they would or would not patronize or distribute, that fears of dislocation of the national economy and of the complete subservience of national economy and of the consuming public are not entirely unfounded. Nationals, producers and consumers alike can be placed completely at their mercy. This is easily illustrated. Suppose an article of daily use is desired to be prescribed by the aliens, because the producer or importer does not offer them sufficient profits, or because a new competing article offers bigger profits for its introduction. All that aliens would do is to agree to refuse to sell the first article, eliminating it from their stocks, offering the new one as a substitute. Hence, the producers or importers of the prescribed article, or its consumers, find the article suddenly out of the prescribed article, or its consumers, find the article suddenly out of circulation. Freedom of trade is thus curtailed and free enterprise correspondingly suppressed. We can even go farther than theoretical illustrations to show the pernicious influences of alien domination. Grave abuses have characterized the exercise of the retail trade by aliens. It is a fact within judicial notice, which courts of justice may not properly overlook or ignore in the interests of truth and justice, that there exists a general feeling on the part of the public that alien participation in the retail trade has been attended by a pernicious and intolerable practices, the mention of a few of which would suffice for our purposes; that at some time or other they have cornered the market of essential commodities, like corn and rice, creating artificial scarcities to justify and enhance profits to unreasonable proportions; that they have hoarded essential foods to the inconvenience and prejudice of the consuming public, so much so that the Government has had to establish the National Rice and Corn Corporation to save the public from their continuous hoarding practices and tendencies; that they have violated price control laws, especially on foods and essential commodities, such that the legislature had to enact a law (Sec. 9, Republic Act No. 1168), authorizing their immediate and automatic deportation for price control convictions; that they have secret combinations among themselves to control prices, cheating the operation of the law of supply and demand; that they have connived to boycott honest merchants and traders who would not cater or yield to their demands, in unlawful restraint of freedom of trade and enterprise. They are believed by the public to have evaded tax

laws, smuggled goods and money into and out of the land, violated import and export prohibitions, control laws and the like, in derision and contempt of lawful authority. It is also believed that they have engaged in corrupting public officials with fabulous bribes, indirectly causing the prevalence of graft and corruption in the Government. As a matter of fact appeals to unscrupulous aliens have been made both by the Government and by their own lawful diplomatic representatives, action which impliedly admits a prevailing feeling about the existence of many of the above practices. The circumstances above set forth create well founded fears that worse things may come in the future. The present dominance of the alien retailer, especially in the big centers of population, therefore, becomes a potential source of danger on occasions of war or other calamity. We do not have here in this country isolated groups of harmless aliens retailing goods among nationals; what we have are well organized and powerful groups that dominate the distribution of goods and commodities in the communities and big centers of population. They owe no allegiance or loyalty to the State, and the State cannot rely upon them in times of crisis or emergency. While the national holds his life, his person and his property subject to the needs of his country, the alien may even become the potential enemy of the State. f. Law enacted in interest of national economic survival and security. We are fully satisfied upon a consideration of all the facts and circumstances that the disputed law is not the product of racial hostility, prejudice or discrimination, but the expression of the legitimate desire and determination of the people, thru their authorized representatives, to free the nation from the economic situation that has unfortunately been saddled upon it rightly or wrongly, to its disadvantage. The law is clearly in the interest of the public, nay of the national security itself, and indisputably falls within the scope of police power, thru which and by which the State insures its existence and security and the supreme welfare of its citizens. VI. The Equal Protection Limitation a. Objections to alien participation in retail trade. The next question that now poses solution is, Does the law deny the equal protection of the laws? As pointed out above, the mere fact of alienage is the root and cause of the distinction between the alien and the national as a trader. The alien resident owes allegiance to the country of his birth or his adopted country; his stay here is for personal convenience; he is attracted by the lure of gain and profit. His aim or purpose of stay, we admit, is neither illegitimate nor immoral, but he is naturally lacking in that spirit of loyalty and enthusiasm for this country where he temporarily stays and makes his living, or of that spirit of regard, sympathy and consideration for his Filipino customers as would prevent him from taking advantage of their weakness and exploiting them. The faster he makes his pile, the earlier can the alien go back to his beloved country and his beloved kin and countrymen. The experience of the country is that the alien retailer has shown such utter disregard for his customers and the people on whom he makes his profit, that it has been found necessary to adopt the legislation, radical as it may seem. Another objection to the alien retailer in this country is that he never really makes a genuine contribution to national income and wealth. He undoubtedly contributes to general distribution, but the gains and profits he makes are not invested in industries that would help the country's economy and increase national wealth. The alien's interest in this country being merely transient and temporary, it would indeed be illadvised to continue entrusting the very important function of retail distribution to his hands. The practices resorted to by aliens in the control of distribution, as already pointed out above, their secret manipulations of stocks of commodities and prices, their utter

disregard of the welfare of their customers and of the ultimate happiness of the people of the nation of which they are mere guests, which practices, manipulations and disregard do not attend the exercise of the trade by the nationals, show the existence of real and actual, positive and fundamental differences between an alien and a national which fully justify the legislative classification adopted in the retail trade measure. These differences are certainly a valid reason for the State to prefer the national over the alien in the retail trade. We would be doing violence to fact and reality were we to hold that no reason or ground for a legitimate distinction can be found between one and the other. b. Difference in alien aims and purposes sufficient basis for distinction. The above objectionable characteristics of the exercise of the retail trade by the aliens, which are actual and real, furnish sufficient grounds for legislative classification of retail traders into nationals and aliens. Some may disagree with the wisdom of the legislature's classification. To this we answer, that this is the prerogative of the law-making power. Since the Court finds that the classification is actual, real and reasonable, and all persons of one class are treated alike, and as it cannot be said that the classification is patently unreasonable and unfounded, it is in duty bound to declare that the legislature acted within its legitimate prerogative and it can not declare that the act transcends the limit of equal protection established by the Constitution. Broadly speaking, the power of the legislature to make distinctions and classifications among persons is not curtailed or denied by the equal protection of the laws clause. The legislative power admits of a wide scope of discretion, and a law can be violative of the constitutional limitation only when the classification is without reasonable basis. In addition to the authorities we have earlier cited, we can also refer to the case of Linsey vs. Natural Carbonic Fas Co. (1911), 55 L. ed., 369, which clearly and succinctly defined the application of equal protection clause to a law sought to be voided as contrary thereto: . . . . "1. The equal protection clause of the Fourteenth Amendment does not take from the state the power to classify in the adoption of police laws, but admits of the exercise of the wide scope of discretion in that regard, and avoids what is done only when it is without any reasonable basis, and therefore is purely arbitrary. 2. A classification having some reasonable basis does not offend against that clause merely because it is not made with mathematical nicety, or because in practice it results in some inequality. 3. When the classification in such a law is called in question, if any state of facts reasonably can be conceived that would sustain it, the existence of that state of facts at the time the law was enacted must be assumed. 4. One who assails the classification in such a law must carry the burden of showing that it does not rest upon any reasonable basis but is essentially arbitrary." c. Authorities recognizing citizenship as basis for classification. The question as to whether or not citizenship is a legal and valid ground for classification has already been affirmatively decided in this jurisdiction as well as in various courts in the United States. In the case of Smith Bell & Co. vs. Natividad, 40 Phil. 136, where the validity of Act No. 2761 of the Philippine Legislature was in issue, because of a condition therein limiting the ownership of vessels engaged in coastwise trade to corporations formed by citizens of the Philippine Islands or the United States, thus denying the right to aliens, it was held that the Philippine Legislature did not violate the equal protection clause of the Philippine Bill of Rights. The legislature in enacting the law had as ultimate purpose the encouragement of Philippine shipbuilding and the safety for these Islands from foreign interlopers. We held that this was a valid exercise of the police power, and all presumptions are in favor of its

constitutionality. In substance, we held that the limitation of domestic ownership of vessels engaged in coastwise trade to citizens of the Philippines does not violate the equal protection of the law and due process or law clauses of the Philippine Bill of Rights. In rendering said decision we quoted with approval the concurring opinion of Justice Johnson in the case of Gibbons vs. Ogden, 9 Wheat., I, as follows: "Licensing acts, in fact, in legislation, are universally restraining acts; as, for example, acts licensing gaming houses, retailers of spirituous liquors, etc. The act, in this instance, is distinctly of that character, and forms part of an extensive system, the object of which is to encourage American shipping, and place them on an equal footing with the shipping of other nations. Almost every commercial nation reserves to its own subjects a monopoly of its coasting trade; and a countervailing privilege in favor of American shipping is contemplated, in the whole legislation of the United States on this subject. It is not to give the vessel an American character, that the license is granted; that effect has been correctly attributed to the act of her enrollment. But it is to confer on her American privileges, as contra distinguished from foreign; and to preserve the Government from fraud by foreigners; in surreptitiously intruding themselves into the American commercial marine, as well as frauds upon the revenue in the trade coastwise, that this whole system is projected." The rule in general is as follows: Aliens are under no special constitutional protection which forbids a classification otherwise justified simply because the limitation of the class falls along the lines of nationality. That would be requiring a higher degree of protection for aliens as a class than for similar classes than for similar classes of American citizens. Broadly speaking, the difference in status between citizens and aliens constitutes a basis for reasonable classification in the exercise of police power. (2 Am., Jur. 468-469.) In Commonwealth vs. Hana, 81 N. E. 149 (Massachusetts, 1907), a statute on the licensing of hawkers and peddlers, which provided that no one can obtain a license unless he is, or has declared his intention, to become a citizen of the United States, was held valid, for the following reason: It may seem wise to the legislature to limit the business of those who are supposed to have regard for the welfare, good order and happiness of the community, and the court cannot question this judgment and conclusion. In Bloomfield vs. State, 99 N. E. 309 (Ohio, 1912), a statute which prevented certain persons, among them aliens, from engaging in the traffic of liquors, was found not to be the result of race hatred, or in hospitality, or a deliberate purpose to discriminate, but was based on the belief that an alien cannot be sufficiently acquainted with "our institutions and our life as to enable him to appreciate the relation of this particular business to our entire social fabric", and was not, therefore, invalid. In Ohio ex rel. Clarke vs. Deckebach, 274 U. S. 392, 71 L. ed. 115 (1926), the U.S. Supreme Court had under consideration an ordinance of the city of Cincinnati prohibiting the issuance of licenses (pools and billiard rooms) to aliens. It held that plainly irrational discrimination against aliens is prohibited, but it does not follow that alien race and allegiance may not bear in some instances such a relation to a legitimate object of legislation as to be made the basis of permitted classification, and that it could not state that the legislation is clearly wrong; and that latitude must be allowed for the legislative appraisement of local conditions and for the legislative choice of methods for controlling an apprehended evil. The case of State vs. Carrol, 124 N. E. 129 (Ohio, 1919) is a parallel case to the one at bar. In Asakura vs. City of Seattle, 210 P. 30 (Washington, 1922), the business of pawn brooking was considered as having tendencies injuring public interest, and limiting it to citizens is

within the scope of police power. A similar statute denying aliens the right to engage in auctioneering was also sustained in Wright vs. May, L.R.A., 1915 P. 151 (Minnesota, 1914). So also in Anton vs. Van Winkle, 297 F. 340 (Oregon, 1924), the court said that aliens are judicially known to have different interests, knowledge, attitude, psychology and loyalty, hence the prohibitions of issuance of licenses to them for the business of pawnbroker, pool, billiard, card room, dance hall, is not an infringement of constitutional rights. In Templar vs. Michigan State Board of Examiners, 90 N.W. 1058 (Michigan, 1902), a law prohibiting the licensing of aliens as barbers was held void, but the reason for the decision was the court's findings that the exercise of the business by the aliens does not in any way affect the morals, the health, or even the convenience of the community. In Takahashi vs. Fish and Game Commission, 92 L. ed. 1479 (1947), a California statute banning the issuance of commercial fishing licenses to person ineligible to citizenship was held void, because the law conflicts with Federal power over immigration, and because there is no public interest in the mere claim of ownership of the waters and the fish in them, so there was no adequate justification for the discrimination. It further added that the law was the outgrowth of antagonism toward the persons of Japanese ancestry. However, two Justices dissented on the theory that fishing rights have been treated traditionally as natural resources. In Fraser vs. McConway & Tarley Co., 82 Fed. 257 (Pennsylvania, 1897), a state law which imposed a tax on every employer of foreign-born unnaturalized male persons over 21 years of age, was declared void because the court found that there was no reason for the classification and the tax was an arbitrary deduction from the daily wage of an employee. d. Authorities contra explained. It is true that some decisions of the Federal court and of the State courts in the United States hold that the distinction between aliens and citizens is not a valid ground for classification. But in this decision the laws declared invalid were found to be either arbitrary, unreasonable or capricious, or were the result or product of racial antagonism and hostility, and there was no question of public interest involved or pursued. In Yu Cong Eng vs. Trinidad, 70 L. ed. 1059 (1925), the United States Supreme Court declared invalid a Philippine law making unlawful the keeping of books of account in any language other than English, Spanish or any other local dialect, but the main reasons for the decisions are: (1) that if Chinese were driven out of business there would be no other system of distribution, and (2) that the Chinese would fall prey to all kinds of fraud, because they would be deprived of their right to be advised of their business and to direct its conduct. The real reason for the decision, therefore, is the court's belief that no public benefit would be derived from the operations of the law and on the other hand it would deprive Chinese of something indispensable for carrying on their business. In Yick Wo vs. Hopkins, 30 L. ed 220 (1885) an ordinance conferring powers on officials to withhold consent in the operation of laundries both as to persons and place, was declared invalid, but the court said that the power granted was arbitrary, that there was no reason for the discrimination which attended the administration and implementation of the law, and that the motive thereof was mere racial hostility. In State vs. Montgomery, 47 A. 165 (Maine, 1900), a law prohibiting aliens to engage as hawkers and peddlers was declared void, because the discrimination bore no reasonable and just relation to the act in respect to which the classification was proposed. The case at bar is radically different, and the facts make them so. As we already have said, aliens do not naturally possess the sympathetic consideration and regard for the customers with whom they come in daily contact, nor the patriotic desire to help bolster the nation's economy, except in so far as it enhances their profit, nor the loyalty and allegiance which the national owes to the land. These limitations on the

qualifications of the aliens have been shown on many occasions and instances, especially in times of crisis and emergency. We can do no better than borrow the language of Anton vs. Van Winkle, 297 F. 340, 342, to drive home the reality and significance of the distinction between the alien and the national, thus: . . . . It may be judicially known, however, that alien coming into this country are without the intimate knowledge of our laws, customs, and usages that our own people have. So it is likewise known that certain classes of aliens are of different psychology from our fellow countrymen. Furthermore, it is natural and reasonable to suppose that the foreign born, whose allegiance is first to their own country, and whose ideals of governmental environment and control have been engendered and formed under entirely different regimes and political systems, have not the same inspiration for the public weal, nor are they as well disposed toward the United States, as those who by citizenship, are a part of the government itself. Further enlargement, is unnecessary. I have said enough so that obviously it cannot be affirmed with absolute confidence that the Legislature was without plausible reason for making the classification, and therefore appropriate discriminations against aliens as it relates to the subject of legislation. . . . . VII. The Due Process of Law Limitation. a. Reasonability, the test of the limitation; determination by legislature decisive. We now come to due process as a limitation on the exercise of the police power. It has been stated by the highest authority in the United States that: . . . . And the guaranty of due process, as has often been held, demands only that the law shall not be unreasonable, arbitrary or capricious, and that the means selected shall have a real and substantial relation to the subject sought to be attained. . . . . xxx xxx xxx So far as the requirement of due process is concerned and in the absence of other constitutional restriction a state is free to adopt whatever economic policy may reasonably be deemed to promote public welfare, and to enforce that policy by legislation adapted to its purpose. The courts are without authority either to declare such policy, or, when it is declared by the legislature, to override it. If the laws passed are seen to have a reasonable relation to a proper legislative purpose, and are neither arbitrary nor discriminatory, the requirements of due process are satisfied, and judicial determination to that effect renders a court functus officio. . . . (Nebbia vs. New York, 78 L. ed. 940, 950, 957.) Another authority states the principle thus: . . . . Too much significance cannot be given to the word "reasonable" in considering the scope of the police power in a constitutional sense, for the test used to determine the constitutionality of the means employed by the legislature is to inquire whether the restriction it imposes on rights secured to individuals by the Bill of Rights are unreasonable, and not whether it imposes any restrictions on such rights. . . . xxx xxx xxx . . . . A statute to be within this power must also be reasonable in its operation upon the persons whom it affects, must not be for the annoyance of a particular class, and must not be unduly oppressive. (11 Am. Jur. Sec. 302., 1:1)- 1074-1075.) In the case of Lawton vs. Steele, 38 L. ed. 385, 388. it was also held: . . . . To justify the state in thus interposing its authority in behalf of the public, it must appear, first, that the interests of the public generally, as

distinguished from those of a particular class, require such interference; and second, that the means are reasonably necessary for the accomplishment of the purpose, and not unduly oppressive upon individuals. . . . Prata Undertaking Co. vs. State Board of Embalming, 104 ALR, 389, 395, fixes this test of constitutionality: In determining whether a given act of the Legislature, passed in the exercise of the police power to regulate the operation of a business, is or is not constitutional, one of the first questions to be considered by the court is whether the power as exercised has a sufficient foundation in reason in connection with the matter involved, or is an arbitrary, oppressive, and capricious use of that power, without substantial relation to the health, safety, morals, comfort, and general welfare of the public. b. Petitioner's argument considered. Petitioner's main argument is that retail is a common, ordinary occupation, one of those privileges long ago recognized as essential to the orderly pursuant of happiness by free men; that it is a gainful and honest occupation and therefore beyond the power of the legislature to prohibit and penalized. This arguments overlooks fact and reality and rests on an incorrect assumption and premise, i.e., that in this country where the occupation is engaged in by petitioner, it has been so engaged by him, by the alien in an honest creditable and unimpeachable manner, without harm or injury to the citizens and without ultimate danger to their economic peace, tranquility and welfare. But the Legislature has found, as we have also found and indicated, that the privilege has been so grossly abused by the alien, thru the illegitimate use of pernicious designs and practices, that he now enjoys a monopolistic control of the occupation and threatens a deadly stranglehold on the nation's economy endangering the national security in times of crisis and emergency. The real question at issue, therefore, is not that posed by petitioner, which overlooks and ignores the facts and circumstances, but this, Is the exclusion in the future of aliens from the retail trade unreasonable. Arbitrary capricious, taking into account the illegitimate and pernicious form and manner in which the aliens have heretofore engaged therein? As thus correctly stated the answer is clear. The law in question is deemed absolutely necessary to bring about the desired legislative objective, i.e., to free national economy from alien control and dominance. It is not necessarily unreasonable because it affects private rights and privileges (11 Am. Jur. pp. 10801081.) The test of reasonableness of a law is the appropriateness or adequacy under all circumstances of the means adopted to carry out its purpose into effect (Id.) Judged by this test, disputed legislation, which is not merely reasonable but actually necessary, must be considered not to have infringed the constitutional limitation of reasonableness. The necessity of the law in question is explained in the explanatory note that accompanied the bill, which later was enacted into law: This bill proposes to regulate the retail business. Its purpose is to prevent persons who are not citizens of the Philippines from having a strangle hold upon our economic life. If the persons who control this vital artery of our economic life are the ones who owe no allegiance to this Republic, who have no profound devotion to our free institutions, and who have no permanent stake in our people's welfare, we are not really the masters of our destiny. All aspects of our life, even our national security, will be at the mercy of other people. In seeking to accomplish the foregoing purpose, we do not propose to deprive persons who are not citizens of the Philippines of their means of livelihood. While this bill seeks to take away from the hands of persons who

are not citizens of the Philippines a power that can be wielded to paralyze all aspects of our national life and endanger our national security it respects existing rights. The approval of this bill is necessary for our national survival. If political independence is a legitimate aspiration of a people, then economic independence is none the less legitimate. Freedom and liberty are not real and positive if the people are subject to the economic control and domination of others, especially if not of their own race or country. The removal and eradication of the shackles of foreign economic control and domination, is one of the noblest motives that a national legislature may pursue. It is impossible to conceive that legislation that seeks to bring it about can infringe the constitutional limitation of due process. The attainment of a legitimate aspiration of a people can never be beyond the limits of legislative authority. c. Law expressly held by Constitutional Convention to be within the sphere of legislative action. The framers of the Constitution could not have intended to impose the constitutional restrictions of due process on the attainment of such a noble motive as freedom from economic control and domination, thru the exercise of the police power. The fathers of the Constitution must have given to the legislature full authority and power to enact legislation that would promote the supreme happiness of the people, their freedom and liberty. On the precise issue now before us, they expressly made their voice clear; they adopted a resolution expressing their belief that the legislation in question is within the scope of the legislative power. Thus they declared the their Resolution: That it is the sense of the Convention that the public interest requires the nationalization of retail trade; but it abstain from approving the amendment introduced by the Delegate for Manila, Mr. Araneta, and others on this matter because it is convinced that the National Assembly is authorized to promulgate a law which limits to Filipino and American citizens the privilege to engage in the retail trade. (11 Aruego, The Framing of the Philippine Constitution, quoted on pages 66 and 67 of the Memorandum for the Petitioner.) It would do well to refer to the nationalistic tendency manifested in various provisions of the Constitution. Thus in the preamble, a principle objective is the conservation of the patrimony of the nation and as corollary the provision limiting to citizens of the Philippines the exploitation, development and utilization of its natural resources. And in Section 8 of Article XIV, it is provided that "no franchise, certificate, or any other form of authorization for the operation of the public utility shall be granted except to citizens of the Philippines." The nationalization of the retail trade is only a continuance of the nationalistic protective policy laid down as a primary objective of the Constitution. Can it be said that a law imbued with the same purpose and spirit underlying many of the provisions of the Constitution is unreasonable, invalid and unconstitutional? The seriousness of the Legislature's concern for the plight of the nationals as manifested in the approval of the radical measures is, therefore, fully justified. It would have been recreant to its duties towards the country and its people would it view the sorry plight of the nationals with the complacency and refuse or neglect to adopt a remedy commensurate with the demands of public interest and national survival. As the repository of the sovereign power of legislation, the Legislature was in duty bound to face the problem and meet, through adequate measures, the danger and threat that alien domination of retail trade poses to national economy. d. Provisions of law not unreasonable.

A cursory study of the provisions of the law immediately reveals how tolerant, how reasonable the Legislature has been. The law is made prospective and recognizes the right and privilege of those already engaged in the occupation to continue therein during the rest of their lives; and similar recognition of the right to continue is accorded associations of aliens. The right or privilege is denied to those only upon conviction of certain offenses. In the deliberations of the Court on this case, attention was called to the fact that the privilege should not have been denied to children and heirs of aliens now engaged in the retail trade. Such provision would defeat the law itself, its aims and purposes. Beside, the exercise of legislative discretion is not subject to judicial review. It is well settled that the Court will not inquire into the motives of the Legislature, nor pass upon general matters of legislative judgment. The Legislature is primarily the judge of the necessity of an enactment or of any of its provisions, and every presumption is in favor of its validity, and though the Court may hold views inconsistent with the wisdom of the law, it may not annul the legislation if not palpably in excess of the legislative power. Furthermore, the test of the validity of a law attacked as a violation of due process, is not its reasonableness, but its unreasonableness, and we find the provisions are not unreasonable. These principles also answer various other arguments raised against the law, some of which are: that the law does not promote general welfare; that thousands of aliens would be thrown out of employment; that prices will increase because of the elimination of competition; that there is no need for the legislation; that adequate replacement is problematical; that there may be general breakdown; that there would be repercussions from foreigners; etc. Many of these arguments are directed against the supposed wisdom of the law which lies solely within the legislative prerogative; they do not import invalidity. VIII. Alleged defect in the title of the law A subordinate ground or reason for the alleged invalidity of the law is the claim that the title thereof is misleading or deceptive, as it conceals the real purpose of the bill which is to nationalize the retail business and prohibit aliens from engaging therein. The constitutional provision which is claimed to be violated in Section 21 (1) of Article VI, which reads: No bill which may be enacted in the law shall embrace more than one subject which shall be expressed in the title of the bill. What the above provision prohibits is duplicity, that is, if its title completely fails to appraise the legislators or the public of the nature, scope and consequences of the law or its operation (I Sutherland, Statutory Construction, Sec. 1707, p. 297.) A cursory consideration of the title and the provisions of the bill fails to show the presence of duplicity. It is true that the term "regulate" does not and may not readily and at first glance convey the idea of "nationalization" and "prohibition", which terms express the two main purposes and objectives of the law. But "regulate" is a broader term than either prohibition or nationalization. Both of these have always been included within the term regulation. Under the title of an act to "regulate", the sale of intoxicating liquors, the Legislature may prohibit the sale of intoxicating liquors. (Sweet vs. City of Wabash, 41 Ind., 7; quoted in page 41 of Answer.) Within the meaning of the Constitution requiring that the subject of every act of the Legislature shall be stated in the tale, the title to regulate the sale of intoxicating liquors, etc." sufficiently expresses the subject of an act prohibiting the sale of such liquors to minors and to persons in the habit of getting intoxicated; such matters being properly included within the subject of regulating the sale. (Williams vs. State, 48 Ind. 306, 308, quoted in p. 42 of Answer.)

The word "regulate" is of broad import, and necessarily implies some degree of restraint and prohibition of acts usually done in connection with the thing to be regulated. While word regulate does not ordinarily convey meaning of prohibit, there is no absolute reason why it should not have such meaning when used in delegating police power in connection with a thing the best or only efficacious regulation of which involves suppression. (State vs. Morton, 162 So. 718, 182 La. 887, quoted in p. 42 of Answer.) The general rule is for the use of general terms in the title of a bill; it has also been said that the title need not be an index to the entire contents of the law (I Sutherland, Statutory Construction, See. 4803, p. 345.) The above rule was followed the title of the Act in question adopted the more general term "regulate" instead of "nationalize" or "prohibit". Furthermore, the law also contains other rules for the regulation of the retail trade which may not be included in the terms "nationalization" or "prohibition"; so were the title changed from "regulate" to "nationalize" or "prohibit", there would have been many provisions not falling within the scope of the title which would have made the Act invalid. The use of the term "regulate", therefore, is in accord with the principle governing the drafting of statutes, under which a simple or general term should be adopted in the title, which would include all other provisions found in the body of the Act. One purpose of the constitutional directive that the subject of a bill should be embraced in its title is to apprise the legislators of the purposes, the nature and scope of its provisions, and prevent the enactment into law of matters which have received the notice, action and study of the legislators or of the public. In the case at bar it cannot be claimed that the legislators have been appraised of the nature of the law, especially the nationalization and the prohibition provisions. The legislators took active interest in the discussion of the law, and a great many of the persons affected by the prohibitions in the law conducted a campaign against its approval. It cannot be claimed, therefore, that the reasons for declaring the law invalid ever existed. The objection must therefore, be overruled. IX. Alleged violation of international treaties and obligations Another subordinate argument against the validity of the law is the supposed violation thereby of the Charter of the United Nations and of the Declaration of the Human Rights adopted by the United Nations General Assembly. We find no merit in the Nations Charter imposes no strict or legal obligations regarding the rights and freedom of their subjects (Hans Kelsen, The Law of the United Nations, 1951 ed. pp. 29-32), and the Declaration of Human Rights contains nothing more than a mere recommendation or a common standard of achievement for all peoples and all nations (Id. p. 39.) That such is the import of the United Nations Charter aid of the Declaration of Human Rights can be inferred the fact that members of the United Nations Organizations, such as Norway and Denmark, prohibit foreigners from engaging in retail trade, and in most nations of the world laws against foreigners engaged in domestic trade are adopted. The Treaty of Amity between the Republic of the Philippines and the Republic of China of April 18, 1947 is also claimed to be violated by the law in question. All that the treaty guarantees is equality of treatment to the Chinese nationals "upon the same terms as the nationals of any other country." But the nationals of China are not discriminating against because nationals of all other countries, except those of the United States, who are granted special rights by the Constitution, are all prohibited from engaging in the retail trade. But even supposing that the law infringes upon the said treaty, the treaty is always subject to qualification or amendment by a subsequent law (U. S. vs. Thompson, 258, Fed. 257, 260), and the same may never

curtail or restrict the scope of the police power of the State (plaston vs. Pennsylvania, 58 L. ed. 539.) X. Conclusion Resuming what we have set forth above we hold that the disputed law was enacted to remedy a real actual threat and danger to national economy posed by alien dominance and control of the retail business and free citizens and country from dominance and control; that the enactment clearly falls within the scope of the police power of the State, thru which and by which it protects its own personality and insures its security and future; that the law does not violate the equal protection clause of the Constitution because sufficient grounds exist for the distinction between alien and citizen in the exercise of the occupation regulated, nor the due process of law clause, because the law is prospective in operation and recognizes the privilege of aliens already engaged in the occupation and reasonably protects their privilege; that the wisdom and efficacy of the law to carry out its objectives appear to us to be plainly evident as a matter of fact it seems not only appropriate but actually necessary and that in any case such matter falls within the prerogative of the Legislature, with whose power and discretion the Judicial department of the Government may not interfere; that the provisions of the law are clearly embraced in the title, and this suffers from no duplicity and has not misled the legislators or the segment of the population affected; and that it cannot be said to be void for supposed conflict with treaty obligations because no treaty has actually been entered into on the subject and the police power may not be curtailed or surrendered by any treaty or any other conventional agreement. Some members of the Court are of the opinion that the radical effects of the law could have been made less harsh in its impact on the aliens. Thus it is stated that the more time should have been given in the law for the liquidation of existing businesses when the time comes for them to close. Our legal duty, however, is merely to determine if the law falls within the scope of legislative authority and does not transcend the limitations of due process and equal protection guaranteed in the Constitution. Remedies against the harshness of the law should be addressed to the Legislature; they are beyond our power and jurisdiction. The petition is hereby denied, with costs against petitioner. Paras, C.J., Bengzon, Reyes, A., Bautista Angelo, Concepcion, Reyes, J.B.L., Endencia and Felix, JJ., concur.

Separate Opinions PADILLA, J., concurring and dissenting: I agree to the proposition, principle or rule that courts may not inquire into the wisdom of an the Act passed by the Congress and duly approved by the President of the Republic. But the rule does not preclude courts from inquiring and determining whether the Act offends against a provision or provisions of the Constitution. I am satisfied that the Act assailed as violative of the due process of law and the equal protection of the laws clauses of the Constitution does not infringe upon them, insofar as it affects associations, partnership or corporations, the capital of which is not wholly owned by the citizens of the Philippines, and aliens, who are not and have not been engaged in the retail business. I am, however, unable to persuade myself that it does not violate said clauses insofar as the Act applies to associations and partnerships referred to in the Act and to aliens, who are and have heretofore been engaged in said business. When they did engage in the retail business there was no prohibition on or against them to engage in it. They assumed and believed in good faith they were entitled to engaged in the business. The Act allows aliens to continue

in business until their death or voluntary retirement from the business or forfeiture of their license; and corporations, associations or partnership, the capital of which is not wholly owned by the citizens of the Philippines to continue in the business for a period of ten years from the date of the approval of the Act (19 June 1954) or until the expiry of term of the existence of the association or partnership or corporation, whichever event comes first. The prohibition on corporations, the capital of which is not wholly owned by citizens of the Philippines, to engage in the retail business for a period of more than ten years from the date of the approval of the Act or beyond the term of their corporate existence, whichever event comes first, is valid and lawful, because the continuance of the existence of such corporations is subject to whatever the 1 Congress may impose reasonably upon them by subsequent legislation. But the prohibition to engage in the retail business by associations and partnerships, the capital of which is not wholly owned by citizen of the Philippines, after ten years from the date of the approval of the Act, even before the end of the term of their existence as agreed upon by the associates and partners, and by alien heirs to whom the retail business is transmitted by the death of an alien engaged in the business, or by his executor or administrator, amounts to a deprivation of their property without due process of law. To my mind, the ten-year period from the date of the approval of the Act or until the expiration of the term of the existence of the association and partnership, whichever event comes first, and the six-month period granted to alien heirs of a deceased alien, his executor or administrator, to liquidate the business, do not cure the defect of the law, because the effect of the prohibition is to compel them to sell or dispose of their business. The price obtainable at such forced sale of the business would be inadequate to reimburse and compensate the associates or partners of the associations or partnership, and the alien heirs of a deceased alien, engaged in the retail business for the capital invested in it. The stock of merchandise bought and sold at retail does not alone constitute the business. The goodwill that the association, partnership and the alien had built up during a long period of effort, patience and perseverance forms part of such business. The constitutional provisions 2 that no person shall be deprived of his property without due process of law and that 3 no person shall be denied the equal protection of the laws would have no meaning as applied to associations or partnership and alien heirs of an alien engaged in the retail business if they were to be compelled to sell or dispose of their business within ten years from the date of the approval of the Act and before the end of the term of the existence of the associations and partnership as agreed upon by the associations and partners and within six months after the death of their predecessor-in-interest. The authors of the Constitution were vigilant, careful and zealous in the safeguard of the ownership of private agricultural lands which together with the lands of the public domain constitute the priceless patrimony and mainstay of the nation; yet, they did 4 not deem it wise and prudent to deprive aliens and their heirs of such lands. For these reasons, I am of the opinion that section 1 of the Act, insofar as it compels associations and partnership referred to therein to wind up their retail business within ten years from the date of the approval of the Act even before the expiry of the term of their existence as agreed upon by the associates and partners and section 3 of the Act, insofar as it compels the aliens engaged in the retail business in his lifetime his executor or administrator, to liquidate the business, are invalid, for they violate the due process of law and the equal protection of the laws clauses of the Constitution.

3 4

Ibid. Section 5, Article XIII, of the Constitution.

Footnotes 1 Section 76, Act No. 1459.. 2 Section 1 (1), Article III, of the Constitution..

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 91332 July 16, 1993 PHILIP MORRIS, INC., BENSON & HEDGES (CANADA), INC., AND FABRIQUES OF TABAC REUNIES, S.A.,petitioners vs. THE COURT OF APPEALS AND FORTUNE TOBACCO CORPORATION, respondents. Quasha, Asperilla, Ancheta, Pea & Nolasco Law Office for petitioners. Teresita Gandionco-Oledan for private respondent. MELO, J.: In the petition before us, petitioners Philip Morris, Inc., Benson and Hedges (Canada), Inc., and Fabriques of Tabac Reunies, S.A., are ascribing whimsical exercise of the faculty conferred upon magistrates by Section 6, Rule 58 of the Revised Rules of Court when respondent Court of Appeals lifted the writ of preliminary injunction it earlier had issued against Fortune Tobacco Corporation, herein private respondent, from manufacturing and selling "MARK" cigarettes in the local market. Banking on the thesis that petitioners' respective symbols "MARK VII", "MARK TEN", and "LARK", also for cigarettes, must be protected against unauthorized appropriation, petitioners twice solicited the ancillary writ in the course the main suit for infringement but the court of origin was unpersuaded. Before we proceed to the generative facts of the case at bar, it must be emphasized that resolution of the issue on the propriety of lifting the writ of preliminary injunction should not be construed as a prejudgment of the suit below. Aware of the fact that the discussion we are about to enter into involves a mere interlocutory order, a discourse on the aspect infringement must thus be avoided. With these caveat, we shall now shift our attention to the events which spawned the controversy. As averred in the initial pleading, Philip Morris, Incorporated is a corporation organized under the laws of the State of Virginia, United States of America, and does business at 100 Park Avenue, New York, New York, United States of America. The two other plaintiff foreign corporations, which are wholly-owned subsidiaries of Philip Morris, Inc., are similarly not doing business in the Philippines but are suing on an isolated transaction. As registered owners "MARK VII", "MARK TEN", and "LARK" per certificates of registration issued by the Philippine Patent Office on April 26, 1973, May 28, 1964, and March 25, 1964, plaintiffs-petitioners asserted that defendant Fortune Tobacco Corporation has no right to manufacture and sell cigarettes bearing the allegedly identical or confusingly similar trademark "MARK" in contravention of Section 22 of the Trademark Law, and should, therefore, be precluded during the pendency of the case from performing the acts complained of via a preliminary injunction (p. 75, Court of Appeals Rollo in AC-G.R. SP No. 13132). For its part, Fortune Tobacco Corporation admitted petitioners' certificates of registration with the Philippine Patent Office subject to the affirmative and special defense on misjoinder of party plaintiffs. Private respondent alleged further that it has been authorized by the Bureau of Internal Revenue to manufacture and sell cigarettes bearing the trademark "MARK", and that "MARK" is a common word which cannot be exclusively appropriated (p.158, Court of Appeals Rollo in A.C.-G.R. SP No. 13132). On March 28, 1983, petitioners' prayer for preliminary injunction was denied by the

Presiding Judge of Branch 166 of the Regional Trial Court of the National Capital Judicial Region stationed at Pasig, premised upon the following propositions: Plaintiffs admit in paragraph 2 of the complaint that ". . . they are not doing business in the Philippines and are suing on an isolated transaction . . .". This simply means that they are not engaged in the sale, manufacture, importation, expor[t]ation and advertisement of their cigarette products in the Philippines. With this admission, defendant asks: ". . . how could defendant's "MARK" cigarettes cause the former "irreparable damage" within the territorial limits of the Philippines?" Plaintiffs maintain that since their trademarks are entitled to protection by treaty obligation under Article 2 of the Paris Convention of which the Philippines is a member and ratified by Resolution No. 69 of the Senate of the Philippines and as such, have the force and effect of law under Section 12, Article XVII of our Constitution and since this is an action for a violation or infringement of a trademark or trade name by defendant, such mere allegation is sufficient even in the absence of proof to support it. To the mind of the Court, precisely, this is the issue in the main case to determine whether or not there has been an invasion of plaintiffs' right of property to such trademark or trade name. This claim of plaintiffs is disputed by defendant in paragraphs 6 and 7 of the Answer; hence, this cannot be made a basis for the issuance of a writ of preliminary injunction. There is no dispute that the First Plaintiff is the registered owner of trademar[k] "MARK VII" with Certificate of Registration No. 18723, dated April 26,1973 while the Second Plaintiff is likewise the registered owner of trademark "MARK TEN" under Certificate of Registration No. 11147, dated May 28, 1963 and the Third Plaintiff is a registrant of trademark "LARK" as shown by Certificate of Registration No. 10953 dated March 23, 1964, in addition to a pending application for registration of trademark "MARK VII" filed on November 21, 1980 under Application Serial No. 43243, all in the Philippine Patent Office. In same the manner, defendant has a pending application for registration of the trademark "LARK" cigarettes with the Philippine Patent Office under Application Serial No. 44008. Defendant contends that since plaintiffs are "not doing business in the Philippines" coupled the fact that the Director of Patents has not denied their pending application for registration of its trademark "MARK", the grant of a writ of preliminary injunction is premature. Plaintiffs contend that this act(s) of defendant is but a subterfuge to give semblance of good faith intended to deceive the public and patronizers into buying the products and create the impression that defendant's goods are identical with or come from the same source as plaintiffs' products or that the defendant is a licensee of plaintiffs when in truth and in fact the former is not. But the fact remains that with its pending application, defendant has embarked in the manufacturing, selling, distributing and advertising of "MARK" cigarettes. The question of good faith or bad faith on the part of defendant are matters which are evidentiary in character which have to be proven during the hearing on the merits; hence, until and unless the Director of Patents has denied defendant's

application, the Court is of the opinion and so holds that issuance a writ of preliminary injunction would not lie. There is no question that defendant has been authorized by the Bureau of Internal Revenue to manufacture cigarettes bearing the trademark "MARK" (Letter of Ruben B. Ancheta, Acting Commissioner addressed to Fortune Tobacco Corporation dated April 3, 1981, marked as Annex "A", defendant's "OPPOSITION, etc." dated September 24, 1982). However, this authority is qualified . . . that the said brands have been accepted and registered by the Patent Office not later than six (6) months after you have been manufacturing the cigarettes and placed the same in the market." However, this grant ". . . does not give you protection against any person or entity whose rights may be prejudiced by infringement or unfair competition in relation to your indicated trademarks/brands". As aforestated, the registration of defendant's application is still pending in the Philippine Patent Office. It has been repeatedly held in this jurisdiction as well as in the United States that the right or title of the applicant for injunction remedy must be clear and free from doubt. Because of the disastrous and painful effects of an injunction, Courts should be extremely careful, cautious and conscionable in the exercise of its discretion consistent with justice, equity and fair play. There is no power the exercise of which is more delicate which requires greater caution, deliberation, and sound discretion, or (which is) more dangerous in a doubtful case than the issuing of an injunction; it is the strong arm of equity that never ought to be extended unless to cases of great injury, where courts of law cannot afford an adequate or commensurate remedy in damages. The right must be clear, the injury impending or threatened, so as to be averted only by the protecting preventive process of injunction. (Bonaparte v. Camden, etc. N. Co., 3 F. Cas. No. 1, 617, Baldw. 205, 217.) Courts of equity constantly decline to lay down any rule which injunction shall be granted or withheld. There is wisdom in this course, for it is impossible to foresee all exigencies of society which may require their aid to protect rights and restrain wrongs. (Merced M. Go v. Freemont, 7 Gal. 317, 321; 68 Am. Dec. 262.) It is the strong arm of the court; and to render its operation begin and useful, it must be exercised with great discretion, and when necessary requires it. (Attorney-General v. Utica Inc. Co., P. John Ch. (N.Y.) 371.) Having taken a panoramic view of the position[s] of both parties as viewed from their pleadings, the picture reduced to its minimum size would be this: At the crossroads are the two (2) contending parties, plaintiffs vigorously asserting the rights granted by law,

treaty and jurisprudence to restrain defendant in its activities of manufacturing, selling, distributing and advertising its "MARK" cigarettes and now comes defendant who countered and refused to be restrained claiming that it has been authorized temporarily by the Bureau of Internal Revenue under certain conditions to do so as aforestated coupled by its pending application for registration of trademark "MARK" in the Philippine Patent Office. This circumstance in itself has created a dispute between the parties which to the mind of the Court does not warrant the issuance of a writ of preliminary injunction. It is well-settled principle that courts of equity will refuse an application for the injunctive remedy where the principle of law on which the right to preliminary injunction rests is disputed and will admit of doubt, without a decision of the court of law establishing such principle although satisfied as to what is a correct conclusion of law upon the facts. The fact, however, that there is no such dispute or conflict does not in itself constitute a justifiable ground for the court to refuse an application for the injunctive relief. (Hackensack Impr. Commn. v. New Jersey Midland P. Co., 22 N.J. Eg. 94.) Hence, the status quo existing between the parties prior to the filing of this case should be maintained. For after all, an injunction, without reference to the parties, should be violent, vicious nor even vindictive. (pp. 338-341, Rollo in G.R. No. 91332.) In the process of denying petitioners' subsequent motion for reconsideration of the order denying issuance of the requested writ, the court of origin took cognizance of the certification executed on January 30, 1984 by the Philippine Patent Office attesting to the fact that private respondent's application for registration is still pending appropriate action. Apart from this communication, what prompted the trial court judge to entertain the idea of prematurity and untimeliness of petitioners' application for a writ of preliminary injunction was the letter from the Bureau of Internal Revenue date February 2, 1984 which reads: MRS. TERESITA GANDIONGCO OLEDAN Legal Counsel Fortune Tobacco Corporation Madam: In connection with your letter dated January 25, 1984, reiterating your query as to whether your label approval automatically expires or becomes null and void after six (6) months if the brand is not accepted and by the patent office, please be informed that no provision in the Tax Code or revenue regulation that requires an applicant to comply with the aforementioned condition order that his label approved will remain valid and existing. Based on the document you presented, it shows that registration of this particular label still pending resolution by the Patent Office. These being so , you may therefore continue with the production said brand of cigarette until this Office is officially notified that the question of ownership of "MARK" brand is finally resolved.

V e r y t r u l y y o u r s , T E O D O R O D . P A R E O C h i e f , M (p. 348, Rollo.) a It appears from the testimony ofn Atty. Enrique Madarang, Chief of the Trademark Division of the then Philippine Patent Office that Fortune's application for its u trademark is still pending beforef said office (p. 311, Rollo). Petitioners thereafter cited supervening events which supposedly transpired since a March 28, 1983, when the trial court first declined issuing a writ of preliminary c injunction, that could alter the results of the case in that Fortune's application had t been rejected, nay, barred by the Philippine Patent Office, and that the application u r

had been forfeited by abandonment, but the trial court nonetheless denied the second motion for issuance of the injunctive writ on April 22, 1987, thus: For all the prolixity of their pleadings and testimonial evidence, the plaintiffs-movants have fallen far short of the legal requisites that would justify the grant of the writ of preliminary injunction prayed for. For one, they did not even bother to establish by competent evidence that the products supposedly affected adversely by defendant's trademark now subject of an application for registration with the Philippine Patents Office, are in actual use in the Philippines. For another, they concentrated their fire on the alleged abandonment and forfeiture by defendant of said application for registration. The Court cannot help but take note of the fact that in their complaint plaintiffs included a prayer for issuance preliminary injunction. The petition was duly heard, and thereafter matter was assiduously discussed lengthily and resolved against plaintiffs in a 15-page Order issued by the undersigned's predecessor on March 28, 1983. Plaintiffs' motion for reconsideration was denied in another well-argued 8 page Order issued on April 5, 1984,, and the matter was made to rest. However, on the strength of supposed changes in the material facts of this case, plaintiffs came up with the present motion citing therein the said changes which are: that defendant's application had been rejected and barred by the Philippine Patents Office, and that said application has been deemed abandoned and forfeited. But defendant has refiled the same. Plaintiffs' arguments in support of the present motion appear to be a mere rehash of their stand in the first above-mentioned petition which has already been ruled upon adversely against them. Granting that the alleged changes in the material facts are sufficient grounds for a motion seeking a favorable grant of what has already been denied, this motion just the same cannot prosper. In the first place there is no proof whatsoever that any of plaintiffs' products which they seek to protect from any adverse effect of the trademark applied for by defendant, is in actual use and available for commercial purposes anywhere in the Philippines. Secondly as shown by plaintiffs' own evidence furnished by no less than the chief of Trademarks Division of the Philippine Patent Office, Atty. Enrique Madarang, the abandonment of an application is of no moment, for the same can always be refiled. He said there is no specific provision in the rules prohibiting such refiling (TSN, November 21, 1986, pp. 60 & 64, Raviera). In fact, according to Madarang, the refiled application of defendant is now pending before the Patents Office. Hence, it appears that the motion has no leg to stand on. (pp. 350-351, Rollo in G. R. No. 91332.) Confronted with this rebuff, petitioners filed a previous petition for certiorari before the Court, docketed as G.R. No. 78141, but the petition was referred to the Court of Appeals. The Court of Appeals initially issued a resolution which set aside the court of origin's order dated April 22, 1987, and granted the issuance of a writ of preliminary injunction enjoining Fortune, its agents, employees, and representatives, from manufacturing,

selling, and advertising "MARK" cigarettes. The late Justice Cacdac, speaking for the First Division of the Court of Appeals in CA-G.R. SP No. 13132, remarked: There is no dispute that petitioners are the registered owners of the trademarks for cigarettes "MARK VII", "MARK TEN", and "LARK".(Annexes B, C and D, petition). As found and reiterated by the Philippine Patent Office in two (2) official communications dated April 6, 1983 and January 24, 1984, the trademark "MARK" is "confusingly similar" to the trademarks of petitioners, hence registration was barred under Sec. 4 (d) of Rep. Act. No. 166, as amended (pp. 106, 139, SCA rollo). In a third official communication dated April 8, 1986, the trademark application of private respondent for the "MARK" under Serial No. 44008 filed on February 13, 1981 which was declared abandoned as of February 16, 1986, is now deemed forfeited, there being no revival made pursuant to Rule 98 of the Revised Rules of Practitioners in Trademark Cases." (p. 107, CA rollo). The foregoing documents or communications mentioned by petitioners as "the changes in material facts which occurred after March 28, 1983", are not also questioned by respondents. Pitted against the petitioners' documentary evidence, respondents pointed to (1) the letter dated January 30, 1979 (p. 137, CA rollo) of Conrado P. Diaz, then Acting Commissioner of Internal Revenue, temporarily granting the request of private respondent for a permit to manufacture two (2) new brands of cigarettes one of which is brand "MARK" filter-type blend, and (2) the certification dated September 26, 1986 of Cesar G. Sandico, Director of Patents (p. 138, CA rollo) issued upon the written request of private respondents' counsel dated September 17, 1986 attesting that the records of his office would show that the "trademark MARK" for cigarettes is now the subject of a pending application under Serial No. 59872 filed on September 16, 1986. Private respondent's documentary evidence provides the reasons neutralizing or weakening their probative values. The penultimate paragraph of Commissioner Diaz' letter of authority reads: Please be informed further that the authority herein granted does not give you protection against any person or entity whose rights may be prejudiced by infringement or unfair competition in relation to your above-named brands/trademark. while Director Sandico's certification contained similar conditions as follows: This Certification, however, does not give protection as against any person or entity whose right may be prejudiced by infringement or unfair competition in relation to the aforesaid trademark nor the right to register if contrary to the provisions of the Trademark Law, Rep. Act No. 166 as amended and the Revised Rules of Practice in Trademark Cases. The temporary permit to manufacture under the trademark "MARK" for cigarettes and the acceptance of the second application filed by

private respondent in the height of their dispute in the main case were evidently made subject to the outcome of the said main case or Civil Case No. 47374 of the respondent Court. Thus, the Court has not missed to note the absence of a mention in the Sandico letter of September 26, 1986 of any reference to the pendency of the instant action filed on August 18, 1982. We believe and hold that petitioners have shown a prima facie case for the issuance of the writ of prohibitory injunction for the purposes stated in their complaint and subsequent motions for the issuance of the prohibitory writ. (Buayan Cattle Co. vs. Quintillan, 125 SCRA 276) The requisites for the granting of preliminary injunction are the existence of the right protected and the facts against which the injunction is to be directed as violative of said right. (Buayan Cattle Co. vs. Quintillan, supra; Ortigas & Co. vs. Ruiz, 148 SCRA 326). It is a writ framed according to the circumstances of the case commanding an act which the Court regards as essential to justice and restraining an act it deems contrary to equity and good conscience (Rosauro vs. Cuneta, 151 SCRA 570). If it is not issued, the defendant may, before final judgment, do or continue the doing of the act which the plaintiff asks the court to restrain, and thus make ineffectual the final judgment rendered afterwards granting the relief sought by the plaintiff (Calo vs. Roldan, 76 Phil. 445). Generally, its grant or denial rests upon the sound discretion of the Court except on a clear case of abuse (Belish Investment & Finance Co. vs. State House, 151 SCRA 636). Petitioners' right of exclusivity to their registered trademarks being clear and beyond question, the respondent court's denial of the prohibitive writ constituted excess of jurisdiction and grave abuse discretion. If the lower court does not grant preliminary injunction, the appellate court may grant the same. (Service Specialists, Inc. vs. Sheriff of Manila, 145 SCRA 139). (pp. 165-167, Rollo in G.R. No. 91332.) After private respondent Fortune's motion for reconsideration was rejected, a motion to dissolve the disputed writ of preliminary injunction with offer to post a counterbond was submitted which was favorably acted upon by the Court of Appeals, premised on the filing of a sufficient counterbond to answer for whatever perjuicio petitioners may suffer as a result thereof, to wit: The private respondent seeks to dissolve the preliminary injunction previously granted by this Court with an offer to file a counterbond. It was pointed out in its supplemental motion that lots of workers employed will be laid off as a consequence of the injunction and that the government will stand to lose the amount of specific taxes being paid by the private respondent. The specific taxes being paid is the sum total of P120,120, 295.98 from January to July 1989. The petitioners argued in their comment that the damages caused by the infringement of their trademark as well as the goodwill it generates are incapable of pecuniary estimation and monetary evaluation and not even the counterbond could adequately compensate for the damages it will incur as a result of the dissolution of the bond. In addition, the petitioner further argued that doing business in the Philippines is not relevant as the injunction pertains to an infringement of a trademark right.

After a thorough re-examination of the issues involved and the arguments advanced by both parties in the offer to file a counterbond and the opposition thereto, WE believe that there are sound and cogent reasons for US to grant the dissolution of the writ of preliminary injunction by the offer of the private respondent to put up a counterbond to answer for whatever damages the petitioner may suffer as a consequence of the dissolution of the preliminary injunction. The petitioner will not be prejudiced nor stand to suffer irreparably as a consequence of the lifting of the preliminary injunction considering that they are not actually engaged in the manufacture of the cigarettes with the trademark in question and the filing of the counterbond will amply answer for such damages. While the rule is that an offer of a counterbond does not operate to dissolve an injunction previously granted, nevertheless, it is equally true that an injunction could be dissolved only upon good and valid grounds subject to the sound discretion of the court. As WE have maintained the view that there are sound and good reasons to lift the preliminary injunction, the motion to file a counterbond is granted. (pp. 53-54, Rollo in G.R. No. 91332.) Petitioners, in turn, filed their own motion for re-examination geared towards reimposition of the writ of preliminary injunction but to no avail (p. 55, Rollo in G.R. No. 91332). Hence, the instant petition casting three aspersions that respondent court gravely abused its discretion tantamount to excess of jurisdiction when: I. . . . it required, contrary to law and jurisprudence, that in order that petitioners may suffer irreparable injury due to the lifting of the injunction, petitioners should be using actually their registered trademarks in commerce in the Philippines; II. . . . it lifted the injunction in violation of section 6 of Rule 58 of the Rules of Court; and III. . . . after having found that the trial court had committed grave abuse of discretion and exceeded its jurisdiction for having refused to issue the writ of injunction to restrain private respondent's acts that are contrary to equity and good conscience, it made a complete about face for legally insufficient grounds and authorized the private respondent to continue performing the very same acts that it had considered contrary to equity and good conscience, thereby ignoring not only the mandates of the Trademark Law, the international commitments of the Philippines, the judicial admission of private respondent that it will have no more right to use the trademark "MARK" after the Director of Patents shall have rejected the application to register it, and the admonitions of the Supreme Court. (pp. 24-25, Petition; pp. 25-26, Rollo.) To sustain a successful prosecution of their suit for infringement, petitioners, as foreign corporations not engaged in local commerce, rely on section 21-A of the Trademark Law reading as follows: Sec. 21-A. Any foreign corporation or juristic person to which a mark or trade-name has been registered or assigned under this act may bring an action hereunder for infringement, for unfair competition, or false designation of origin and false description, whether or not it has been licensed to do business in the

Philippines under Act Numbered Fourteen hundred and fifty-nine, as amended, otherwise known as the Corporation Law, at the time it brings complaint: Provided, That the country of which the said foreign corporation or juristic person is a citizen or in which it is domiciled, by treaty, convention or law, grants a similar privilege to corporate or juristic persons of the Philippines. (As inserted by Sec. 7 of Republic Act No. 638.) to drive home the point that they are not precluded from initiating a cause of action in the Philippines on account of the principal perception that another entity is pirating their symbol without any lawful authority to do so. Judging from a perusal of the aforequoted Section 21-A, the conclusion reached by petitioners is certainly correct for the proposition in support thereof is embedded in the Philippine legal jurisprudence. Indeed, it was stressed in General Garments Corporation vs. Director of Patents (41 SCRA 50 [1971]) by then Justice (later Chief Justice) Makalintal that: Parenthetically, it may be stated that the ruling in the Mentholatum case was subsequently derogated when Congress, purposely to "counteract the effects" of said case, enacted Republic Act No. 638, inserting Section 21-A in the Trademark Law, which allows a foreign corporation or juristic person to bring an action in Philippine courts for infringement of a mark or tradename, for unfair competition, or false designation of origin and false description, "whether or not it has been licensed to do business in the Philippines under Act Numbered Fourteen hundred and fifty-nine, as amended, otherwise known as the Corporation Law, at the time it brings complaint." Petitioner argues that Section 21-A militates against respondent's capacity to maintain a suit for cancellation, since it requires, before a foreign corporation may bring an action, that its trademark or tradename has been registered under the Trademark Law. The argument misses the essential point in the said provision, which is that the foreign corporation is allowed thereunder to sue "whether or not it has been licensed to do business in the Philippines" pursuant to the Corporation Law (precisely to counteract the effects of the decision in the Mentholatum case). (at p. 57.) However, on May, 21, 1984, Section 21-A, the provision under consideration, was qualified by this Court in La Chemise Lacoste S.A. vs. Fernandez (129 SCRA 373 [1984]), to the effect that a foreign corporation not doing business in the Philippines may have the right to sue before Philippine Courts, but existing adjective axioms require that qualifying circumstances necessary for the assertion of such right should first be affirmatively pleaded (2 Agbayani Commercial Laws of the Philippines, 1991 Ed., p. 598; 4 Martin, Philippine Commercial Laws, Rev. Ed., 1986, p. 381). Indeed, it is not sufficient for a foreign corporation suing under Section 21-A to simply allege its alien origin. Rather, it must additionally allege its personality to sue. Relative to this condition precedent, it may be observed that petitioners were not remiss in averring their personality to lodge a complaint for infringement (p. 75,Rollo in AC-G.R. SP No. 13132) especially so when they asserted that the main action for infringement is anchored on an isolated transaction (p. 75, Rollo in AC-G.R. SP No. 13132; Atlantic Mutual Ins. Co. vs. Cebu Stevedoring Co., Inc., 17 SCRA 1037 (1966), 1 Regalado, Remedial Law Compendium, Fifth Rev. Ed., 1988, p. 103).

Another point which petitioners considered to be of significant interest, and which they desire to impress upon us is the protection they enjoy under the Paris Convention of 1965 to which the Philippines is a signatory. Yet, insofar as this discourse is concerned, there is no necessity to treat the matter with an extensive response because adherence of the Philippines to the 1965 international covenant due to pact sunt servanda had been acknowledged in La Chemise (supra at page 390). Given these confluence of existing laws amidst the cases involving trademarks, there can be no disagreement to the guiding principle in commercial law that foreign corporations not engaged in business in the Philippines may maintain a cause of action for infringement primarily because of Section 21-A of the Trademark Law when the legal standing to sue is alleged, which petitioners have done in the case at hand. In assailing the justification arrived at by respondent court when it recalled the writ of preliminary injunction, petitioners are of the impression that actual use of their trademarks in Philippine commercial dealings is not an indispensable element under Article 2 of the Paris Convention in that: (2) . . . . no condition as to the possession of a domicile or establishment in the country where protection is claimed may be required of persons entitled to the benefits of the Union for the enjoyment of any industrial property of any industrial property rights. (p. 28, Petition; p. 29, Rollo in G.R. No. 91332.) Yet petitioners' perception along this line is nonetheless resolved by Sections 2 and 2-A of the Trademark Law which speak loudly, about necessity of actual commercial use of the trademark in the local forum: Sec. 2. What are registrable. Trademarks, tradenames 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 trademarks, 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 by R.A. No. 865). Sec. 2-A. Ownership of trademarks, tradenames and service marks; how acquired. Anyone who lawfully produces or deals in merchandise of any kind or who engages in any lawful business, or who renders any lawful service in commerce, by actual use thereof in manufacture or trade, in business,and in the service rendered, may appropriate to his exclusive use a trademark, a tradename, or a service mark not so appropriated by another, to distinguish his merchandise, business or service from the merchandise, business or service of others. The ownership or possession of a trademark, 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 known to the law. (As amended by R.A. No. 638). (Kabushi Kaisha

Isetan vs. Intermediate Appellate Court, 203 SCRA 583 [1991], at pp. 589-590; emphasis supplied.) 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 (Mortensen 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 (Salonga and Yap, Public International Law, Fourth ed., 1974, p. 16). The aforequoted basic provisions of our Trademark Law, according to Justice Gutierrez, Jr., in Kabushi Kaisha Isetan vs. Intermediate Appellate Court (203 SCRA 583 [1991]), have been construed in this manner: A fundamental principle of Philippine Trademark Law is that actual use in commerce in the Philippines is a pre-requisite to the acquisition of ownership over a trademark or a tradename. xxx xxx xxx These provisions have been interpreted in Sterling Products International, Inc. v. Farbenfabriken Bayer Actiengesellschaft (27 SCRA 1214 [1969]) in this way: 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 to the acquisition of the right of ownership over a trademark. xxx xxx xxx . . . 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. . . . In fact, a prior registrant cannot claim exclusive use of the trademark unless it uses it in commerce. We rule[d] in Pagasa Industrial Corporation v. Court of Appeals (118 SCRA 526 [1982]): 3. 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 (Exhibits 7, 7-a, and 8-b) 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. (Sy Ching v. Gaw Lui, 44 SCRA 148149) "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 the 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. (Pagasa Industrial Corp. v. Court of Appeals, 118 SCRA 526 [1982]; Emphasis Supplied) The records show that the petitioner has never conducted any business in the Philippines. It has never promoted its tradename or trademark in the Philippines. It is unknown to Filipino except the very few who may have noticed it while travelling abroad. It has never paid a single centavo of tax to the Philippine government. Under the law, it has no right to the remedy it seeks. (at pp. 589591.) In other words, petitioners 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 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 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. Going back to the first assigned error, we can not help but notice the manner the ascription was framed which carries with it the implied but unwarranted assumption of the existence of petitioners' right to relief. It must be emphasized that this aspect of exclusive dominion to the trademarks, together with the corollary allegation of irreparable injury, has yet to be established by petitioners by the requisite quantum of evidence in civil cases. It cannot be denied that our reluctance to issue a writ of preliminary injunction is due to judicial deference to the lower courts, involved as there is mere interlocutory order (Villarosa vs. Teodoro, Sr., 100 Phil. 25 [1956]). In point of adjective law, the petition has its roots on a remedial measure which is but ancillary to the main action for infringement still pending factual determination before the court of origin. It is virtually needless to stress the obvious reality that critical facts in an infringement case are not before us more so when even Justice Feliciano's opinion observes that "the evidence is scanty" and that petitioners "have yet to submit copies or photographs of their registered marks as used in cigarettes" while private respondent has not, for its part, "submitted the actual labels or packaging materials used in selling its "Mark" cigarettes." Petitioners therefore, may not be permitted to presume a given state of facts on their so called right to the trademarks which could be subjected to irreparable injury and in the process, suggest the fact of infringement. Such a ploy would practically place the cart ahead of the horse. To our mind, what appears to be the insurmountable barrier to petitioners' portrayal of whimsical

exercise of discretion by the Court of Appeals is the well-taken remark of said court that: The petitioner[s] will not be prejudiced nor stand to suffer irreparably as a consequence of the lifting of the preliminary injunction considering that they are not actually engaged in the manufacture of the cigarettes with the trademark in question and the filing of the counterbond will amply answer for such damages. (p. 54. Rollo in G.R. No. 91332.) More telling are the allegations of petitioners in their complaint (p. 319, Rollo G.R. No. 91332) as well as in the very petition filed with this Court (p. 2, Rollo in G.R. No. 91332) indicating that they are not doing business in the Philippines, for these frank representations are inconsistent and incongruent with any pretense of a right which can breached (Article 1431, New Civil Code; Section 4, Rule 129; Section 3, Rule 58, Revised Rules of Court). Indeed, to be entitled to an injunctive writ, petitioner must show that there exists a right to be protected and that the facts against which injunction is directed are violative of said right (Searth Commodities Corporation vs. Court of Appeals, 207 SCRA 622 [1992]). It may be added in this connection that albeit petitioners are holders of certificate of registration in the Philippines of their symbols as admitted by private respondent, the fact of exclusive ownership cannot be made to rest solely on these documents since dominion over trademarks is not acquired by the mere fact of registration alone and does not perfect a trademark right (Unno Commercial Enterprises, Inc. vs. General Milling Corporation, 120 SCRA 804 [1983]). Even if we disregard the candid statements of petitioners anent the absence of business activity here and rely on the remaining statements of the complaint below, still, when these averments are juxtaposed with the denials and propositions of the answer submitted by private respondent, the supposed right of petitioners to the symbol have thereby been controverted. This is not to say, however, that the manner the complaint was traversed by the answer is sufficient to tilt the scales of justice in favor of private respondent. Far from it. What we are simply conveying is another basic tenet in remedial law that before injunctive relief may properly issue, complainant's right or title must be undisputed and demonstrated on the strength of one's own title to such a degree as to unquestionably exclude dark clouds of doubt, rather than on the weakness of the adversary's evidence, inasmuch as the possibility of irreparable damage, without prior proof of transgression of an actual existing right, is no ground for injunction being mere damnum absque injuria (Talisay-Silay Milling Co., Inc. vs. CFI of Negros Occidental, 42 SCRA 577 [1971]; Francisco, Rules of Court, Second ed., 1985, p. 225; 3 Martin, Rules of Court, 1986 ed., p. 82). On the economic repercussion of this case, we are extremely bothered by the thought of having to participate in throwing into the streets Filipino workers engaged in the manufacture and sale of private respondent's "MARK" cigarettes who might be retrenched and forced to join the ranks of the many unemployed and unproductive as a result of the issuance of a simple writ of preliminary injunction and this, during the pendency of the case before the trial court, not to mention the diminution of tax revenues represented to be close to a quarter million pesos annually. On the other hand, if the status quo is maintained, there will be no damage that would be suffered by petitioners inasmuch as they are not doing business in the Philippines. With reference to the second and third issues raised by petitioners on the lifting of the writ of preliminary injunction, it cannot be gainsaid that respondent court acted well within its prerogatives under Section 6, Rule 58 of the Revised Rules of Court: Sec. 6. Grounds for objection to, or for motion of dissolution of injunction. The injunction may be refused or, if granted ex parte,

may be dissolved, upon the insufficiency of the complaint as shown by the complaint itself, with or without notice to the adverse party. It may also be refused or dissolved on other grounds upon affidavits on the part of the defendants which may be opposed by the plaintiff also by affidavits. It may further be refused or, if granted, may be dissolved, if it appears after hearing that although the plaintiff is entitled to the injunction, the issuance or continuance thereof, as the case may be, would cause great damage to the defendant while the plaintiff can be fully compensated for such damages as he may suffer, and the defendant files a bond in an amount fixed by the judge conditioned that he will pay all damages which the plaintiff may suffer by the refusal or the dissolution of the injunction. If it appears that the extent of the preliminary injunction granted is too great, it must be modified. Under the foregoing rule, injunction may be refused, or, if granted, may be dissolved, on the following instances: (1) If there is insufficiency of the complaint as shown by the allegations therein. Refusal or dissolution may be granted in this case with or without notice to the adverse party. (2) If it appears after hearing that although the plaintiff is entitled to the injunction, the issuance or continuance thereof would cause great damage to the defendant, while the plaintiff can be fully compensated for such damages as he may suffer. The defendant, in this case, must file a bond in an amount fixed by the judge conditioned that he will pay all damages which plaintiff may suffer by the refusal or the dissolution of the injunction. (3) On the other grounds upon affidavits on the part of the defendant which may be opposed by the plaintiff also affidavits. Modification of the injunction may also be ordered by the court if it appears that the extent of the preliminary injunction granted is too great. (3 Martin, Rules of Court, 1986 ed., p. 99; Francisco,supra, at p. 268.) In view of the explicit representation of petitioners in the complaint that they are not engaged in business in the Philippines, it inevitably follows that no conceivable damage can be suffered by them not to mention the foremost consideration heretofore discussed on the absence of their "right" to be protected. At any rate, and assuming in gratia argumenti that respondent court erroneously lifted the writ it previously issued, the same may be cured by appeal and not in the form of a petition for certiorari (Clark vs. Philippine Ready Mix Concrete Co., 88 Phil. 460 [1951]). Verily, and mindful of the rule that a writ of preliminary injunction is an interlocutory order which is always under the control of the court before final judgment, petitioners' criticism must fall flat on the ground, so to speak, more so when extinction of the previously issued writ can even be made without previous notice to the adverse party and without a hearing (Caluya vs. Ramos, 79 Phil. 640 [1974]; 3 Moran, Rules of Court, 1970 ed., p. 81). WHEREFORE, the petition is hereby DISMISSED and the Resolutions of the Court of Appeals dated September 14, 1989 and November 29, 1989 are hereby AFFIRMED. SO ORDERED. Bidin, J., concurs. Davide, Jr., concurs in the result. Romero, J. took no part.

Separate Opinions FELICIANO, J., dissenting: I find myself unable to join in the opinion prepared by my distinguished brother, Melo, J. It seems to me that the issues involved in this case are rather more complex than what has been assumed to be the case by the majority opinion. For this and related reasons, there is set out below a statement of the relevant facts (as I see them) that is more extensive than what is ordinarily found in dissenting opinions. Petitioner Philip Morris, Inc. is a corporation organized and existing under the law of Virginia, U.S.A. Petitioners Benson & Hedges (Canada), Inc. and Fabriques de Tabac Reunies, S.A., both wholly owned subsidiaries of Philip Morris, Inc., are organized and existing under the law of Canada and Switzerland, respectively. Philip Morris, Inc. is registered owner of the trademark "MARK VII" for cigarettes. Its ownership thereof is evidenced by Philippine Patent Office Trademark Certificate of Registration No. 18723, dated 26 April 1973. The statement attached to the Certificate of Registration states that the trademark "MARK VII" had been registered in the United States Patent Office, on the Principal Register, under Certificate of Registration No. 888,931 issued on 7 April 1970. The statement also requested that the trademark be registered in the Philippine Patent Office on the Principal Register in accordance with Section 37 of R.A. No. 166, as amended. Benson & Hedges (Canada), Inc. is the registered owner of the trademark "MARK TEN" also for cigarettes, as evidenced by Philippine Patent Office Trademark Certificate of Registration No. 11147, dated 28 May 1964, on the Principal Register. This Trademark Certificate of Registration was originally issued in the name of Canadian Tabacofina Ltd. and later assigned to Benson & Hedges (Canada), Inc. Petitioners alleged that the name Canadian Tabacofina Ltd. was later changed to Benson & Hedges (Canada) Ltd. This trademark Certificate of Registration was renewed on 28 May 1984. The statement attached thereto stated that the "date of first use of the trademark 'MARK TEN' in trade in or with the Philippines is April 15, 1963," and that trademark had "been in actual use in commerce over the Philippines continuously for two months." Fabriques de Tabac Reunies, S.A. is registered owner of the trademark "LARK" also for cigarettes, as evidenced by Philippine Patent Office Trademark Certificate of Registration No. 10953, dated 25 March 1964. This Trademark Certificate of Registration was originally issued in the name of Ligget and Myres Tobacco Company was later assigned to Fabriques de Tabac Reunies, S.A. Petitioners alleged that the name of Liggett and Myres Tobacco Company was changed later to Fabriques de Tabac Reunies, S.A. The statement attached to this Certificate of Registration states that the trademark "LARK" was first used by Ligget and Myres Tobacco Company on 31 May 1920, and first used by it "in commerce in or with the Philippines on February 6, 1963" and has been continuously used by it "in trade in or with the Philippines since February 6, 1963." Sometime before 17 October 1981, private respondent Fortune Tobacco Corporation ("Fortune") commenced manufacturing and selling in the Philippines cigarettes under the brandname "MARK." Fortune also filed on 13 February 1981 with the Philippine Patent Office an application for registration of "MARK" as a trademark for cigarettes. By a letter dated 17 October 1981, petitioner through their lawyers wrote to Fortune stating that the manufacturing, selling and advertising of "MARK" cigarettes by Fortune constituted an "infringement or an act of unfair competition with" petitioners'

"well-known international trademarks used on cigarettes and tobacco products which were registered worldwide and with the Philippine Patent Office." Petitioners listed their Philippine Certificates of Registration for the trademarks "MARK VII," "MARK TEN," and "LARK." Petitioners then asked Fortune "to cease and desist from further manufacturing; selling or advertising 'MARK' cigarettes," otherwise appropriate court actions would be filed without further notice. On 18 August 1982, petitioners commenced action before the Court of First Instance of Pasig, Metro Manila (Civil Case No. 47374). In their complaint, petitioners alleged that they were not doing business in the Philippines but had nonetheless the right and the capacity to bring the instant suit; that they were owners of Philippine Patent Office Trademark Certificates of Registration which were in full force and effect, covering "MARK VII," "MARK TEN," and "LARK," all for cigarettes (except the last which also covered chewing and smoking tobacco); that they had registered those trademarks in their respective countries of origin and in other countries the world and that by virtue of their "long and extensive use [had] gained international fame and acceptance;" that they had their respective real and effective industrial or commercial establishments in the United States, Canada and Switzerland, which countries were, like the Philippines, members of the Convention of Paris for the Protection of Industrial Property; that under that Convention each member-country undertakes to prohibit the use of a trademark which constitutes a reproduction, imitation or translation of a mark already belonging to a person entitled to the benefits of the Convention and use for identical or similar goods; that petitioner Fabriques de Tabac Reunies, S.A. had long been using trademark "LARK" throughout the world, including the Philippines where its products bearing the trademark "LARK" had been sold in the duty-free market, and advertised and marketted in the Philippines at least since 1964 and have continued to be so to present; that Fortune had without previous consent, authority or license from petitioners, with knowledge of the popularity of petitioners' marks and their Philippine registrations, manufactured, advertised and sold cigarettes bearing the identical or confusingly similar trademark "MARK" which unauthorized use constituted an act of infringement under Section 22 of R.A. No. 166, as amended; that thereby the public and the patronizers of petitioners' products were being deceived into buying Fortune's cigarettes under the impression and mistaken belief that Fortune's cigarettes were identical with, or came from the same source as, petitioners' products or that Fortune was licensee of petitioners, which it was not; that the infringement by Fortune of petitioners' trademarks have inflicted damages upon petitioners; that the continued unauthorized and unlicensed manufacture and sale by Fortune of its infringing products during the litigation would work injustice and cause irreparable injury to petitioners in violation of their property rights and moreover tend to render the judgment which the court might render ineffectual. Petitioners accordingly asked for a writ of preliminary injunction to restrain Fortune from manufacturing or selling "MARK" cigarettes, and after trial, to make such preliminary injunction permanent and to order Fortune's infringing materials to be destroyed, and for damages. Fortune filed an Opposition to petitioners' prayer for preliminary injunction. On 28 1 March 1983, the trial court issued an Order denying petitioners' motion for preliminary injunction. In rendering that order, the trial court, while noting that petitioners were holders of Philippine Certificates of Trademark Registration, relied heavily on three (3) factors: Firstly, that petitioners were foreign corporations not doing business in the Philippines; Secondly, that Fortune's application for a registration as trademark of the word "MARK" for cigarettes was then pending before the Philippine Patent Office; and

Thirdly, that Fortune was the "only party authorized" by the Bureau of Internal Revenue ("BIR") to manufacture cigarettes bearing the mark "MARK" in the Philippines. In respect of the first point, the trial court was obviously heavily influenced by Fortune's argument that because petitioners were not doing business in the Philippines, which meant that "they [were] not engaged in the sale, manufacture, importation, exportation and advertisement of their cigarette products in the Philippines," Fortune's manufacture and sale of its "MARK" cigarettes could not be said to be causing petitioners "irreparable damage" within the Philippines. In respect to the second point, the trial judge felt that because the Director of Patents had not, at that point, denied Fortune's pending application for registration of its trademark "MARK," the grant of a preliminary injunction was premature. With regard to the third point, the 2 judge noted a letter dated 30 January 1979 of the then Acting Commissioner of Internal Revenue Mr. Conrado P. Diaz, temporarily granting the request of Fortune for a permit to manufacture two (2) new brands of cigarettes, one of which was "MARK." The trial judge also noted that the BIR letter contained the following paragraph: Please be informed further that this authority herein granted does not give you protection against any person or entity whose rights may be prejudiced by infringement or unfair competition in relation 3 to your above named brands/trademarks. The trial judge, however, apparently gave no weight at all to this caveat. Petitioners sought, on 15 April 1983, reconsideration of Judge Reyes' Order denying preliminary injunction. After Fortune had filed an Opposition to petitioners' Motion for Reconsideration, and petitioners had filed their Reply and Fortune a Rejoinder, and after an offer of exhibits by the parties respectively, Judge Reyes issued on 5 April 1984 another Order denying the Motion for Reconsideration. In his second order, the trial judge laid great stress on the fact that Fortune's application for registration of its trademark "MARK" for cigarettes remained subsisting. On the basis, Judge Reyes denied petitioners' motion for reconsideration. More than two (2) years later, petitioners filed a "Second Motion for Issuance of Preliminary Injunction" dated 1 September 1986. In their Second Motion, petitioners invited attention to Paper No. 3, dated 6 April 1983, relating to Fortune's application for registration of its brandname "MARK." This Paper No. 3 reproduced a letter to Fortune's counsel by Bienvenido A. Palisoc, Senior Trademark Examiner, and Wilfredo T. Jaramillo, Trademark Examiner, stating that: This application [for registration of "Mark"] has been examined. Caption mark of the application must tally with the drawing on file. Subject mark is confusingly similar with the following marks on file: a. "Mark" with Reg. No. SR-2659 for cigarettes. b. "Mark VII" with Reg. No. 18723 for cigarettes. c. "Mark Ten" with Reg. No. 11147 for cigarettes. d. "Lark" with Reg. No. 10953 for cigarettes. Hence, registration is barred under Sec. 4 (d) of Rep. Act No. 166 as amended. Subject mark has no trademark significance and can not serve its purpose as to indicate the source and origin of goods. Furthermore, the word "Mark" is generic and therefore incapable of exclusive appropriation. 4 Makati, Metro Manila, April 6, 1983. (Emphasis supplied)

Petitioners also invited attention to a certification dated 8 August 1986 issued by Mr. Luis M. Daca, Jr., Assistant Director, Philippine Patent Office, to the effect that Fortune's application for the mark "MARK" for cigarettes was declared abandoned as of 16 February 1986 and was now deemed forfeited. In addition, petitioners explained in some detail how Fortune's use of its mark "MARK" was "destructive of [petitioners'] property right to [their] 5 registered trademarks." Further, petitioners assailed Fortune's argument that issuance of preliminary injunction would cause "loss of revenue and taxes to the Government" and that more damages would be sustained by Fortune than by petitioners since the petitioners do not market their cigarettes in the Philippines. After Fortune had filed an Opposition to petitioners' Second Motion, the trial court, this time presided over by Judge Nicolas Galing, issued an Order dated 22 April 1987 denying once more the motion for issuance of a writ of preliminary injunction. In this order, Judge Galing relied on two (2) points: firstly, according to the trial judge, petitioners had not shown that the products they sought to protect from Fortune's "MARK" cigarettes were "in actual use and available for commercial purposes anywhere in the Philippines;" and secondly, it appeared that while Fortune's original application had been abandoned, it could be refiled and was in fact re-filed. Thus, Judge Galing in effect reiterated Judge Reyes's position that until the Director of Patents had definitely acted upon Fortune's application for registration of "MARK," petitioners' prayer for preliminary injunction could not be granted. Petitioners then filed a Petition for Review with the Supreme Court, which Petition was docketed as G.R. No. 78141. The Court ordered respondents to file their Comments on the Petition and on 30 September 1987, the Court referred the Petition to the Court of Appeals. 6 In due course of time, the Court of Appeals, through Cacdac, Jr., J., rendered a decision on 5 May 1989 setting aside the 22 April 1987 order of the trial court and ordering issuance of a writ of preliminary injunction upon filing of a bond by petitioners in the sum of P200,000.00 to be approved by the appellate court, "enjoining the private respondents, its agents, employees and representatives from manufacturing, selling and/or advertising "MARK" cigarettes until further orders." The Court of Appeals said in pertinent part: There is no dispute that petitioners are the registered owners of the trademarks for cigarettes "MARK VII," "MARK TEN," and "LARK". (Annexes B, C and D, Petition). As found and reiterated by the Philippine Patent Office in two (2) official communications dated April 6, 1983 and January 24, 1984, the trademark "MARK" is "confusingly similar" to the trademarks of petitioners, hence, registration was barred under Sec. 4(d) of Rep. Act No. 166, as amended (pp. 106, 139 SCA rollo). In a third official communication dated April 8, 1986, the trademark application of private respondent for the mark "MARK" under Serial No. 44008 filed on February 13, 1981 which was declared abandoned as of February 16, 1986, is now deemed forfeited, there being no revival made pursuant to Rule 98 of the Revised Rules of Practitioners in Trademark Cases.' (p. 107, CA rollo). The foregoing documents or communications mentioned by petitioners as "the changes in material facts which occurred after March 28, 1983", are not also questioned by 7 respondents. (Emphasis supplied) The Court of Appeals also noted the BIR letter of 30 January 1979 temporarily granting Fortune's request for a permit to manufacture two (2) new brands of

cigarettes, including one branded "MARK," and the caveat (earlier noted) that the BIR's authorization would not give Fortune any protection against any person or entity whose rights may be prejudiced by infringement or unfair competition on the part of Fortune. The Court of Appeals also referred to the certificate dated 26 September 1986 of Mr. Cesar G. Sandico, then Director of Patents, issued upon request of Fortune's counsel stating that there was a pending application for registration of the trademark "MARK" for cigarettes under Serial No. 59872, filed on 16 September 1986, noting at the same time, that Director Sandico's certification contained the following caveat or qualification: This certification, however, does not give protection as against any person or entity whose right may be prejudiced by infringement or unfair competition in relation to the aforesaid trademark nor the right to register as contrary to the provisions of the Trademark Law, Republic Act No. 166 as amended and the Revised Rules of Practice in Trademark Cases. (Emphasis supplied) The Court of Appeals then went on to say that: [We] believe and hold that petitioners have shown a prima facie case for the issuance of the writ of prohibitory injunction for the purposes stated in their complaint and subsequent motions for the issuance of the prohibitory writ. (Buayan Cattle Co. v. Quintillan, 125 SCRA 276). The requisites for the granting of preliminary injunction are the existence of the right protected and the facts against which the injunction is to be directed as violative of said right. (Buayan Cattle Co. v. Quintillan, supra; Ortigas & Co. vs. Ruiz, 148 SCRA 326). It is a writ framed according to the circumstances of the case commanding an act which the Court regards as essential to justice and restraining an act it deems contrary to equity and good conscience (Rosauro vs. Cuneta, 151 SCRA 570). If it is not issued, the defendant may, before final judgment, do or continue the doing of the act which the plaintiff asks the court to restrain, and thus make ineffectual the final judgment rendered afterwards granting the relief sought by the plaintiff (Calo vs. Roldan, 76 Phil. 445). Generally, its grant or denial rests upon the sound discretion of the Court except on a clear case of abuse (Belish Investment & Finance Co. vs. Statement House, 151 SCRA 636). Petitioners' right of exclusivity to their registered trademarks being clear and beyond question, the respondent court's denial of the prohibitive writ constituted excess of jurisdiction and grave abuse of discretion. If the lower court does not grant preliminary injunction, the appellate court may grant the same (Service Specialists, Inc. v. 9 Sheriff of Manila. 145 SCRA 139). (Emphasis supplied) Fortune moved for reconsideration of the Decision of the Court of Appeals insisting that petitioners must first prove their "clear, unmistakable and unquestioned right to the writ, coupled with the possible damages it would suffer;" that petitioners had not suffered any "great and irreparable injury to speak of" because "petitioners have never done business in this country in the past nor in the future;" that, on the other hand, Fortune had been authorized by the BIR to manufacture "MARK" cigarettes, "thereby generating much needed funds for the Government;" that Fortune's application for registration of its brandname "MARK" with the Philippine Patent Office "still pending" and not "finally rejected" by the Director of Patents. On 12 July 1989, the Court of Appeals issued a Minute Resolution stating that the issues and

arguments in Fortune's motion for reconsideration had been "fully discussed" in the Decision sought to be reconsidered, that no new arguments were raised, and accordingly denied the Motion for Reconsideration. Fortune then filed a "Motion to Dissolve Writ of Preliminary Injunction with Offer to File Counterbond" date 25 July 1989, where it reiterated the basic arguments it previously made. A "Supplemental Motion to Lift Writ of Preliminary Injunction with Offer of Counterbond" dated 17 August 1989 was next filed by Fortune. In this "Supplemental Motion," Fortune averred that it had paid to the BIR for 1988 the amount of P181,940,177.38 for specific taxes; while for January to July 1989, it had paid the amount of P120,120,735.28. Fortune also referred to its employees assigned to the manufacture of "MARK" cigarettes who were apparently apprehensive that their services would eventually be terminated and that they would join the ranks of the unemployed. Petitioners filed an Opposition to the "Motion to Dissolve" and a Comment on the "Supplemental Motion" of Fortune. On 14 September 1989, the Court of Appeals once more through Cacdac, Jr., J. issued a Resolution lifting the preliminary injunction it had earlier granted upon the filing of counterbond by private respondent in the amount of P400,000.00 to answer for any damages petitioners may suffer as a consequence of such lifting. In its Resolution, the Court of Appeals referred to the "lots of workers employed [who] will be laid off as a consequence of the injunction" and that Government "will stand to lose the amount of specific taxes being paid by" Fortune. It when went on to say: After a thorough re-examination of the issues involved and the arguments advanced by both parties in the offer to file a counterbond and the opposition thereto, WE believe that there are sound and cogent reasons for Us to grant the dissolution of the writ of preliminary injunction by the offer of the private respondent to put up a counterbond to answer for whatever damages the petitioner may suffer as a consequence of the dissolution of the preliminary injunction. The petitioner will not be prejudiced nor stand to suffer irreparably as a consequence of the lifting of the preliminary injunction considering that they are not actually engaged in the manufacture of the cigarettes with the trademarks in question and the filing of the counterbond will amply answer for such damages. While the rule is that an offer of a counterbond does not operate to dissolve an injunction previously granted, nevertheless, it is equally true that an injunction could be dissolved only upon good and valid grounds subject to the sound discretion of the court. As WE have maintained the view that there are sound and good reasons to lift the preliminary injunction the motion to file a counterbond is 10 granted. (Emphasis supplied) Petitioners filed a Motion for Reconsideration, without success. In the instant Petition, petitioners make the following basic submissions: 1. that the Court of Appeals gravely abused its discretion amounting to excess of jurisdiction when it required, contrary to law and jurisprudence that in order that petitioners may suffer irreparable injury due to the lifting of the injunction, petitioners should be using actually their registered trademarks in commerce in the Philippines;

2. that the Court of Appeals gravely abused its discretion amounting to excess of jurisdiction when it lifted the injunction in violation of Section 6 of Rule 58 of the rules of Court; 3. that the Court of Appeals gravely abused its discretion amounting to excess of jurisdiction when, after having found that the trial court had committed grave abuse of discretion and exceeded its jurisdiction for having refused to issue the writ of injunction to restrain respondent's acts that are contrary to equity and good conscience, it made a complete about face for legally insufficient grounds and authorized private respondent to continue performing the very same acts that it had considered contrary to equity and good conscience, thereby ignoring not only the mandates of the trademark law, the international commitments of the Philippines, the judicial admission of private respondent that it will have no more right to use the trademark "MARK" after the Director of Patents shall have rejected the application to register it, 11 and the admonitions of the Supreme Court. The Court required private respondent to file a comment. The comment reiterated the basic arguments made by private respondent before the Court of Appeals: a. the petitioners are not suffering any irreparable damage by the lifting of the preliminary injunction by the Court of appeals. Whatever damages they might suffer are "based purely on speculation, since by judicial admission, petitioners are not doing business in the Philippines. Private respondent stressed that petitioners "are not manufacturing, importing or selling "MARK TEN," "MARK VII" or "LARK" in this country," notwithstanding "false allegation" that petitioners have been "using" the said trademarks "in commerce and trade" in the Philippines since 1963 up to the present. b. that whatever damage petitioners may be suffering is negligible when compared to the taxes that would have to be foregone by the Government considering that private respondent "paid an annual specific tax of P240 Million only on the manufacture and sale of "MARK cigarettes." Private respondent claims that, in contrast, petitioners which are foreign corporations "based in three different countries" have not contributed anything to Government tax revenues. c. that the Court of Appeals lifted the writ of preliminary injunction it had earlier issued upon the submission of a counter bond in double the amount of the bond submitted by petitioners, under Section 6, Rule 58 of the Rules of Court, which act was within the sound discretion of the Court of Appeals. Private respondent also stresses that the right of petitioners to the injunction was still being litigated before the trial court. Reformulating the issues raised by the petitioners here, we think the principal issues may be reduced to the following: firstly, is there a clear legal right to the relief asked by petitioners in the form of a preliminary injunction to restrain private respondent from manufacturing, selling and distributing cigarettes under the trademark "MARK"? The second question is: are private respondent's acts complained of by petitioners causing irreparable injury to petitioners' rights in the premises? These two (2) basic issues are obviously related and need to be addressed together. I

The first point that needs to be stressed is that petitioners have Philippine Certificates of Registration for their trademarks "MARK TEN", "MARK VII," and "LARK" in the Principal Register. Upon the other hand, private respondent's trademark "MARK" is not registered in the Principal Register in the Office of the Director of Patents; private respondents is simply an applicant for registration of a mark, the status of which application may be noted later. It is important to stress the legal effects of registration of a trademark in the Principal Register in the Office of the Director of Patents. Section 20 of R.A. No. 166, as amended, sets out the principal legal effects of such registration: Sec. 20. Certificate of registration prima facie evidence of validity. A certificate of registration, of a mark or a trade name shall be prima facie evidence of the validity of the registration, the registrant's ownership of the mark or trade name, 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. (Emphasis supplied) 12 In Lorenzana v. Macagba, the Court distinguished between the effects of registration in the Principal Register and registration in the Supplemental Register in the following manner: (1) Registration in the Principal Register gives rise to a presumption of the validity of the registration, the registrant's ownership of the mark, and his right to the exclusive use thereof. There is no such presumption in registrations in the Supplemental Register. (2) Registration in the Principal Register is limited to the actual owner of the trademark (Unno Commercial Enterprises v. Gen. Milling Corp., 120 SCRA 804 [1983]) and proceedings therein pass on the issue of ownership, which may be contested through opposition or interference proceedings, or after registration, in a petition for cancellation. Registration in the Principal Register is constructive notice of the registrant's claims of ownership, while registration in the Supplemental Register is merely proof of actual use of the trademark and notice that the registrant has used or appropriated it. (Le Chemise Lacoste, S.A. v. Fernandez, 129 SCRA 373 [1984]: "Registration in the Supplemental Register . . . serves as notice that the registrant is using or has appropriated the trademark.") It is not subject to opposition although it may be cancelled after its issuance. Corollarilly, registration in the Principal Register is a basis for an action for infringement, while registration in the Supplemental Register is not. (3) In application for registration in the Principal Register, publication of the application is necessary. This is not so in applications for registration in the Supplemental Register. Certificates of registration under both Registers are also different from each other. (4) Proof of registration in the Principal Register may be filed with the Bureau of Customs to exclude foreign goods bearing infringing marks while it does not hold true for registrations in the 13 Supplemental Register. (Emphasis supplied) When taken with the companion presumption of regularity of performance of official duty, it will be seen that issuance of a Certificate of Registration of a trademark in the

Principal Register also gives rise to the presumption that all requirements of Philippine law necessary for a valid registration (including prior use in commerce in the Philippines for at least two [2] months) were complied with and satisfied. In contrast, private respondent filed an application for registration of its mark "MARK" for cigarettes with the Director of Patents soon after it commenced manufacturing and selling cigarettes trademark with "MARK." This application was abandoned or 14 "forfeited", for failure of private respondent to file a necessary Paper with the Director of Patent. It also appears, however, that private respondent later re-filed or 15 reinstated its application for registration of "MARK" and that, so far as the record here before us is concerned, this application remains merely an application and has not been granted and a Certificate of Registration in the Principal Register 16 issued. While final action does not appear as yet to have been taken by the Director of Patents on private respondent's application, there was at least a preliminary determination of the trademark examiners that the trademark "MARK" was "confusingly similar" with petitioners' marks "MARK VII," "MARK TEN" and "LARK" and that accordingly, registration was barred under Section 4 (d) of R.A. No. 166, as 17 amended. In the trial court, both Judge Reyes and Judge Galing took the position that until the Director of Patents shall have finally acted on private respondent's application for registration of "MARK," petitioners cannot be granted the relief of preliminary injunction. It is respectfully submitted that this position is both erroneous and unfortunate. In reliance upon that position, private respondent has kept its application for registration alive and pending. The Director of Patents in turn may well have refrained from taking final action on that application, even in the absence of a restraining order from the courts, out of deference to the courts. The pendency of the application before the Director of Patents is not in itself a reason for denying preliminary injunction. Our courts have jurisdiction and authority to determine whether or not "MARK" is an infringement on petitioners' registered trademarks. Under our case law, the issuance of a Certificate of Registration of a trademark in the Principal Register by the Director of Patents would not prevent a court from ruling on whether or not the trademark so granted registration is confusingly similar with a previously registered trademark, where such issue is essential for resolution of a case properly before the court. A fortiori, a mere application for registration cannot be a sufficient reason for denying injunctive relief, whether preliminary or definitive. In the case at bar, petitioners' suit for injunction and for damages for infringement, and their application for a preliminary injunction against private respondent, cannot be resolved without resolving the issue of claimed confusing similarity. In the case at bar, the evidence of record is scanty. Petitioners have not submitted actual copies or photographs of their registered marks as used in cigarettes. Private respondent has not, for its part, submitted the actual labels or packaging material used in selling its "MARK" cigarettes. Petitioners have appended to their Petition a photocopy of an advertisement of "MARK" cigarettes. Private respondent has not included in the record a copy of its application for registration of "MARK" for cigarettes, which would include a facsimile of the trademark being applied for. It should be noted that "MARK" and "LARK," when read or pronounced orally, constitute idem sonansin striking degree. Further, "MARK" has taken over the dominant word in "MARK VII" and "MARK TEN." These circumstances, coupled with private respondent's failure to explain how or why it chose, out of all the words in the English language, the word "mark" to refer to its cigarettes, lead me to the submission that there is a prima faciebasis for holding, as the Patent Office has held and as the

Court of Appeals did hold originally, that private respondent's "MARK" infringes upon petitioners' registered trademarks. II There is thus no question as to the legal rights of petitioners as holders of trademarks registered in the Philippines. Private respondent, however, resists and assails petitioners' effort to enforce their legal rights by heavily underscoring the fact that petitioners are not registered to do business in the Philippines and are not in fact doing business in the Philippines. It is thus necessary to determine what consequences, if any, flow from this circumstance so far as enforcement of petitioners' rights as holders of registered Philippine trademarks is concerned. It should be stressed at the outset that circumstance has no legal impact upon the right of petitioners to own and register their trademarks in the Philippines. Section 2 of R.A. No. 166 as amended expressly recognizes as registrable, under this statute, marks which are owned by corporations domiciled in any foreign country: Sec. 2. What are registrable. Trademarks, 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, trade names 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. (Emphasis suppplied) It is also entirely clear that foreign corporations and corporations domiciled in a foreign country are not disabled from bringing suit in Philippine courts to protect their rights as holders of trademarks registered in the Philippines. Under Section 21-A of R.A. No. 166, as amended, any foreign corporation which is a holder of a trademark registered under Philippine law may bring an action for infringement of such mark or for unfair competition or false designation of origin and false description "whether or not it has been licensed to do business in the Philippines under the [Corporation Law] at the time it brings complaint, subject to the proviso that: . . . that the country of which the said foreign corporation or juristic person is a citizen or in which it is domiciled by treaty, convention or law, grants similar privilege to corporate or juristic persons of the Philippines. (Emphasis supplied) The rule thus embodied in Section 21-A of R.A. No. 166 as amended is also set out in Article 2 of the Paris Convention for the Protection of Industrial Property ("Paris Convention"), to which the Philippines, the United States, Canada and Switzerland 18 are all parties. Article 2 of the Paris Convention provides in relevant part: Article 2 (1) Nationals of any country of the Union shall, as regards the protection of industrial property, enjoy in all the other countries of the Union the advantages that their respective laws now grant, or may hereafter grant, to nationals; all without prejudice to the rights specially provided for by this Convention. Consequently, they shall have the same protection as the latter, and the same legal remedy

against any infringement of their rights, provided that the conditions and formalities imposed upon national are complied with. (2) However, no requirement as to domicile or establishment in the country where protection is claimed may be imposed upon nationals of countries of the Union for the enjoyment of any industrial property rights. xxx xxx xxx (Emphasis supplied) Article 2, paragraph 1 of the Paris Convention embodies the principle of "national treatment" or "assimilation with nationals," one of the basic rules of the 19 Convention. Under Article 2, paragraph 1 of the Paris Convention, nationals of Canada, Switzerland and the United States who are all countries of the Paris Union are entitled to enjoy in the Philippines, also a country of the Union, the advantages and protections which Philippine law grants to Philippine nationals. Article 2 paragraph 2 of the Paris Convention restrains the Philippines from imposing a requirement of local incorporation or establishment of a local domicile as a prerequisite for granting to foreign nationals the protection which nationals of the Philippines are entitled to under Philippine law in respect of their industrial property rights. It should be noted that Article 2, paragraph 2 also constitutes proof of compliance with the requirement of reciprocity between, on the one hand, the Philippines and, on the other hand, Canada, Switzerland and the United States required under Section 21-A of R.A. No. 166 as amended. The net effect of the statutory and treaty provisions above referred to is that a corporate national of a member country of the Paris Union is entitled to bring in Philippine courts an action for infringement of trademarks, or for unfair competition, without necessity for obtaining registration or a license to do business in the Philippines. Article 2 as quoted above is in effect with respect to all four (4) countries. Such has been the rule in our jurisdiction even before the enactment of R.A. No. 166 and before the Philippines became a party to the Paris Convention. In Western 20 Equipment and Supplies Company, et al. v. Reyes, etc., et al., petitioner Western Electrical Company, a U.S. manufacturer of electrical and telephone equipment and suppliesnot doing business in the Philippines, commenced action in a Philippine court to protect its corporate name from unauthorized use thereof by certain Philippine residents. The Philippine residents sought to organize a Philippine corporation to be known as "Western Electrical Company" for the purpose of manufacturing and selling electrical and telephone equipment in the Philippines. The local residents resisted the suit by contending, inter alia, that the petitioner Western Electrical Company had never transacted business in the Philippines and that registration of private respondent's articles of incorporation could not in any way injure petitioner. The Supreme Court, in rejecting this argument, stated that: . . . a foreign corporation which has never done business in the Philippines but is widely and favorably known in the Philippines through the use therein of its products bearing its corporate name and tradename hasa legal right to maintain an action in the [Philippines]. The purpose of such a suit is to protect its reputation, corporate name and goodwill which has been established through the natural development of its trade for a long period of years in the doing of which it does not seek to enforce any legal or contract rights arising from or closing out of any business which it has 21 transacted in the Philippines. . . . (Emphasis supplied) 22 Similarly, in Asari Yoko v. Kee Boc, a Japanese corporation, also not engaged in any business in the Philippines, successfully opposed an application for registration of

its trademark "Race Brand" on shirts and undershirts by a local businessman, even though the Japanese company had not previously registered its own mark "Race Brand" in the Philippines. Again, in General Garments Corporation v. Director of Patents and Puritan 23 Sportswear Corporation, Puritan Sportswear Corporation, an entity organized in Pennsylvania U.S.A. and not doing business in the Philippines, filed a petition for cancellation of the mark "Puritan" which was registered in the name of petitioner General Garments Corporation for assorted men's wear, undershirts, briefs, shirts, sweaters and jackets. Puritan Sportswear alleged ownership and prior use of the trademark "Puritan" in the Philippines. Petitioner General Garments, on the other hand, contended that Puritan Sportswear, being a foreign corporation not licensed to do, and not doing, business in the Philippines, could not maintain an action for cancellation of a trademark. The Court, in upholding the Director of Patents' cancellation of the registration of the mark "Puritan" in the name of General Garments, said: . . . .such mark should not have been registered in the first place (and consequently may be cancelled if so required) if it consists of or comprises a mark or tradename which so resembles a mark or tradename . . . . previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with goods, business or services of the applicant, to 24 cause confusion or mistake or to deceive purchasers. (Emphasis supplied) 25 In Converse Rubber Corporation v. Universal Rubber Products, Inc., petitioner Converse Rubber Corporation was an American manufacturer of rubber shoes, not doing business on its own in the Philippines and not licensed to do business in the Philippines, opposed the application for registration of the trademark "Universal Converse and Device" to be used also in rubber shoes and rubber slippers by private respondent Universal Rubber Products, Inc. ("Universal"). In reversing the Director of Patents and holding that Universal's application must be rejected, the Supreme Court said: The sales of 12 to 20 pairs a month of petitioner's rubber shoes cannot be considered insignificant, considering that they appear to be of high expensive quality, which not too many basketball players can afford to buy. Any sale made by a legitimate trader from his store is a commercial act establishing trademark rights since such sales are made in due course of business to the general public, not only to limited individuals. It is a matter of public knowledge that all brands of goods filter into the market, indiscriminately sold by jobbers, dealers and merchants not necessarily with the knowledge or consent of the manufacturer. Such actual sale of goods in the local market establishes trademark use which serves as the basis for any action aimed at trademark pre-emption. It is a corollary logical deduction that while Converse Rubber Corporation is not licensed to do business in the country and is not actually doing business here, it does not mean that its goods are not being sold here or that it has not earned a reputation or goodwill as regards its products. The Director of Patents was, therefore, remiss in ruling that the proofs sales presented "was made by a single witness who had never dealt with nor had never known opposer {petitioner} . . . without Opposer having a direct or indirect hand in the transaction 26 to be the basis of trademark pre-exemption. (Emphasis supplied)

Three (3) other cases may be noted. The first is La Chemise Lacoste, S.A. v. 27 Fernandez La Chemise Lacoste, S.A. although a foreign corporation not engaged in and not licensed to do business in the Philippines, was accorded protection for its trademarks "Lacoste", "Chemise Lacoste," and "Crocodile Device" for clothing and sporting apparel. The Court recognized that those marks were "world famous trademarks which the Philippines, as a party to the Paris Union, is bound to protect." 28 Similarly, in Del Monte Corporation, et al. v. Court of Appeals, et al., petitioner Del Monte Corporation was a company organized under the laws of the United States and not engaged in business in the Philippines. Because both the Philippines and the United States are signatories to the Convention of Paris, which grants to nationals of the parties the rights and advantages which their own nationals enjoy for the repression of acts of infringement and unfair competition, the Court, having found that private respondent's label was an infringement of Del Monte's trademark, held Del Monte entitled to recover damages. In Puma Sportschuhfabriken Rudolf Dassler, K.G. v. Intermediate appellate Court, et 29 al, petitioner Puma was a foreign corporation existing under the laws of the Federal Republic of Germany not registered to do business and not doing business in the Philippines, filed a complaint for infringement of trademark and for issuance of a writ of preliminary injunction against a local manufacturing company. Reversing the Court of Appeals, this Court held that Puma had legal capacity to bring the suit in the Philippines under Section 21-A of R.A. No. 166 as amended and under the provisions of the Paris Convention to which both the Philippines and the Federal Republic of Germany are parties. The Court also noted that "Puma" is an internationally known brandname. The relevancy of the doctrines set out in the cases above cited are conceded by my distinguished brother Melo, J. in the majority opinion. The majority opinion, however, goes on to say: In other words, petitioners 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 symbols 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. With great respect, certain essential qualifications must be made respecting the above paragraph. Firstly, of the petitioners' three (3) marks here involved, two (2) of them i.e., "MARK TEN" and "LARK" were registered in the Philippines on the basis of actual use in the Philippines, precisely in accordance with the requirements of Section 2-A and Section 5 (A) of R.A. No. 166 as amended. The pre-registration use in commerce and trade in the Philippines for at least two (2) months as required by the statute, is explicitly stated in the Certificates of Registration. The very fact that the appropriate Philippine Government office issued the Certificates of Registration necessarily gave rise to the presumption that such pre-registration use had in fact been shown to the satisfaction of the Philippine Patent Office (now the Bureau of Patents, Trademark and Technology Transfer ["BPTTT"]). It is important to note that

respondent Fortune has not purported to attack the validity of the trademarks "Mark Ten" and "Lark" by pretending that no pre-registration use in commerce in the 30 Philippines had been shown. The third mark of petitioners "MARK VII" was registered in the Philippines on the basis of Section 37 of R.A. No. 166 as amended, i.e., on the basis of registration in the country of origin and under the Paris Convention. In such registration, by the express provisions of Section 37 (b) of R.A. No. 166 as amended, prior (preregistration) use in commerce in the Philippines need not be alleged. Whether the Philippine trademark was based on actual use in the Philippines (under Section 2-A) or on registration in a foreign country of origin (under Section 37), the statute appears to require that trademarks (at least trademarks not shown to be internationally "well-known") must continue to be used in trade and commerce in the Philippines. It is, however, essential to point out that such continued use, as a requirement for the continued right to the exclusive use of the registered trademark, is presumed so long as the Certificate of Registration remains outstanding and so long as the registered trademark owner complies with the requirements of Section 12 of R.A. No. 166 as amended of filing affidavits with the BPTTT on the 5th, 10th and 15th anniversaries of the date of issuance of the Certificate of Registration, showing that the trademark is still in use or showing that its non-use is not due to any intention to abandon the same. In the case at bar, again, respondent Fortune has not explicitly pretended that the petitioners' trademarks have been abandoned by non-use in trade and commerce in the Philippines although it appears to insinuate such non-use and abandonment by stressing that petitioners are not doing business in the Philippines. That petitioners are not doing business and are not licensed to do business in the Philippines, does not by any means mean either that petitioners have not complied with the requirements of Section 12 of R.A. No. 166 relating to affidavits of continued use, or that petitioners' trademarks are not in fact used in trade and commerce in the Philippines. In the Converse case, as earlier noted, the Court held that the circumstance that the foreign owner of a Philippine trademark is not licensed to do business and is not doing business in the Philippines, does not mean that petitioner's goods (that is, goods bearing petitioner's trademark) are not sold in the Philippines. For cigarettes bearing petitioners' trademarks may in fact be imported into and be available for sale in the Philippines through the acts of importers or distributors. Petitioners have stated that their "Mark VII," "Mark Ten" and "Lark" cigarettes are in fact brought into the country and available for sale here in, e.g., duty-free shops, though not imported into or sold in the Philippines by petitioners themselves. There is no legal requirement that the foreign registrant itself manufacture and sell its products here. All the statute requires is the use in trade and commerce in the Philippines, and that can be carried out by third party manufacturers operating under license granted by the foreign registrant or by the importation and distribution of finished products by independent importers or traders. The "use" of the trademark in such instances by the independent third parties constitutes use of the foreign registrant's trademarks to the 31 benefit of the foreign registrant. III We turn to petitioners' claim that they are suffering irreparable damage by reason of the manufacture and sale of cigarettes under the trademark "MARK." Here again, a basic argument of private respondent was that petitioners had not shown any damages because they are not doing business in the Philippines. I respectfully maintain that this argument is specious and without merit. That petitioners are not doing business and are not licensed to do business in the Philippines, does notnecessarily mean that petitioners are not in a position to sustain, and do not in fact sustain, damage through trademark infringement on the part of a

local enterprise. Such trademark infringement by a local company may, for one thing, affect the volume of importation into the Philippines of cigarettes bearing petitioners' trademarks by independent or third party traders. The damage which the petitioners claim they are sustaining by reason of the acts of private respondents, are not limited to impact upon the volume of actual imports into the Philippines of petitioners' cigarettes. Petitioners urge that private respondent's use of its confusingly similar trademark "MARK" is invasive and destructive of petitioners property right in their registered trademarks because. a) Plaintiffs' undeniable right to the exclusive use of their registered trademarks is effectively effaced by defendant's use of a confusingly similar trademark; b) Plaintiffs would lose control of the reputation of their products as their reputation will depend on defendant's commercial activities and the quality of defendant's products; c) The market in the Philippines for plaintiffs' products will be preempted; d) Purchasers will think that defendant's goods are approved or sponsored by plaintiff; e) Defendant will be allowed to benefit from the reputation of the plaintiffs' goods and trademarks; f) Defendant will be effectively authorized to continually invade plaintiffs' property rights, for which invasion no fair and reasonable redness can be had in a court of law; and g) Plaintiffs will lose their goodwill and trade and the value of their registered trademarks will irreparably diluted and the damages to be suffered by plaintiffs cannot be redressed fairly in terms of 33 money. Modern authorities on trademark law view trademarks as symbols which perform three (3) distinct functions: first, they indicate origin or ownership of the articles to which they are attached; second, they guarantee that those articles come up to a 34 certain standard of quality; third, they advertise the articles they symbolize. The first two (2) functions have long been recognized in trademark law which characterizes the goodwill or business reputation symbolized by a trademark as a property right protected by law. Thus, the owner of a trademark is held entitled to exclude others from the use of the same, or of a confusingly similar, mark where confusion results in diversion of trade or financial injury. At the same time, trademarks warn against the imitation or faking of products and prevent the imposition of fraud upon the public. The first two (2) functions of trademarks were aptly stressed in e.g., the La Chemise Lacoste case where the objectives of trademark protection were described in the following terms: . . . to stem the tide of fake and counterfeit consumer items flooding the Philippine market or exported abroad from our country. The greater victim is not so much the manufacturer whose product is being faked but the Filipino consuming public and in the case of exportations, our image abroad . . . . We buy a kitchen appliance, a household tool, perfume, a face powder, other toilet articles, watches, brandy or whisky, and items of clothing like jeans, T-shirts, neckties, etc. the list is quite lengthy and pay good money relying on the brand name as guarantee of its quality and genuine nature only to explode in bitter frustration and helpless anger because the

32

purchased item turns out to be a shoddy imitation, albeit a clever 35 looking counterfeit, of the quality product . . . . The third or advertisement function of trademark has become of especial importance given the modern technology of communication and transportation and the growth of 36 international trade. Through advertisement in the broadcast and print media, the owner of the trademark is able to establish a nexus between its trademark products and the public in regions where the owner does not itself manufacture or sell its own 37 products. Through advertisement, a well-established and well-earned reputation may be gained in countries where the trademark owner has itself no established 38 business connection. Goodwill may thus be seen to be much less closely confined 39 territorially than, say, a hundred or fifty years ago. It is no longer true that "a trademark of itself cannot travel to markets where there is no article to wear the 40 badge and no trader to offer the article." Advertisement of trademarks is geared towards the promotion of use of the marked article and the attraction of potential 41 buyers and users; by fixing the identity of the marked article in the public mind, it prepares the way for growth in such commerce whether the commerce be handled by the trademark owner itself or by its licensees or independent traders. That a registered trademark has value in itself apart from the trade physically 42 accompanying its use, has been recognized by our Court. In Ang v. Teodoro, the Court was called upon the determine whether there was infringement in the use of the same trademark on articles which do not belong to the same class of goods which the lawful trademark owner manufactures and sells. In holding that there was infringing use in such case, the Court said: . . . . such unfair trading can cause injury or damage to the first user of a given trade-mark, first, by prevention of the natural expansion of his business and, second, by having his business reputation confused with and put at the mercy of the second user. When noncompetitive products are sold under the same mark, the gradual whittling away or dispersion of the identity and hold upon the public mind of the mark created by its first user, inevitably result. The original owner is entitled to the preservation of the valuable link between him and the public that has been created by his ingenuity and the merit of his wares or services. Experience has demonstrated that when a well-known trade-mark is adopted by another even for a totally different class of goods, it is done to get the benefit of the reputation and advertisements of the originator of said mark, to convey to the public a false impression of some supposed connection between the manufacturer of the article sold under the original mark and the new articles being tendered to the public under the same or similar mark . . . The owner of a trademark or tradename has a property right in which he is entitled to protection, since there is damage to him in the form of confusion of reputation or goodwill in the mind of the public as well as from confusion of goods. (Emphasis supplied) 43 In Sta. Ana v. Maliwat, the Court, through J.B.L. Reyes, J., in holding that the use of the name "Flormen" with respect to shoes was infringement of the mark "Flormann" used in the men's wear such as shirts, polo shirts and pants, said: Modern law recognizes that the protection to which the owner of a trade-mark is entitled is not limited to guarding his goods or business from actual market competition with identical or similar products of the parties, but extends to all cases in which the use by

a junior appropriator of a trade-mark or trade-name is likely to lead to a confusing of source, as where prospective purchasers would be misled into thinking that the complaining party has extended his business into the field (see 148 ALR 56 et seq; 52 Am. Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the normal potential expansion of his business (v. 148 44 ALR, 77, 84; 52 Am. Jur. 576, 577). . . . . (Emphasis supplied) Petitioners did not try to put a peso figure on their claimed damage arising from the erosion and possible eventual destruction of the symbolic value of their trademark. Such damage, while not easily quantifiable, is nonetheless real and effective. I submit, with respect, that such continuing damage falls clearly within the concept of 45 irreparable damage or injury described in Social Security Commission v. Bayona in the following terms: Damages are irreparable within the meaning of the rule relative to the issuance of injunction where there is no standard by which their amount can be measured with reasonable accuracy (Crouc v. Central Labor Council, 83 ALR, 193). "An irreparable injury which a court of equity will enjoin includes that degree of wrong of a repeated and continuing kind which produce hurt, inconvenience, or damage that can be estimated only by conjecture, and not by any accurate standard of measurement" (Phipps v. Rogue River Valley Canal Co., 7 ALR, 741). An irreparable injury to authorize an injunction consists of a serious charge of, or is destructive to, the property if affects, either physically or in the character in which it has been held and enjoined, or when the property has some peculiar quality or use, so that its pecuniary value will not fairly recompense the owner of the loss thereof' (Dunker v. Field and Tub Club, 92 P., 502). Respondent corporations made a lengthy discourse on the matter of irreparable injury they may suffer if the injunction were not issued, but the array of figures they have laid out merely succeeded in proving that the damage, if any they may suffer, is susceptible of mathematical computation. It is not then irreparable. As already stated, this term has a definite meaning in law. It does not have reference to the amount of damages that may be caused but rather to the difficulty of measuring the damages inflicted. If full compensation can be obtained by way of damages, equity will not apply the remedy of injunction (28 Am. Jur., 244; 43 C.J.S., 427, 46 446). I next turn to private respondent's claim that issuance of an injunction would impose heavy damage upon itself and upon Government. As noted, private respondent stated that it had paid many millions of pesos as ad valorem and VAT taxes to the Government in 1988 and 1989 in connection with its "MARK" 47 cigarettes. Presumably, the total volume of its business associated with the manufacture and sale of cigarettes trademarked "MARK" would be even larger. In addition, private respondent suggests, albeit indirectly only, that hundreds if not thousands of its employees would find themselves unemployed if it were restrained from the manufacture and sale of "MARK" cigarettes. Private respondent's claims concerning alleged damages both to itself and to the Government, which obviously loomed very large in the mind of the majority here, and of the Court of Appeals when it lifted the injunction it had issued, appear to me to be extravagant indeed. Petitioners cannot claim to be entitled to an injunction which

could restrain private respondent from manufacturing and selling cigarettes completely; petitioner do not pretend to be so entitled to such a comprehensive injunction. Petitioners seek only the reinstatement of the original injunction issued by the Court of Appeals, i.e., one that restrains private respondent from using the trademark "MARK" on its cigarettes. There is nothing to prevent private respondent from continuing to manufacture and sell cigarettes under any of its already existing and registered trademarks, of which it has several, or under some new and specially created trademark(s). Realistically, private respondent, if enjoined, would lose only the value of the packaging material imprinted with the same trademark (which cigarettes and material may well be amenable to re-cycling) and the cost of past advertisements of "MARK" in media, if any. Thus, the apprehension on the part of the majority which private respondent tried diligently to foment that the Government would lose many millions of pesos in tax revenues and that many employees would lose their jobs, if an injunction is issued is more apparent than real. The damages private respondent would sustain from reinstatement of the preliminary injunction are clearly quantifiable in pesos. Besides, as pointed out by petitioners, to pay heed to private respondent's creative economic argument would ultimately mean that the greater the volume of sales and the profits of the infringer, the greater would be the infringer's claim to be entitled to continue infringement. I respectfully submit that the law should not countenance such a cynical result. My conclusion is that private respondent's claims concerning damage which it would sustain if the petitioners were granted the injunction they seek, did not constitute a sufficient basis for overturning the original decision of the Court of Appeals. The Resolution of the Court of Appeals granting private respondent's Motion to Dissolve, in effect disregarded everything that Court had set out in its original Decision. The mere offer and filing of a counterbond does not, by itself, provide a sufficient basis for lifting the preliminary injunction earlier granted. For all the elements which supported the original issuance of a preliminary injunction continued to exist. Private respondent's hyperbolic claims concerning the damages that it and the Government would sustain by reason of an injunction, had been made earlier both before the trial court and the Court of Appeals. Finally, it is not enough to say as private respondent says, that the Court of Appeals in granting its Motion to Dissolve the preliminary injunction was merely exercising its discretion; for the Court of Appeals obviously was also exercising its discretion when it rendered its original Decision granting the preliminary injunction. I vote to grant due course to the petition for Certiorari, to set aside the Resolution of the respondent Court of Appeals dated 14 September 1989 in C.A.-G.R. SP No. 13132 and to reinstate the Decision of that same Court dated 5 May 1989. # Separate Opinions FELICIANO, J., dissenting: I find myself unable to join in the opinion prepared by my distinguished brother, Melo, J. It seems to me that the issues involved in this case are rather more complex than what has been assumed to be the case by the majority opinion. For this and related reasons, there is set out below a statement of the relevant facts (as I see them) that is more extensive than what is ordinarily found in dissenting opinions. Petitioner Philip Morris, Inc. is a corporation organized and existing under the law of Virginia, U.S.A. Petitioners Benson & Hedges (Canada), Inc. and Fabriques de Tabac Reunies, S.A., both wholly owned subsidiaries of Philip Morris, Inc., are organized and existing under the law of Canada and Switzerland, respectively.

Philip Morris, Inc. is registered owner of the trademark "MARK VII" for cigarettes. Its ownership thereof is evidenced by Philippine Patent Office Trademark Certificate of Registration No. 18723, dated 26 April 1973. The statement attached to the Certificate of Registration states that the trademark "MARK VII" had been registered in the United States Patent Office, on the Principal Register, under Certificate of Registration No. 888,931 issued on 7 April 1970. The statement also requested that the trademark be registered in the Philippine Patent Office on the Principal Register in accordance with Section 37 of R.A. No. 166, as amended. Benson & Hedges (Canada), Inc. is the registered owner of the trademark "MARK TEN" also for cigarettes, as evidenced by Philippine Patent Office Trademark Certificate of Registration No. 11147, dated 28 May 1964, on the Principal Register. This Trademark Certificate of Registration was originally issued in the name of Canadian Tabacofina Ltd. and later assigned to Benson & Hedges (Canada), Inc. Petitioners alleged that the name Canadian Tabacofina Ltd. was later changed to Benson & Hedges (Canada) Ltd. This trademark Certificate of Registration was renewed on 28 May 1984. The statement attached thereto stated that the "date of first use of the trademark 'MARK TEN' in trade in or with the Philippines is April 15, 1963," and that trademark had "been in actual use in commerce over the Philippines continuously for two months." Fabriques de Tabac Reunies, S.A. is registered owner of the trademark "LARK" also for cigarettes, as evidenced by Philippine Patent Office Trademark Certificate of Registration No. 10953, dated 25 March 1964. This Trademark Certificate of Registration was originally issued in the name of Ligget and Myres Tobacco Company was later assigned to Fabriques de Tabac Reunies, S.A. Petitioners alleged that the name of Liggett and Myres Tobacco Company was changed later to Fabriques de Tabac Reunies, S.A. The statement attached to this Certificate of Registration states that the trademark "LARK" was first used by Ligget and Myres Tobacco Company on 31 May 1920, and first used by it "in commerce in or with the Philippines on February 6, 1963" and has been continuously used by it "in trade in or with the Philippines since February 6, 1963." Sometime before 17 October 1981, private respondent Fortune Tobacco Corporation ("Fortune") commenced manufacturing and selling in the Philippines cigarettes under the brandname "MARK." Fortune also filed on 13 February 1981 with the Philippine Patent Office an application for registration of "MARK" as a trademark for cigarettes. By a letter dated 17 October 1981, petitioner through their lawyers wrote to Fortune stating that the manufacturing, selling and advertising of "MARK" cigarettes by Fortune constituted an "infringement or an act of unfair competition with" petitioners' "well-known international trademarks used on cigarettes and tobacco products which were registered worldwide and with the Philippine Patent Office." Petitioners listed their Philippine Certificates of Registration for the trademarks "MARK VII," "MARK TEN," and "LARK." Petitioners then asked Fortune "to cease and desist from further manufacturing; selling or advertising 'MARK' cigarettes," otherwise appropriate court actions would be filed without further notice. On 18 August 1982, petitioners commenced action before the Court of First Instance of Pasig, Metro Manila (Civil Case No. 47374). In their complaint, petitioners alleged that they were not doing business in the Philippines but had nonetheless the right and the capacity to bring the instant suit; that they were owners of Philippine Patent Office Trademark Certificates of Registration which were in full force and effect, covering "MARK VII," "MARK TEN," and "LARK," all for cigarettes (except the last which also covered chewing and smoking tobacco); that they had registered those trademarks in their respective countries of origin and in other countries the world and that by virtue of their "long and extensive use [had] gained international fame and acceptance;" that

they had their respective real and effective industrial or commercial establishments in the United States, Canada and Switzerland, which countries were, like the Philippines, members of the Convention of Paris for the Protection of Industrial Property; that under that Convention each member-country undertakes to prohibit the use of a trademark which constitutes a reproduction, imitation or translation of a mark already belonging to a person entitled to the benefits of the Convention and use for identical or similar goods; that petitioner Fabriques de Tabac Reunies, S.A. had long been using trademark "LARK" throughout the world, including the Philippines where its products bearing the trademark "LARK" had been sold in the duty-free market, and advertised and marketted in the Philippines at least since 1964 and have continued to be so to present; that Fortune had without previous consent, authority or license from petitioners, with knowledge of the popularity of petitioners' marks and their Philippine registrations, manufactured, advertised and sold cigarettes bearing the identical or confusingly similar trademark "MARK" which unauthorized use constituted an act of infringement under Section 22 of R.A. No. 166, as amended; that thereby the public and the patronizers of petitioners' products were being deceived into buying Fortune's cigarettes under the impression and mistaken belief that Fortune's cigarettes were identical with, or came from the same source as, petitioners' products or that Fortune was licensee of petitioners, which it was not; that the infringement by Fortune of petitioners' trademarks have inflicted damages upon petitioners; that the continued unauthorized and unlicensed manufacture and sale by Fortune of its infringing products during the litigation would work injustice and cause irreparable injury to petitioners in violation of their property rights and moreover tend to render the judgment which the court might render ineffectual. Petitioners accordingly asked for a writ of preliminary injunction to restrain Fortune from manufacturing or selling "MARK" cigarettes, and after trial, to make such preliminary injunction permanent and to order Fortune's infringing materials to be destroyed, and for damages. Fortune filed an Opposition to petitioners' prayer for preliminary injunction. On 28 1 March 1983, the trial court issued an Order denying petitioners' motion for preliminary injunction. In rendering that order, the trial court, while noting that petitioners were holders of Philippine Certificates of Trademark Registration, relied heavily on three (3) factors: Firstly, that petitioners were foreign corporations not doing business in the Philippines; Secondly, that Fortune's application for a registration as trademark of the word "MARK" for cigarettes was then pending before the Philippine Patent Office; and Thirdly, that Fortune was the "only party authorized" by the Bureau of Internal Revenue ("BIR") to manufacture cigarettes bearing the mark "MARK" in the Philippines. In respect of the first point, the trial court was obviously heavily influenced by Fortune's argument that because petitioners were not doing business in the Philippines, which meant that "they [were] not engaged in the sale, manufacture, importation, exportation and advertisement of their cigarette products in the Philippines," Fortune's manufacture and sale of its "MARK" cigarettes could not be said to be causing petitioners "irreparable damage" within the Philippines. In respect to the second point, the trial judge felt that because the Director of Patents had not, at that point, denied Fortune's pending application for registration of its trademark "MARK," the grant of a preliminary injunction was premature. With regard to the third point, the 2 judge noted a letter dated 30 January 1979 of the then Acting Commissioner of Internal Revenue Mr. Conrado P. Diaz, temporarily

granting the request of Fortune for a permit to manufacture two (2) new brands of cigarettes, one of which was "MARK." The trial judge also noted that the BIR letter contained the following paragraph: Please be informed further that this authority herein granted does not give you protection against any person or entity whose rights may be prejudiced by infringement or unfair competition in relation 3 to your above named brands/trademarks. The trial judge, however, apparently gave no weight at all to this caveat. Petitioners sought, on 15 April 1983, reconsideration of Judge Reyes' Order denying preliminary injunction. After Fortune had filed an Opposition to petitioners' Motion for Reconsideration, and petitioners had filed their Reply and Fortune a Rejoinder, and after an offer of exhibits by the parties respectively, Judge Reyes issued on 5 April 1984 another Order denying the Motion for Reconsideration. In his second order, the trial judge laid great stress on the fact that Fortune's application for registration of its trademark "MARK" for cigarettes remained subsisting. On the basis, Judge Reyes denied petitioners' motion for reconsideration. More than two (2) years later, petitioners filed a "Second Motion for Issuance of Preliminary Injunction" dated 1 September 1986. In their Second Motion, petitioners invited attention to Paper No. 3, dated 6 April 1983, relating to Fortune's application for registration of its brandname "MARK." This Paper No. 3 reproduced a letter to Fortune's counsel by Bienvenido A. Palisoc, Senior Trademark Examiner, and Wilfredo T. Jaramillo, Trademark Examiner, stating that: This application [for registration of "Mark"] has been examined. Caption mark of the application must tally with the drawing on file. Subject mark is confusingly similar with the following marks on file: a. "Mark" with Reg. No. SR2659 for cigarettes. b. "Mark VII" with Reg. No. 18723 for cigarettes. c. "Mark Ten" with Reg. No. 11147 for cigarettes. d. "Lark" with Reg. No. 10953 for cigarettes. Hence, registration is barred under Sec. 4 (d) of Rep. Act No. 166 as amended. Subject mark has no trademark significance and can not serve its purpose as to indicate the source and origin of goods. Furthermore, the word "Mark" is generic and therefore incapable of exclusive appropriation. 4 Makati, Metro Manila, April 6, 1983." (Emphasis supplied) Petitioners also invited attention to a certification dated 8 August 1986 issued by Mr. Luis M. Daca, Jr., Assistant Director, Philippine Patent Office, to the effect that Fortune's application for the mark "MARK" for cigarettes was declared abandoned as of 16 February 1986 and was now deemed forfeited. In addition, petitioners explained in some detail how Fortune's use of its mark "MARK" was "destructive of [petitioners'] property right to [their] 5 registered trademarks." Further, petitioners assailed Fortune's argument that issuance of preliminary injunction would cause "loss of revenue and taxes to the Government" and that more damages would be sustained by Fortune than by petitioners since the petitioners do not market their cigarettes in the Philippines.

After Fortune had filed an Opposition to petitioners' Second Motion, the trial court, this time presided over by Judge Nicolas Galing, issued an Order dated 22 April 1987 denying once more the motion for issuance of a writ of preliminary injunction. In this order, Judge Galing relied on two (2) points: firstly, according to the trial judge, petitioners had not shown that the products they sought to protect from Fortune's "MARK" cigarettes were "in actual use and available for commercial purposes anywhere in the Philippines;" and secondly, it appeared that while Fortune's original application had been abandoned, it could be refiled and was in fact re-filed. Thus, Judge Galing in effect reiterated Judge Reyes's position that until the Director of Patents had definitely acted upon Fortune's application for registration of "MARK," petitioners' prayer for preliminary injunction could not be granted. Petitioners then filed a Petition for Review with the Supreme Court, which Petition was docketed as G.R. No. 78141. The Court ordered respondents to file their Comments on the Petition and on 30 September 1987, the Court referred the Petition to the Court of Appeals. 6 In due course of time, the Court of Appeals, through Cacdac, Jr., J., rendered a decision on 5 May 1989 setting aside the 22 April 1987 order of the trial court and ordering issuance of a writ of preliminary injunction upon filing of a bond by petitioners in the sum of P200,000.00 to be approved by the appellate court, "enjoining the private respondents, its agents, employees and representatives from manufacturing, selling and/or advertising "MARK" cigarettes until further orders." The Court of Appeals said in pertinent part: There is no dispute that petitioners are the registered owners of the trademarks for cigarettes "MARK VII," "MARK TEN," and "LARK". (Annexes B, C and D, Petition). As found and reiterated by the Philippine Patent Office in two (2) official communications dated April 6, 1983 and January 24, 1984, the trademark "MARK" is "confusingly similar" to the trademarks of petitioners, hence, registration was barred under Sec. 4(d) of Rep. Act No. 166, as amended (pp. 106, 139 SCA rollo). In a third official communication dated April 8, 1986, the trademark application of private respondent for the mark "MARK" under Serial No. 44008 filed on February 13, 1981 which was declared abandoned as of February 16, 1986, is now deemed forfeited, there being no revival made pursuant to Rule 98 of the Revised Rules of Practitioners in Trademark Cases. (p. 107, CA rollo). The foregoing documents or communications mentioned by petitioners as "the changes in material facts which occurred after March 28, 1983", are not also questioned by 7 respondents. (Emphasis supplied) The Court of Appeals also noted the BIR letter of 30 January 1979 temporarily granting Fortune's request for a permit to manufacture two (2) new brands of 8 cigarettes, including one branded "MARK," and the caveat (earlier noted) that the BIR's authorization would not give Fortune any protection against any person or entity whose rights may be prejudiced by infringement or unfair competition on the part of Fortune. The Court of Appeals also referred to the certificate dated 26 September 1986 of Mr. Cesar G. Sandico, then Director of Patents, issued upon request of Fortune's counsel stating that there was a pending application for registration of the trademark "MARK" for cigarettes under Serial No. 59872, filed on 16 September 1986, noting at the same time, that Director Sandico's certification contained the following caveat or qualification: This certification, however, does not give protection as against any person or entity whose right may be prejudiced by infringement or

unfair competition in relation to the aforesaid trademark nor the right to register as contrary to the provisions of the Trademark Law, Republic Act No. 166 as amended and the Revised Rules of Practice in Trademark Cases. (Emphasis supplied) The Court of Appeals then went on to say that: [We] believe and hold that petitioners have shown a prima facie case for the issuance of the writ of prohibitory injunction for the purposes stated in their complaint and subsequent motions for the issuance of the prohibitory writ. (Buayan Cattle Co. v. Quintillan, 125 SCRA 276). The requisites for the granting of preliminary injunction are the existence of the right protected and the facts against which the injunction is to be directed as violative of said right. (Buayan Cattle Co. v. Quintillan, supra; Ortigas & Co. vs. Ruiz, 148 SCRA 326). It is a writ framed according to the circumstances of the case commanding an act which the Court regards as essential to justice and restraining an act it deems contrary to equity and good conscience (Rosauro vs. Cuneta, 151 SCRA 570). If it is not issued, the defendant may, before final judgment, do or continue the doing of the act which the plaintiff asks the court to restrain, and thus make ineffectual the final judgment rendered afterwards granting the relief sought by the plaintiff (Calo vs. Roldan, 76 Phil. 445). Generally, its grant or denial rests upon the sound discretion of the Court except on a clear case of abuse (Belish Investment & Finance Co. vs. Statement House, 151 SCRA 636). Petitioners' right of exclusivity to their registered trademarks being clear and beyond question, the respondent court's denial of the prohibitive writ constituted excess of jurisdiction and grave abuse of discretion. If the lower court does not grant preliminary injunction, the appellate court may grant the same (Service Specialists, Inc. v. 9 Sheriff of Manila. 145 SCRA 139). (Emphasis supplied) Fortune moved for reconsideration of the Decision of the Court of Appeals insisting that petitioners must first prove their "clear, unmistakable and unquestioned right to the writ, coupled with the possible damages it would suffer;" that petitioners had not suffered any "great and irreparable injury to speak of" because "petitioners have never done business in this country in the past nor in the future;" that, on the other hand, Fortune had been authorized by the BIR to manufacture "MARK" cigarettes, "thereby generating much needed funds for the Government;" that Fortune's application for registration of its brandname "MARK" with the Philippine Patent Office "still pending" and not "finally rejected" by the Director of Patents. On 12 July 1989, the Court of Appeals issued a Minute Resolution stating that the issues and arguments in Fortune's motion for reconsideration had been "fully discussed" in the Decision sought to be reconsidered, that no new arguments were raised, and accordingly denied the Motion for Reconsideration. Fortune then filed a "Motion to Dissolve Writ of Preliminary Injunction with Offer to File Counterbond" date 25 July 1989, where it reiterated the basic arguments it previously made. A "Supplemental Motion to Lift Writ of Preliminary Injunction with Offer of Counterbond" dated 17 August 1989 was next filed by Fortune. In this "Supplemental Motion," Fortune averred that it had paid to the BIR for 1988 the amount of P181,940,177.38 for specific taxes; while for January to July 1989, it had paid the amount of P120,120,735.28. Fortune also referred to its employees assigned to the

manufacture of "MARK" cigarettes who were apparently apprehensive that their services would eventually be terminated and that they would join the ranks of the unemployed. Petitioners filed an Opposition to the "Motion to Dissolve" and a Comment on the "Supplemental Motion" of Fortune. On 14 September 1989, the Court of Appeals once more through Cacdac, Jr., J. issued a Resolution lifting the preliminary injunction it had earlier granted upon the filing of counterbond by private respondent in the amount of P400,000.00 to answer for any damages petitioners may suffer as a consequence of such lifting. In its Resolution, the Court of Appeals referred to the "lots of workers employed [who] will be laid off as a consequence of the injunction" and that Government "will stand to lose the amount of specific taxes being paid by" Fortune. It when went on to say: After a thorough re-examination of the issues involved and the arguments advanced by both parties in the offer to file a counterbond and the opposition thereto, WE believe that there are sound and cogent reasons for Us to grant the dissolution of the writ of preliminary injunction by the offer of the private respondent to put up a counterbond to answer for whatever damages the petitioner may suffer as a consequence of the dissolution of the preliminary injunction. The petitioner will not be prejudiced nor stand to suffer irreparably as a consequence of the lifting of the preliminary injunction considering that they are not actually engaged in the manufacture of the cigarettes with the trademarks in question and the filing of the counterbond will amply answer for such damages. While the rule is that an offer of a counterbond does not operate to dissolve an injunction previously granted, nevertheless, it is equally true that an injunction could be dissolved only upon good and valid grounds subject to the sound discretion of the court. As WE have maintained the view that there are sound and good reasons to lift the preliminary injunction the motion to file a counterbond is 10 granted. (Emphasis supplied) Petitioners filed a Motion for Reconsideration, without success. In the instant Petition, petitioners make the following basic submissions: 1. that the Court of Appeals gravely abused its discretion amounting to excess of jurisdiction when it required, contrary to law and jurisprudence that in order that petitioners may suffer irreparable injury due to the lifting of the injunction, petitioners should be using actually their registered trademarks in commerce in the Philippines; 2. that the Court of Appeals gravely abused its discretion amounting to excess of jurisdiction when it lifted the injunction in violation of Section 6 of Rule 58 of the rules of Court; 3. that the Court of Appeals gravely abused its discretion amounting to excess of jurisdiction when, after having found that the trial court had committed grave abuse of discretion and exceeded its jurisdiction for having refused to issue the writ of injunction to restrain respondent's acts that are contrary to equity and good conscience, it made a complete about face for legally insufficient grounds and authorized private respondent to continue performing the very same acts that it had considered contrary to equity and good conscience, thereby ignoring not only the

mandates of the trademark law, the international commitments of the Philippines, the judicial admission of private respondent that it will have no more right to use the trademark "MARK" after the Director of Patents shall have rejected the application to register it, 11 and the admonitions of the Supreme Court. The Court required private respondent to file a comment. The comment reiterated the basic arguments made by private respondent before the Court of Appeals: a. the petitioners are not suffering any irreparable damage by the lifting of the preliminary injunction by the Court of appeals. Whatever damages they might suffer are "based purely on speculation, since by judicial admission, petitioners are not doing business in the Philippines. Private respondent stressed that petitioners "are not manufacturing, importing or selling "MARK TEN," "MARK VII" or "LARK" in this country," notwithstanding "false allegation" that petitioners have been "using" the said trademarks "in commerce and trade" in the Philippines since 1963 up to the present. b. that whatever damage petitioners may be suffering is negligible when compared to the taxes that would have to be foregone by the Government considering that private respondent "paid an annual specific tax of P240 Million only on the manufacture and sale of "MARK cigarettes." Private respondent claims that, in contrast, petitioners which are foreign corporations "based in three different countries" have not contributed anything to Government tax revenues. c. that the Court of Appeals lifted the writ of preliminary injunction it had earlier issued upon the submission of a counter bond in double the amount of the bond submitted by petitioners, under Section 6, Rule 58 of the Rules of Court, which act was within the sound discretion of the Court of Appeals. Private respondent also stresses that the right of petitioners to the injunction was still being litigated before the trial court. Reformulating the issues raised by the petitioners here, we think the principal issues may be reduced to the following: firstly, is there a clear legal right to the relief asked by petitioners in the form of a preliminary injunction to restrain private respondent from manufacturing, selling and distributing cigarettes under the trademark "MARK"? The second question is: are private respondent's acts complained of by petitioners causing irreparable injury to petitioners' rights in the premises? These two (2) basic issues are obviously related and need to be addressed together. I The first point that needs to be stressed is that petitioners have Philippine Certificates of Registration for their trademarks "MARK TEN", "MARK VII," and "LARK" in the Principal Register. Upon the other hand, private respondent's trademark "MARK" is not registered in the Principal Register in the Office of the Director of Patents; private respondents is simply an applicant for registration of a mark, the status of which application may be noted later. It is important to stress the legal effects of registration of a trademark in the Principal Register in the Office of the Director of Patents. Section 20 of R.A. No. 166, as amended, sets out the principal legal effects of such registration: Sec. 20. Certificate of registration prima facie evidence of validity. A certificate of registration, of a mark or a trade name shall be

prima facie evidence of the validity of the registration, the registrant's ownership of the mark or trade name, 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. (Emphasis supplied) 12 In Lorenzana v. Macagba, the Court distinguished between the effects of registration in the Principal Register and registration in the Supplemental Register in the following manner: (1) Registration in the Principal Register gives rise to a presumption of the validity of the registration, the registrant's ownership of the mark, and his right to the exclusive use thereof. There is no such presumption in registrations in the Supplemental Register. (2) Registration in the Principal Register is limited to the actual owner of the trademark (Unno Commercial Enterprises v. Gen. Milling Corp., 120 SCRA 804 [1983]) and proceedings therein pass on the issue of ownership, which may be contested through opposition or interference proceedings, or after registration, in a petition for cancellation. Registration in the Principal Register is constructive notice of the registrant's claims of ownership, while registration in the Supplemental Register is merely proof of actual use of the trademark and notice that the registrant has used or appropriated it. (Le Chemise Lacoste, S.A. v. Fernandez, 129 SCRA 373 [1984]: "Registration in the Supplemental Register . . . serves as notice that the registrant is using or has appropriated the trademark.") It is not subject to opposition although it may be cancelled after its issuance. Corollarilly, registration in the Principal Register is a basis for an action for infringement, while registration in the Supplemental Register is not. (3) In application for registration in the Principal Register, publication of the application is necessary. This is not so in applications for registration in the Supplemental Register. Certificates of registration under both Registers are also different from each other. (4) Proof of registration in the Principal Register may be filed with the Bureau of Customs to exclude foreign goods bearing infringing marks while it does not hold true for registrations in the 13 Supplemental Register. (Emphasis supplied) When taken with the companion presumption of regularity of performance of official duty, it will be seen that issuance of a Certificate of Registration of a trademark in the Principal Register also gives rise to the presumption that all requirements of Philippine law necessary for a valid registration (including prior use in commerce in the Philippines for at least two [2] months) were complied with and satisfied. In contrast, private respondent filed an application for registration of its mark "MARK" for cigarettes with the Director of Patents soon after it commenced manufacturing and selling cigarettes trademark with "MARK." This application was abandoned or 14 "forfeited", for failure of private respondent to file a necessary Paper with the Director of Patent. It also appears, however, that private respondent later re-filed or 15 reinstated its application for registration of "MARK" and that, so far as the record here before us is concerned, this application remains merely an application and has not been granted and a Certificate of Registration in the Principal Register

issued. While final action does not appear as yet to have been taken by the Director of Patents on private respondent's application, there was at least a preliminary determination of the trademark examiners that the trademark "MARK" was "confusingly similar" with petitioners' marks "MARK VII," "MARK TEN" and "LARK" and that accordingly, registration was barred under Section 4 (d) of R.A. No. 166, as 17 amended. In the trial court, both Judge Reyes and Judge Galing took the position that until the Director of Patents shall have finally acted on private respondent's application for registration of "MARK," petitioners cannot be granted the relief of preliminary injunction. It is respectfully submitted that this position is both erroneous and unfortunate. In reliance upon that position, private respondent has kept its application for registration alive and pending. The Director of Patents in turn may well have refrained from taking final action on that application, even in the absence of a restraining order from the courts, out of deference to the courts. The pendency of the application before the Director of Patents is not in itself a reason for denying preliminary injunction. Our courts have jurisdiction and authority to determine whether or not "MARK" is an infringement on petitioners' registered trademarks. Under our case law, the issuance of a Certificate of Registration of a trademark in the Principal Register by the Director of Patents would not prevent a court from ruling on whether or not the trademark so granted registration is confusingly similar with a previously registered trademark, where such issue is essential for resolution of a case properly before the court. A fortiori, a mere application for registration cannot be a sufficient reason for denying injunctive relief, whether preliminary or definitive. In the case at bar, petitioners' suit for injunction and for damages for infringement, and their application for a preliminary injunction against private respondent, cannot be resolved without resolving the issue of claimed confusing similarity. In the case at bar, the evidence of record is scanty. Petitioners have not submitted actual copies or photographs of their registered marks as used in cigarettes. Private respondent has not, for its part, submitted the actual labels or packaging material used in selling its "MARK" cigarettes. Petitioners have appended to their Petition a photocopy of an advertisement of "MARK" cigarettes. Private respondent has not included in the record a copy of its application for registration of "MARK" for cigarettes, which would include a facsimile of the trademark being applied for. It should be noted that "MARK" and "LARK," when read or pronounced orally, constitute idem sonansin striking degree. Further, "MARK" has taken over the dominant word in "MARK VII" and "MARK TEN." These circumstances, coupled with private respondent's failure to explain how or why it chose, out of all the words in the English language, the word "mark" to refer to its cigarettes, lead me to the submission that there is a prima faciebasis for holding, as the Patent Office has held and as the Court of Appeals did hold originally, that private respondent's "MARK" infringes upon petitioners' registered trademarks. II There is thus no question as to the legal rights of petitioners as holders of trademarks registered in the Philippines. Private respondent, however, resists and assails petitioners' effort to enforce their legal rights by heavily underscoring the fact that petitioners are not registered to do business in the Philippines and are not in fact doing business in the Philippines. It is thus necessary to determine what consequences, if any, flow from this circumstance so far as enforcement of petitioners' rights as holders of registered Philippine trademarks is concerned. It should be stressed at the outset that circumstance has no legal impact upon the right of petitioners to own and register their trademarks in the Philippines. Section 2 of

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R.A. No. 166 as amended expressly recognizes as registrable, under this statute, marks which are owned by corporations domiciled in any foreign country: Sec. 2. What are registrable. Trademarks, 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, trade names 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. (Emphasis in the original) It is also entirely clear that foreign corporations and corporations domiciled in a foreign country are not disabled from bringing suit in Philippine courts to protect their rights as holders of trademarks registered in the Philippines. Under Section 21-A of R.A. No. 166, as amended, any foreign corporation which is a holder of a trademark registered under Philippine law may bring an action for infringement of such mark or for unfair competition or false designation of origin and false description "whether or not it has been licensed to do business in the Philippines under the [Corporation Law] at the time it brings complaint, subject to the proviso that: . . . that the country of which the said foreign corporation or juristic person is a citizen or in which it is domiciled by treaty, convention or law, grants similar privilege to corporate or juristic persons of the Philippines. (Emphasis supplied) The rule thus embodied in Section 21-A of R.A. No. 166 as amended is also set out in Article 2 of the Paris Convention for the Protection of Industrial Property ("Paris Convention"), to which the Philippines, the United States, Canada and Switzerland 18 are all parties. Article 2 of the Paris Convention provides in relevant part: Article 2 (1) Nationals of any country of the Union shall, as regards the protection of industrial property, enjoy in all the other countries of the Union the advantages that their respective laws now grant, or may hereafter grant, to nationals; all without prejudice to the rights specially provided for by this Convention. Consequently, they shall have the same protection as the latter, and the same legal remedy against any infringement of their rights, provided that the conditions and formalities imposed upon national are complied with. (2) However, no requirement as to domicile or establishment in the country where protection is claimed may be imposed upon nationals of countries of the Union for the enjoyment of any industrial property rights. xxx xxx xxx (Emphasis supplied) Article 2, paragraph 1 of the Paris Convention embodies the principle of "national treatment" or "assimilation with nationals," one of the basic rules of the 19 Convention. Under Article 2, paragraph 1 of the Paris Convention, nationals of Canada, Switzerland and the United States who are all countries of the Paris Union

are entitled to enjoy in the Philippines, also a country of the Union, the advantages and protections which Philippine law grants to Philippine nationals. Article 2 paragraph 2 of the Paris Convention restrains the Philippines from imposing a requirement of local incorporation or establishment of a local domicile as a prerequisite for granting to foreign nationals the protection which nationals of the Philippines are entitled to under Philippine law in respect of their industrial property rights. It should be noted that Article 2, paragraph 2 also constitutes proof of compliance with the requirement of reciprocity between, on the one hand, the Philippines and, on the other hand, Canada, Switzerland and the United States required under Section 21-A of R.A. No. 166 as amended. The net effect of the statutory and treaty provisions above referred to is that a corporate national of a member country of the Paris Union is entitled to bring in Philippine courts an action for infringement of trademarks, or for unfair competition, without necessity for obtaining registration or a license to do business in the Philippines. Article 2 as quoted above is in effect with respect to all four (4) countries. Such has been the rule in our jurisdiction even before the enactment of R.A. No. 166 and before the Philippines became a party to the Paris Convention. In Western 20 Equipment and Supplies Company, et al. v. Reyes, etc., et al., petitioner Western Electrical Company, a U.S. manufacturer of electrical and telephone equipment and suppliesnot doing business in the Philippines, commenced action in a Philippine court to protect its corporate name from unauthorized use thereof by certain Philippine residents. The Philippine residents sought to organize a Philippine corporation to be known as "Western Electrical Company" for the purpose of manufacturing and selling electrical and telephone equipment in the Philippines. The local residents resisted the suit by contending, inter alia, that the petitioner Western Electrical Company had never transacted business in the Philippines and that registration of private respondent's articles of incorporation could not in any way injure petitioner. The Supreme Court, in rejecting this argument, stated that: . . . a foreign corporation which has never done business in the Philippines but is widely and favorably known in the Philippines through the use therein of its products bearing its corporate name and tradename hasa legal right to maintain an action in the [Philippines]. The purpose of such a suit is to protect its reputation, corporate name and goodwill which has been established through the natural development of its trade for a long period of years in the doing of which it does not seek to enforce any legal or contract rights arising from or closing out of any business which it has 21 transacted in the Philippines. . . . (Emphasis supplied) 22 Similarly, in Asari Yoko v. Kee Boc, a Japanese corporation, also not engaged in any business in the Philippines, successfully opposed an application for registration of its trademark "Race Brand" on shirts and undershirts by a local businessman, even though the Japanese company had not previously registered its own mark "Race Brand" in the Philippines. Again, in General Garments Corporation v. Director of Patents and Puritan 23 Sportswear Corporation, Puritan Sportswear Corporation, an entity organized in Pennsylvania U.S.A. and not doing business in the Philippines, filed a petition for cancellation of the mark "Puritan" which was registered in the name of petitioner General Garments Corporation for assorted men's wear, undershirts, briefs, shirts, sweaters and jackets. Puritan Sportswear alleged ownership and prior use of the trademark "Puritan" in the Philippines. Petitioner General Garments, on the other hand, contended that Puritan Sportswear, being a foreign corporation not licensed to do, and not doing, business in the Philippines, could not maintain an action for

cancellation of a trademark. The Court, in upholding the Director of Patents' cancellation of the registration of the mark "Puritan" in the name of General Garments, said: . . . .such mark should not have been registered in the first place (and consequently may be cancelled if so required) if it consists of or comprises a mark or tradename which so resembles a mark or tradename . . . . previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with goods, business or services of the applicant, to 24 cause confusion or mistake or to deceive purchasers. (Emphasis supplied) 25 In Converse Rubber Corporation v. Universal Rubber Products, Inc., petitioner Converse Rubber Corporation was an American manufacturer of rubber shoes, not doing business on its own in the Philippines and not licensed to do business in the Philippines, opposed the application for registration of the trademark "Universal Converse and Device" to be used also in rubber shoes and rubber slippers by private respondent Universal Rubber Products, Inc. ("Universal"). In reversing the Director of Patents and holding that Universal's application must be rejected, the Supreme Court said: The sales of 12 to 20 pairs a month of petitioner's rubber shoes cannot be considered insignificant, considering that they appear to be of high expensive quality, which not too many basketball players can afford to buy. Any sale made by a legitimate trader from his store is a commercial act establishing trademark rights since such sales are made in due course of business to the general public, not only to limited individuals. It is a matter of public knowledge that all brands of goods filter into the market, indiscriminately sold by jobbers, dealers and merchants not necessarily with the knowledge or consent of the manufacturer. Such actual sale of goods in the local market establishes trademark use which serves as the basis for any action aimed at trademark pre-emption. It is a corollary logical deduction that while Converse Rubber Corporation is not licensed to do business in the country and is not actually doing business here, it does not mean that its goods are not being sold here or that it has not earned a reputation or goodwill as regards its products. The Director of Patents was, therefore, remiss in ruling that the proofs sales presented "was made by a single witness who had never dealt with nor had never known opposer (petitioner) . . . without Opposer having a direct or indirect hand in the transaction 26 to be the basis of trademark pre-exemption. (Emphasis supplied) Three (3) other cases may be noted. The first is La Chemise Lacoste, S.A. v. 27 Fernandez La Chemise Lacoste, S.A. although a foreign corporation not engaged in and not licensed to do business in the Philippines, was accorded protection for its trademarks "Lacoste", "Chemise Lacoste," and "Crocodile Device" for clothing and sporting apparel. The Court recognized that those marks were "world famous trademarks which the Philippines, as a party to the Paris Union, is bound to protect." 28 Similarly, in Del Monte Corporation, et al. v. Court of Appeals, et al., petitioner Del Monte Corporation was a company organized under the laws of the United States and not engaged in business in the Philippines. Because both the Philippines and the United States are signatories to the Convention of Paris, which grants to nationals of the parties the rights and advantages which their own nationals enjoy for the repression of acts of infringement and unfair competition, the Court, having found that

private respondent's label was an infringement of Del Monte's trademark, held Del Monte entitled to recover damages. In Puma Sportschuhfabriken Rudolf Dassler, K.G. v. Intermediate appellate Court, et 29 al, petitioner Puma was a foreign corporation existing under the laws of the Federal Republic of Germany not registered to do business and not doing business in the Philippines, filed a complaint for infringement of trademark and for issuance of a writ of preliminary injunction against a local manufacturing company. Reversing the Court of Appeals, this Court held that Puma had legal capacity to bring the suit in the Philippines under Section 21-A of R.A. No. 166 as amended and under the provisions of the Paris Convention to which both the Philippines and the Federal Republic of Germany are parties. The Court also noted that "Puma" is an internationally known brandname. The relevancy of the doctrines set out in the cases above cited are conceded by my distinguished brother Melo, J. in the majority opinion. The majority opinion, however, goes on to say: In other words, petitioners 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 symbols 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. With great respect, certain essential qualifications must be made respecting the above paragraph. Firstly, of the petitioners' three (3) marks here involved, two (2) of them i.e., "MARK TEN" and "LARK" were registered in the Philippines on the basis of actual use in the Philippines, precisely in accordance with the requirements of Section 2-A and Section 5 (A) of R.A. No. 166 as amended. The pre-registration use in commerce and trade in the Philippines for at least two (2) months as required by the statute, is explicitly stated in the Certificates of Registration. The very fact that the appropriate Philippine Government office issued the Certificates of Registration necessarily gave rise to the presumption that such pre-registration use had in fact been shown to the satisfaction of the Philippine Patent Office (now the Bureau of Patents, Trademark and Technology Transfer ["BPTTT"]). It is important to note that respondent Fortune has not purported to attack the validity of the trademarks "Mark Ten" and "Lark" by pretending that no pre-registration use in commerce in the 30 Philippines had been shown. The third mark of petitioners "MARK VII" was registered in the Philippines on the basis of Section 37 of R.A. No. 166 as amended, i.e., on the basis of registration in the country of origin and under the Paris Convention. In such registration, by the express provisions of Section 37 (b) of R.A. No. 166 as amended, prior (preregistration) use in commerce in the Philippines need not be alleged. Whether the Philippine trademark was based on actual use in the Philippines (under Section 2-A) or on registration in a foreign country of origin (under Section 37), the statute appears to require that trademarks (at least trademarks not shown to be internationally "well-known") must continue to be used in trade and commerce in the

Philippines. It is, however, essential to point out that such continued use, as a requirement for the continued right to the exclusive use of the registered trademark, is presumed so long as the Certificate of Registration remains outstanding and so long as the registered trademark owner complies with the requirements of Section 12 of R.A. No. 166 as amended of filing affidavits with the BPTTT on the 5th, 10th and 15th anniversaries of the date of issuance of the Certificate of Registration, showing that the trademark is still in use or showing that its non-use is not due to any intention to abandon the same. In the case at bar, again, respondent Fortune has not explicitly pretended that the petitioners' trademarks have been abandoned by non-use in trade and commerce in the Philippines although it appears to insinuate such non-use and abandonment by stressing that petitioners are not doing business in the Philippines. That petitioners are not doing business and are not licensed to do business in the Philippines, does not by any means mean either that petitioners have not complied with the requirements of Section 12 of R.A. No. 166 relating to affidavits of continued use, or that petitioners' trademarks are not in fact used in trade and commerce in the Philippines. In the Converse case, as earlier noted, the Court held that the circumstance that the foreign owner of a Philippine trademark is not licensed to do business and is not doing business in the Philippines, does not mean that petitioner's goods (that is, goods bearing petitioner's trademark) are not sold in the Philippines. For cigarettes bearing petitioners' trademarks may in fact be imported into and be available for sale in the Philippines through the acts of importers or distributors. Petitioners have stated that their "Mark VII," "Mark Ten" and "Lark" cigarettes are in fact brought into the country and available for sale here in, e.g., duty-free shops, though not imported into or sold in the Philippines by petitioners themselves. There is no legal requirement that the foreign registrant itself manufacture and sell its products here. All the statute requires is the use in trade and commerce in the Philippines, and that can be carried out by third party manufacturers operating under license granted by the foreign registrant or by the importation and distribution of finished products by independent importers or traders. The "use" of the trademark in such instances by the independent third parties constitutes use of the foreign registrant's trademarks to the 31 benefit of the foreign registrant. III We turn to petitioners' claim that they are suffering irreparable damage by reason of the manufacture and sale of cigarettes under the trademark "MARK." Here again, a basic argument of private respondent was that petitioners had not shown any damages because they are not doing business in the Philippines. I respectfully maintain that this argument is specious and without merit. That petitioners are not doing business and are not licensed to do business in the Philippines, does notnecessarily mean that petitioners are not in a position to sustain, and do not in fact sustain, damage through trademark infringement on the part of a 32 local enterprise. Such trademark infringement by a local company may, for one thing, affect the volume of importation into the Philippines of cigarettes bearing petitioners' trademarks by independent or third party traders. The damage which the petitioners claim they are sustaining by reason of the acts of private respondents, are not limited to impact upon the volume of actual imports into the Philippines of petitioners' cigarettes. Petitioners urge that private respondent's use of its confusingly similar trademark "MARK" is invasive and destructive of petitioners property right in their registered trademarks because. a) Plaintiffs' undeniable right to the exclusive use of their registered trademarks is effectively effaced by defendant's use of a confusingly similar trademark;

b) Plaintiffs would lose control of the reputation of their products as their reputation will depend on defendant's commercial activities and the quality of defendant's products; c) The market in the Philippines for plaintiffs' products will be preempted; d) Purchasers will think that defendant's goods are approved or sponsored by plaintiff; e) Defendant will be allowed to benefit from the reputation of the plaintiffs' goods and trademarks; f) Defendant will be effectively authorized to continually invade plaintiffs' property rights, for which invasion no fair and reasonable redness can be had in a court of law; and g) Plaintiffs will lose their goodwill and trade and the value of their registered trademarks will irreparably diluted and the damages to be suffered by plaintiffs cannot be redressed fairly in terms of 33 money. Modern authorities on trademark law view trademarks as symbols which perform three (3) distinct functions: first, they indicate origin or ownership of the articles to which they are attached; second, they guarantee that those articles come up to a 34 certain standard of quality; third, they advertise the articles they symbolize. The first two (2) functions have long been recognized in trademark law which characterizes the goodwill or business reputation symbolized by a trademark as a property right protected by law. Thus, the owner of a trademark is held entitled to exclude others from the use of the same, or of a confusingly similar, mark where confusion results in diversion of trade or financial injury. At the same time, trademarks warn against the imitation or faking of products and prevent the imposition of fraud upon the public. The first two (2) functions of trademarks were aptly stressed in e.g., the La Chemise Lacoste case where the objectives of trademark protection were described in the following terms: . . . to stem the tide of fake and counterfeit consumer items flooding the Philippine market or exported abroad from our country. The greater victim is not so much the manufacturer whose product is being faked but the Filipino consuming public and in the case of exportations, our image abroad . . . . We buy a kitchen appliance, a household tool, perfume, a face powder, other toilet articles, watches, brandy or whisky, and items of clothing like jeans, T-shirts, neckties, etc. the list is quite lengthy and pay good money relying on the brand name as guarantee of its quality and genuine nature only to explode in bitter frustration and helpless anger because the purchased item turns out to be a shoddy imitation, albeit a clever 35 looking counterfeit, of the quality product . . . . The third or advertisement function of trademark has become of especial importance given the modern technology of communication and transportation and the growth of 36 international trade. Through advertisement in the broadcast and print media, the owner of the trademark is able to establish a nexus between its trademark products and the public in regions where the owner does not itself manufacture or sell its own 37 products. Through advertisement, a well-established and well-earned reputation may be gained in countries where the trademark owner has itself no established 38 business connection. Goodwill may thus be seen to be much less closely confined 39 territorially than, say, a hundred or fifty years ago. It is no longer true that "a trademark of itself cannot travel to markets where there is no article to wear the

badge and no trader to offer the article." Advertisement of trademarks is geared towards the promotion of use of the marked article and the attraction of potential 41 buyers and users; by fixing the identity of the marked article in the public mind, it prepares the way for growth in such commerce whether the commerce be handled by the trademark owner itself or by its licensees or independent traders. That a registered trademark has value in itself apart from the trade physically 42 accompanying its use, has been recognized by our Court. In Ang v. Teodoro, the Court was called upon the determine whether there was infringement in the use of the same trademark on articles which do not belong to the same class of goods which the lawful trademark owner manufactures and sells. In holding that there was infringing use in such case, the Court said: . . . . such unfair trading can cause injury or damage to the first user of a given trade-mark, first, by prevention of the natural expansion of his business and, second, by having his business reputation confused with and put at the mercy of the second user. When noncompetitive products are sold under the same mark, the gradual whittling away or dispersion of the identity and hold upon the public mind of the mark created by its first user, inevitably result. The original owner is entitled to the preservation of the valuable link between him and the public that has been created by his ingenuity and the merit of his wares or services. Experience has demonstrated that when a well-known trade-mark is adopted by another even for a totally different class of goods, it is done to get the benefit of the reputation and advertisements of the originator of said mark, to convey to the public a false impression of some supposed connection between the manufacturer of the article sold under the original mark and the new articles being tendered to the public under the same or similar mark . . . The owner of a trademark or tradename has a property right in which he is entitled to protection, since there is damage to him in the form of confusion of reputation or goodwill in the mind of the public as well as from confusion of goods. (Emphasis supplied) 43 In Sta. Ana v. Maliwat, the Court, through J.B.L. Reyes, J., in holding that the use of the name "Flormen" with respect to shoes was infringement of the mark "Flormann" used in the men's wear such as shirts, polo shirts and pants, said: Modern law recognizes that the protection to which the owner of a trade-mark is entitled is not limited to guarding his goods or business from actual market competition with identical or similar products of the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or trade-name is likely to lead to a confusing of source, as where prospective purchasers would be misled into thinking that the complaining party has extended his business into the field (see 148 ALR 56 et seq; 52 Am. Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the normal potential expansion of his business (v. 148 44 ALR, 77, 84; 52 Am. Jur. 576, 577). . . .. (Emphasis supplied) Petitioners did not try to put a peso figure on their claimed damage arising from the erosion and possible eventual destruction of the symbolic value of their trademark. Such damage, while not easily quantifiable, is nonetheless real and effective. I submit, with respect, that such continuing damage falls clearly within the concept of

40

irreparable damage or injury described in Social Security Commission v. Bayona in the following terms: Damages are irreparable within the meaning of the rule relative to the issuance of injunction where there is no standard by which their amount can be measured with reasonable accuracy (Crouc v. Central Labor Council, 83 ALR, 193). "An irreparable injury which a court of equity will enjoin includes that degree of wrong of a repeated and continuing kind which produce hurt, inconvenience, or damage that can be estimated only by conjecture, and not by any accurate standard of measurement" (Phipps v. Rogue River Valley Canal Co., 7 ALR, 741). An irreparable injury to authorize an injunction consists of a serious charge of, or is destructive to, the property if affects, either physically or in the character in which it has been held and enjoined, or when the property has some peculiar quality or use, so that its pecuniary value will not fairly recompense the owner of the loss thereof' (Dunker v. Field and Tub Club, 92 P., 502). Respondent corporations made a lengthy discourse on the matter of irreparable injury they may suffer if the injunction were not issued, but the array of figures they have laid out merely succeeded in proving that the damage, if any they may suffer, is susceptible of mathematical computation. It is not then irreparable. As already stated, this term has a definite meaning in law. It does not have reference to the amount of damages that may be caused but rather to the difficulty of measuring the damages inflicted. If full compensation can be obtained by way of damages, equity will not apply the remedy of injunction (28 Am. Jur., 244; 43 C.J.S., 427, 46 446). I next turn to private respondent's claim that issuance of an injunction would impose heavy damage upon itself and upon Government. As noted, private respondent stated that it had paid many millions of pesos as ad valorem and VAT taxes to the Government in 1988 and 1989 in connection with its "MARK" 47 cigarettes. Presumably, the total volume of its business associated with the manufacture and sale of cigarettes trademarked "MARK" would be even larger. In addition, private respondent suggests, albeit indirectly only, that hundreds if not thousands of its employees would find themselves unemployed if it were restrained from the manufacture and sale of "MARK" cigarettes. Private respondent's claims concerning alleged damages both to itself and to the Government, which obviously loomed very large in the mind of the majority here, and of the Court of Appeals when it lifted the injunction it had issued, appear to me to be extravagant indeed. Petitioners cannot claim to be entitled to an injunction which could restrain private respondent from manufacturing and selling cigarettes completely; petitioner do not pretend to be so entitled to such a comprehensive injunction. Petitioners seek only the reinstatement of the original injunction issued by the Court of Appeals, i.e., one that restrains private respondent from using the trademark "MARK" on its cigarettes. There is nothing to prevent private respondent from continuing to manufacture and sell cigarettes under any of its already existing and registered trademarks, of which it has several, or under some new and specially created trademark(s). Realistically, private respondent, if enjoined, would lose only the value of the packaging material imprinted with the same trademark (which cigarettes and material may well be amenable to re-cycling) and the cost of past advertisements of "MARK" in media, if any. Thus, the apprehension on the part of the

45

majority which private respondent tried diligently to foment that the Government would lose many millions of pesos in tax revenues and that many employees would lose their jobs, if an injunction is issued is more apparent than real. The damages private respondent would sustain from reinstatement of the preliminary injunction are clearly quantifiable in pesos. Besides, as pointed out by petitioners, to pay heed to private respondent's creative economic argument would ultimately mean that the greater the volume of sales and the profits of the infringer, the greater would be the infringer's claim to be entitled to continue infringement. I respectfully submit that the law should not countenance such a cynical result. My conclusion is that private respondent's claims concerning damage which it would sustain if the petitioners were granted the injunction they seek, did not constitute a sufficient basis for overturning the original decision of the Court of Appeals. The Resolution of the Court of Appeals granting private respondent's Motion to Dissolve, in effect disregarded everything that Court had set out in its original Decision. The mere offer and filing of a counterbond does not, by itself, provide a sufficient basis for lifting the preliminary injunction earlier granted. For all the elements which supported the original issuance of a preliminary injunction continued to exist. Private respondent's hyperbolic claims concerning the damages that it and the Government would sustain by reason of an injunction, had been made earlier both before the trial court and the Court of Appeals. Finally, it is not enough to say as private respondent says, that the Court of Appeals in granting its Motion to Dissolve the preliminary injunction was merely exercising its discretion; for the Court of Appeals obviously was also exercising its discretion when it rendered its original Decision granting the preliminary injunction. I vote to grant due course to the petition for Certiorari, to set aside the Resolution of the respondent Court of Appeals dated 14 September 1989 in C.A.-G.R. SP No. 13132 and to reinstate the Decision of that same Court dated 5 May 1989. # Footnotes 1 Then presided over by Judge Pastor P. Reyes. 2 Court of Appeals Decision, Rollo, p. 137. 3 Rollo, p. 339. 4 Id., p. 73. 5 Id., p. 88. 6 With the concurrence of Nocon and G.C. Paras, JJ. 7 Rollo, p. 165. 8 Note 3. 9 Rollo, pp. 166-167. 10 Rollo, pp. 53-54. 11 Id. pp. 25-26. 12 154 SCRA 723 (1987). 13 154 SCRA at 728-729. 14 Certification, dated 8 August 1986, Annex "I" of the Petition, Rollo, p. 74. 15 Certification dated 30 January 1984, issued by Cesar C. San Diego, Director of Patents, certifying that as of that date, private respondent's "Application Serial No. 44008 for the registration of trademark "MARK" and design filed on 13 February 1981 was still pending appropriate action." (Rollo, p.). 16 This certification is quoted in the order dated 5 April 1984 of Judge Reyes; Rollo, p. 348.

17 Section 4 (d) of R.A. No. 166, as amended, specifies the kinds of trademarks, tradenames or service marks which cannot be registered on the Principal Register: (d) consists of or comprises a mark or tradename which so resembles mark or tradename registered in the Philippines or a mark or tradename previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with the goods or services of the applicant to cause confusion or mistake or to deceive purchasers; . . . . 18 The Paris Convention was concurred in by the Senate by S.R. No. 69, May 10, 1965 and the Instrument of Ratification was signed by the President on October 11, 1965; List of Treaties and Other International Agreements of the Republic of the Philippines, p. 1 (1966; U.P. Law Center). The adhesion of the Philippines to the Convention became effective as of 27 September 1965; Canada on 12 June 1925; Switzerland on 7 July 1884; and the United States on 30 May 1887. The text of the Paris Convention and of the List of "Members-States of the International Union for the Protection of Industrial Property (Paris Union) as in April 1968" may be found in G.H.C. Bodenhausen, Guide to the Application of the Paris Convention for the Protection of Industrial Property (1968). 19 G.H.C. Bodenhausen, supra, p. 27. 20 51 Phil., 115 (1927). 21 51 Phil., at. 22 1 SCRA 1 (1961). 23 41 SCRA 50 (1971). 24 41 SCRA at. 25 147 SCRA 154 (1987). 26 147 SCRA at 162. 27 129 SCRA 373 (1984). 28 181 SCRA 410 (1990). 29 158 SCRA 233 (1988). 30 Such an attack was apparently made in Pag-Asa Industrial Corporation v. Court of Appeals, 118 SCRA 526(1982) which the majority opinion cites. 31 Accordingly, the importer or distributor does not acquire ownership of the trademark on the goods imported or distributed; e.g., Gabriel v. Perez, 55 SCRA 406 (1974); Unno Commercial Enterprises v. General Milling Corporation, 120 SCRA 804 (1983); Marvex Commercial Co., Inc. v. Petra Hawpia and Co., 18 SCRA 1178 (1966); Operators, Inc. v. Director of Patents, 15 SCRA 147 (1965). 32 See generally, Western Equipment and Supply Co. v. Reyes, 51 SCRA 115 (1927); Asari Yoko Co. v. Kee Boc, 1 S 1 a(1961); General Garments v. Director of Patents, 41 SCRA 50 (1971); La Chemise Lacoste, S.A. v. Fernandez, 129 SCRA 373 (1984); Converse Rubber Corporation v. Universal Rubber Products, 147 SCRA 154 (1987). 33 Petitioners' Second Motion for Issuance of Preliminary Injunction, filed with the trial court; Rollo, p. 88. See also the Petition for Certiorari filed with the Supreme Court, Rollo, p. 16.

34 See 2 Callman, Unfair Competition and Trade Marks (1945), p. 804. See also Grass, "Territorial Scope of Trademark Rights," 44 U Miami L. Rev. 1075 (1990). 35 La Chemise Lacoste, 129 SCRA at 403. 36 See Schechter, "The Rational Basis of Trademark Protection," 40 Harv. L. Rev. 813 (1927); 2 Callman, supra at 810. 37 2 Callman, supra at 811, citing Coca-Cola Company v. Brown, 60 T 2d 319. 38 See generally, 1 Nims, "Unfair Competition and Trademark, S. 35A (1947), p. 149. 39 See also 1 Nims, supra at 150. 40 See Hanover Star Milling Co. v. Metcalf, 240 U.S. 403 (1916); see also Territorial Scope of Trademark Rights, supra at 1086. In Hanover Star Milling Company v. Metcalf, the United States Supreme Court realized that advertising had the potential for spreading business goodwill beyond the areas of actual market sales. The Court alluded to the possibility that, in certain instances, the protection of trademarks could extend beyond the zone of actual market penetration: "Into whatever markets the use of a trademark has extended, or its meaning has become known, there will the manufacturer or trader whose trade is pirated by an infringing use be entitled to protection and redress." 41 See 2 Callman, supra at 811. 42 74 Phil. 50 (1942). 43 24 SCRA 1018 (1968). 44 24 SCRA at 1025. In Faberge, Inc. v. Intermediate Appellate Court (G.R. No. 71189, 4 November 1992), a Third Division Decision, the Court held that the use of the trademark "Brute" for men's briefs, was not an infringement of the mark "Brut 33 and Device" for anti-perpirants, personal deodorant, shaving cream, after shave-shower lotion, hair spray and hair shampoo. This case turned on interpretation of Section 20 R.A. No. 166 as amended, which appeared to limit the exclusive right of the senior user to the goods specified in its Certificate of Registration. Faberge does not, as I read it, deny the existence of categories or damage or injury in trademark cases which transcend the quantifiable loss of volume of commercial sales. Moreover, the case at bar involves competing goods of one and the same class, i.e. cigarettes. 45 5 SCRA 126 (1962). See further Phil. Virginia Tobacco Adm. v. De los Angeles, 164 SCRA 543 (1988); Yu v. Court of Appeals, G.R. No. 86683, 21 January 1993; Golding v. Balatbat, 36 Phil. 941 (1917); Liongson v. Martinez, 36 Phil. 948 (1917). 46 5 SCRA at 130-131. 47 See Certification, dated 11 August 1989, issued by Mr. Melchor Banares, Assistant BIR Commissioner, being Annex "A" to private respondent's "Supplemental Motion to Lift Writ of Preliminary Injunction with Offer of Counterbond" filed with the Court of Appeals; Rollo p. 221.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-21897 October 22, 1963 RAMON A. GONZALES, petitioner, vs. RUFINO G. HECHANOVA, as Executive Secretary, MACARIO PERALTA, JR., as Secretary of Defense, PEDRO GIMENEZ, as Auditor General, CORNELIO BALMACEDA, as Secretary of Commerce and Industry, and SALVADOR MARINO, Secretary of Justice, respondents. Ramon A. Gonzales in his own behalf as petitioner. Office of the Solicitor General and Estanislao Fernandez for respondents. CONCEPCION, J.: This is an original action for prohibition with preliminary injunction. It is not disputed that on September 22, 1963, respondent Executive Secretary authorized the importation of 67,000 tons of foreign rice to be purchased from private sources, and created a rice procurement committee composed of the other 1 respondents herein for the implementation of said proposed importation. Thereupon, or September 25, 1963, herein petitioner, Ramon A. Gonzales a rice planter, and president of the Iloilo Palay and Corn Planters Association, whose members are, likewise, engaged in the production of rice and corn filed the petition herein, averring that, in making or attempting to make said importation of foreign rice, the aforementioned respondents "are acting without jurisdiction or in excess of jurisdiction", because Republic Act No. 3452 which allegedly repeals or amends Republic Act No. 220 explicitly prohibits the importation of rice and corn "the Rice and Corn Administration or any other government agency;" that petitioner has no other plain, speedy and adequate remedy in the ordinary course of law; and that a preliminary injunction is necessary for the preservation of the rights of the parties during the pendency this case and to prevent the judgment therein from coming ineffectual. Petitioner prayed, therefore, that said petition be given due course; that a writ of preliminary injunction be forthwith issued restraining respondent their agents or representatives from implementing the decision of the Executive Secretary to import the aforementioned foreign rice; and that, after due hearing, judgment be rendered making said injunction permanent. Forthwith, respondents were required to file their answer to the petition which they did, and petitioner's pray for a writ of preliminary injunction was set for hearing at which both parties appeared and argued orally. Moreover, a memorandum was filed, shortly thereafter, by the respondents. Considering, later on, that the resolution said incident may require some pronouncements that would be more appropriate in a decision on the merits of the case, the same was set for hearing on the merits thereafter. The parties, however, waived the right to argue orally, although counsel for respondents filed their memoranda. I. Sufficiency of petitioner's interest. Respondents maintain that the status of petitioner as a rice planter does not give him sufficient interest to file the petition herein and secure the relief therein prayed for. We find no merit in this pretense. Apart from prohibiting the importation of rice and corn "by the Rice and Corn Administration or any other government agency". Republic Act No. 3452 declares, in Section 1 thereof, that "the policy of the Government" is to "engage in the purchase of these basic foods directly from those tenants, farmers, growers, producers and landowners in the Philippines who wish to dispose of their

products at a price that will afford them a fair and just return for their labor and capital investment. ... ." Pursuant to this provision, petitioner, as a planter with a rice land of 2 substantial proportion, is entitled to a chance to sell to the Government the rice it now seeks to buy abroad. Moreover, since the purchase of said commodity will have to be effected with public funds mainly raised by taxation, and as a rice producer and landowner petitioner must necessarily be a taxpayer, it follows that he has sufficient personality and interest to seek judicial assistance with a view to restraining what he believes to be an attempt to unlawfully disburse said funds. II. Exhaustion of administrative remedies. Respondents assail petitioner's right to the reliefs prayed for because he "has not exhausted all administrative remedies available to him before coming to court". We have already held, however, that the principle requiring the previous exhaustion of administrative remedies is not applicable where the question in dispute is purely a 3 legal one", or where the controverted act is "patently illegal" or was performed 4 without jurisdiction or in excess of jurisdiction, or where the respondent is a department secretary, whose acts as an alter-ego of the President bear the implied or 5 6 assumed approval of the latter, unless actually disapproved by him, or where there 7 are circumstances indicating the urgency of judicial intervention. The case at bar fails under each one of the foregoing exceptions to the general rule. Respondents' contention is, therefore, untenable. III. Merits of petitioner's cause of action. Respondents question the sufficiency of petitioner's cause of action upon the theory that the proposed importation in question is not governed by Republic Acts Nos. 2207 and 3452, but was authorized by the President as Commander-in-Chief "for military stock pile purposes" in the exercise of his alleged authority under Section 2 of 8 Commonwealth Act No. 1; that in cases of necessity, the President "or his subordinates may take such preventive measure for the restoration of good order and maintenance of peace"; and that, as Commander-in-Chief of our armed forces, "the President ... is duty-bound to prepare for the challenge of threats of war or emergency withoutwaiting for any special authority". Regardless of whether Republic Act No. 3452 repeals Republic Act No. 2207, as contended by petitioner herein - on which our view need not be expressed we are unanimously of the opinion - assuming that said Republic Act No. 2207 is still in force that the two Acts are applicable to the proposed importation in question because the language of said laws is such as to include within the purview thereof all importations of rice and corn into the Philippines". Pursuant to Republic Act No. 2207, "it shall be unlawful for any person, association, corporation orgovernment agency to import rice and corn into any point in the Philippines", although, by way of exception, it adds, that "the President of the Philippines may authorize the importation of these commodities through any government agency that he may designate", is the conditions prescribed in Section 2 of said Act are present. Similarly, Republic Act No. 3452 explicitly enjoins "the Rice and Corn Administration or any government agency" from importing rice and corn. Respondents allege, however, that said provisions of Republic Act Nos. 2207 and 3452, prohibiting the importation of rice and corn by any "government agency", do not apply to importations "made by the Government itself", because the latter is not a "government agency". This theory is devoid of merit. The Department of National Defense and the Armed Forces of the Philippines, as well as respondents herein, and each and every officer and employee of our Government, our government agencies and/or agents. The applicability of said laws even to importations by the Government as such, becomes more apparent when we consider that:

1. The importation permitted in Republic Act No. 2207 is to be authorized by the "President of the Philippines" and, hence, by or on behalf of the Government of the Philippines; 2. Immediately after enjoining the Rice and Corn administration and any other government agency from importing rice and corn, Section 10 of Republic Act No. 3452 adds "that the importation of rice and corn is left to private parties upon payment of the corresponding taxes", thus indicating that only "private parties" may import rice under its provisions; and 3. Aside from prescribing a fine not exceeding P10,000.00 and imprisonment of not more than five (5) years for those who shall violate any provision of Republic Act No. 3452 or any rule and regulation promulgated pursuant thereto, Section 15 of said Act provides that "if the offender is a public official and/or employees", he shall be subject to the additional penalty specified therein. A public official is an officer of the Government itself, as distinguished from officers or employees of instrumentalities of the Government. Hence, the duly authorized acts of the former are those of the Government, unlike those of a government instrumentality which may have a personality of its own, distinct and separate from that of the Government, as such. The provisions of Republic Act No. 2207 are, in this respect, even more explicit. Section 3 thereof provides a similar additional penalty for any "officer or employee of the Government" who "violates, abets or tolerates the violation of any provision" of said Act. Hence, the intent to apply the same to transactions made by the very government is patent. Indeed, the restrictions imposed in said Republic Acts are merely additional to those prescribed in Commonwealth Act No. 138, entitled "An Act to give native products and domestic entities the preference in the purchase of articles for the Government." Pursuant to Section 1 thereof: The Purchase and Equipment Division of the Government of the Philippines and other officers and employees of the municipal and provincial governments and the Government of the Philippines and of chartered cities, boards, commissions, bureaus, departments, offices, agencies, branches, and bodies of any description, including government-owned companies, authorized to requisition, purchase, or contract or make disbursements for articles, materials, and supplies for public use, public buildings, or public works shall give preference to materials ... produced ... in the Philippines or in the United States, and to domestic entities, subject to the conditions hereinbelow specified. (Emphasis supplied.) Under this provision, in all purchases by the Government, including those made by and/or for the armed forces,preference shall be given to materials produced in the Philippines. The importation involved in the case at bar violates this general policy of our Government, aside from the provisions of Republic Acts Nos. 2207 and 3452. The attempt to justify the proposed importation by invoking reasons of national security predicated upon the "worsening situation in Laos and Vietnam", and "the recent tension created by the Malaysia problem" - and the alleged powers of the President as Commander-in-Chief of all armed forces in the Philippines, under Section 2 of the National Defense Act (Commonwealth Act No. 1), overlooks the fact that the protection of local planters of rice and corn in a manner that would foster and accelerate self-sufficiency in the local production of said commodities constitutes a factor that is vital to our ability to meet possible national emergency. Even if the intent in importing goods in anticipation of such emergency were to bolster up that ability, the latter would, instead, be impaired if the importation were so made as to discourage our farmers from engaging in the production of rice.

Besides, the stockpiling of rice and corn for purpose of national security and/or national emergency is within the purview of Republic Act No. 3452. Section 3 thereof expressly authorizes the Rice and Corn Administration "to accumulate stocks as a national reserve in such quantities as it may deem proper and necessary to meet any contingencies". Moreover, it ordains that "the buffer stocks held as a national reserve ... be deposited by the administration throughout the country under the proper dispersal plans ... and may be released only upon the occurrence of calamities or emergencies ...". (Emphasis applied.) Again, the provisions of Section 2 of Commonwealth Act No. 1, upon which respondents rely so much, are not self-executory. They merely outline the general objectives of said legislation. The means for the attainment of those objectives are subject to congressional legislation. Thus, the conditions under which the services of citizens, as indicated in said Section 2, may be availed of, are provided for in Sections 3, 4 and 51 to 88 of said Commonwealth Act No. 1. Similarly, Section 5 thereof specifies the manner in which resources necessary for our national defense may be secured by the Government of the Philippines, but only "during a national 9 mobilization", which does not exist. Inferentially, therefore, in the absence of a national mobilization, said resources shall be produced in such manner as Congress may by other laws provide from time to time. Insofar as rice and corn are concerned, Republic Acts Nos. 2207 and 3452, and Commonwealth Act No. 138 are such laws. Respondents cite Corwin in support of their pretense, but in vain. An examination of 10 the work cited shows that Corwin referred to the powers of the President during 11 "war time" or when he has placed the country or a part thereof under "martial 12 law". Since neither condition obtains in the case at bar, said work merely proves that respondents' theory, if accepted, would, in effect, place the Philippines under martial law, without a declaration of the Executive to that effect. What is worse, it would keep us perpetually under martial law. It has been suggested that even if the proposed importation violated Republic Acts Nos. 2207 and 3452, it should, nevertheless, be permitted because "it redounds to the benefit of the people". Salus populi est suprema lex, it is said. If there were a local shortage of rice, the argument might have some value. But the respondents, as officials of this Government, have expressly affirmed again and again that there is no rice shortage. And the importation is avowedly for stockpile of the Army not the civilian population. But let us follow the respondents' trend of thought. It has a more serious implication that appears on the surface. It implies that if an executive officer believes that compliance with a certain statute will not benefit the people, he is at liberty to disregard it. That idea must be rejected - we still live under a rule of law. And then, "the people" are either producers or consumers. Now as respondents explicitly admit Republic Acts Nos. 2207 and 3452 were approved by the Legislature for the benefit of producers and consumers, i.e., the people, it must follow that the welfare of the people lies precisely in the compliance with said Acts. It is not for respondent executive officers now to set their own opinions against that of the Legislature, and adopt means or ways to set those Acts at naught. Anyway, those laws permit importation but under certain conditions, which have not been, and should be complied with. IV. The contracts with Vietnam and Burma It is lastly contended that the Government of the Philippines has already entered into two (2) contracts for the Purchase of rice, one with the Republic of Vietnam, and another with the Government of Burma; that these contracts constitute valid executive agreements under international law; that such agreements became binding effective upon the signing thereof by representatives the parties thereto; that in case of conflict

between Republic Acts Nos. 2207 and 3452 on the one hand, and aforementioned contracts, on the other, the latter should prevail, because, if a treaty and a statute are inconsistent with each other, the conflict must be resolved under the American jurisprudence in favor of the one which is latest in point of time; that petitioner herein assails the validity of acts of the Executive relative to foreign relations in the conduct of which the Supreme Court cannot interfere; and the aforementioned contracts have already been consummated, the Government of the Philippines having already paid the price of the rice involved therein through irrevocable letters of credit in favor of the sell of the said commodity. We find no merit in this pretense. The Court is not satisfied that the status of said tracts as alleged executive agreements has been sufficiently established. The parties to said contracts do not pear to have regarded the same as executive agreements. But, even assuming that said contracts may properly considered as executive agreements, the same are unlawful, as well as null and void, from a constitutional viewpoint, said agreements being inconsistent with the provisions of Republic Acts Nos. 2207 and 3452. Although the President may, under the American constitutional system enter into executive agreements without previous legislative authority, he may not, by executive agreement, enter into a transaction which is prohibited by statutes enacted prior thereto. Under the Constitution, the main function of the Executive is to enforce laws enacted by Congress. The former may not interfere in the performance of the legislative powers of the latter, except in the exercise of his veto power. He may not defeat legislative enactments that have acquired the status of law, by indirectly repealing the same through an executive agreement providing for the performance of the very act prohibited by said laws. The American theory to the effect that, in the event of conflict between a treaty and a statute, the one which is latest in point of time shall prevail, is not applicable to the case at bar, for respondents not only admit, but, alsoinsist that the contracts adverted to are not treaties. Said theory may be justified upon the ground that treaties to which the United States is signatory require the advice and consent of its Senate, and, hence, of a branch of the legislative department. No such justification can be given as regards executive agreements not authorized by previous legislation, without completely upsetting the principle of separation of powers and the system of checks and balances which are fundamental in our constitutional set up and that of the United States. As regards the question whether an international agreement may be invalidated by our courts, suffice it to say that the Constitution of the Philippines has clearly settled it in the affirmative, by providing, in Section 2 of Article VIII thereof, that the Supreme Court may not be deprived "of its jurisdiction to review, revise, reverse, modify, or affirm on appeal, certiorari, or writ of error as the law or the rules of court may provide, final judgments and decrees of inferior courts in (1) All cases in which the constitutionality or validity of any treaty, law, ordinance, or executive order or regulation is in question". In other words, our Constitution authorizes the nullification of a treaty, not only when it conflicts with the fundamental law, but, also, when it runs counter to an act of Congress. The alleged consummation of the aforementioned contracts with Vietnam and Burma does not render this case academic, Republic Act No. 2207 enjoins our Government not from entering into contracts for the purchase of rice, but from importing rice, except under the conditions Prescribed in said Act. Upon the other hand, Republic Act No. 3452 has two (2) main features, namely: (a) it requires the Government to purchase rice and corn directly from our local planters, growers or landowners; and (b) it prohibits importations of rice by the Government, and leaves such importations to private parties. The pivotal issue in this case is whether the

proposed importation which has not been consummated as yet is legally feasible. Lastly, a judicial declaration of illegality of the proposed importation would not compel our Government to default in the performance of such obligations as it may have contracted with the sellers of the rice in question, because, aside from the fact that said obligations may be complied with without importing the commodity into the Philippines, the proposed importation may still be legalized by complying with the provisions of the aforementioned laws. V. The writ of preliminary injunction. The members of the Court have divergent opinions on the question whether or not respondents herein should be enjoined from implementing the aforementioned proposed importation. However, the majority favors the negative view, for which reason the injunction prayed for cannot be granted. WHEREFORE, judgment is hereby rendered declaring that respondent Executive Secretary had and has no power to authorize the importation in question; that he exceeded his jurisdiction in granting said authority; said importation is not sanctioned by law and is contrary to its provisions; and that, for lack of the requisite majority, the injunction prayed for must be and is, accordingly denied. It is so ordered. Bengzon, CJ, Padilla, Labrador, Reyes, J.B.L., Dizon and Makalintal, JJ., concur. Paredes and Regala, JJ., concur in the result.

Separate Opinions BAUTISTA ANGELO, J., concurring: Under Republic Act No. 2207, which took effect on May 15, 1959, it is unlawful for any person, association, corporation or government agency to import rice and corn into any point in the Philippines. The exception is if there is an existing or imminent shortage of such commodity of much gravity as to constitute national emergency in which case an importation may be authorized by the President when so certified by the National Economic Council. However, on June 14, 1962, Republic Act 3452 was enacted providing that the importation of rice and corn canonly be made by private parties thereby prohibiting from doing so the Rice and Corn Administration or any other government agency. Republic Act 3452 does not expressly repeal Republic Act 2207, but only repeals or modified those parts thereof that are inconsistent with its provisions. The question that now arises is: Has the enactment of Republic Act 3452 the effect of prohibiting completely the government from importing rice and corn into the Philippines? My answer is in the negative. Since this Act does not in any manner provide for the importation of rice and corn in case of national emergency, the provision of the former law on that matter should stand, for that is not inconsistent with any provision embodied in Republic Act 3452. The Rice and Corn Administration, or any other government agency, may therefore still import rice and corn into the Philippines as provided in Republic Act 2207 if there is a declared national emergency. The next question that arises is: Can the government authorize the importation of rice and corn regardless of Republic Act 2207 if that is authorized by the President as Commander-in-Chief of the Philippine Army as a military precautionary measure for military stockpile? Respondents answer this question in the affirmative. They advance the argument that it is the President's duty to see to it that the Armed Forces of the Philippines are geared to the defenses of the country as well as to the fulfillment of our international commitments in Southeast Asia in the event the peace and security of the area are in danger. The stockpiling of rice, they aver, is an essential requirement of defense

preparation in view of the limited local supply and the probable disruption of trade and commerce with outside countries in the event of armed hostilities, and this military precautionary measure is necessary because of the unsettled conditions in the Southeast Asia bordering on actual threats of armed conflicts as evaluated by the Intelligence Service of the Military Department of our Government. This advocacy, they contend, finds support in the national defense policy embodied in Section 2 of our National Defense Act (Commonwealth Act No. 1), which provides: (a) The preservation of the State is the obligation of every citizen. The security of the Philippines and the freedom, independence and perpetual neutrality of the Philippine Republic shall be guaranteed by the employment of all citizens, without distinction of sex or age, and all resources. (b) The employment of the nation's citizens and resources for national defense shall be effected by a national mobilization. (c) The national mobilization shall include the execution of all measures necessary to pass from a peace to a war footing. (d) The civil authority shall always be supreme. The President of the Philippines as the Commander-in-Chief of all military forces, shall be responsible that mobilization measures are prepared at all times.(Emphasis supplied) Indeed, I find in that declaration of policy that the security of the Philippines and its freedom constitutes the core of the preservation of our State which is the basic duty of every citizen and that to secure which it is enjoined that the President employ all the resources at his command. But over and above all that power and duty, fundamental as they may seem, there is the injunction that the civil authority shall always be supreme. This injunction can only mean that while all precautions should be taken to insure the security and preservation of the State and to this effect the employment of all resources may be resorted to, the action must always be taken within the framework of the civil authority. Military authority should be harmonized and coordinated with civil authority, the only exception being when the law clearly ordains otherwise. Neither Republic Act 2207, nor Republic Act 3452, contains any exception in favor of military action concerning importation of rice and corn. An exception must be strictly construed. A distinction is made between the government and government agency in an attempt to take the former out of the operation of Republic Act 2207. I disagree. The Government of the Republic of the Philippines under the Revised Administrative Code refers to that entity through which the functions of government are exercised, including the various arms through which political authority is made effective whether they be provincial, municipal or other form of local government, whereas a government instrumentality refers to corporations owned or controlled by the government to promote certain aspects of the economic life of our people. A government agency, therefore, must necessarily refer to the government itself of the Republic, as distinguished from any government instrumentality which has a personality distinct and separate from it (Section 2). The important point to determine, however, is whether we should enjoin respondents from carrying out the importation of the rice which according to the record has been authorized to be imported on government to government level, it appearing that the arrangement to this effect has already been concluded, the only thing lacking being its implementation. This is evident from the manifestation submitted by the Solicitor General wherein it appears that the contract for the purchase of 47,000 tons of rice from had been sign on October 5, 1963, and for the purchase of 20,000 tons from Burma on October 8, 1963, by the authorized representatives of both our government and the governments of Vietnam and Burma, respectively. If it is true that, our

government has already made a formal commitment with the selling countries there arises the question as to whether the act can still be impeded at this stage of the negotiations. Though on this score there is a divergence of opinion, it is gratifying to note that the majority has expressed itself against it. This is a plausible attitude for, had the writ been issued, our government would have been placed in a predicament where, as a necessary consequence, it would have to repudiate a duly formalized agreement to its great embarrassment and loss of face. This was avoided by the judicial statesmanship evinced by the Court.

BARRERA, J., concurring: Because of possible complications that might be aggravated by misrepresentation of the true nature and scope of the case before this Court, it is well to restate as clearly as possible, the real and only issue presented by the respondents representing the government. From the answer filed by the Solicitor General, in behalf of respondents, we quote: The importation of the rice in question by the Armed Forces of the Philippines is for military stockpilingauthorized by the President pursuant to his inherent power as commander-in-chief and as a military precautionary measure in view the worsening situation in Laos and Vietnam and, it may added, the recent, tension created by the Malaysia problem (Answer, p. 2; emphasis supplied.) During the oral argument, Senator Fernandez, appealing in behalf of the respondents, likewise reiterated the imported rice was for military stockpiling, and which he admitted that some of it went to the Rice and Corn Administration, he emphasized again and again that rice was not intended for the RCA for distribution to people, as there was no shortage of rice for that purpose but it was only exchanged for palay because this could better preserved. From the memorandum filed thereafter by the Solicits General, again the claim was made: We respectfully reiterate the arguments in our answer dated October 4, 1963 that the importation of rice sought be enjoined in this petition is in the exercise of the authority vested in the President of the Philippines as Commander-in-Chief of the Armed Forces, as a measure of military preparedness demanded by a real and actual threat of emergency in the South East Asian countries. (p. 1, Emphasis supplied.) xxx xxx xxx It (the stressing of the unsettled conditions in Southeast Asia) is merely our intention to show the necessity for the stockpiling of rice for army purposes, which is the very reason for the importation. xxx xxx xxx As it is, the importation in question is being made by the Republic of the Philippines for its own use, and the rice is not supposed to be poured into the open market as to affect the price to be paid by the public. (p. 4, Emphasis supplied.) xxx xxx xxx What we do contend is that the law, for want of express and clear provision to that effect, does not include in its prohibition importation by the Government of rice for its own use and not for the consuming public, regardless of whether there is or there is no emergency. (p. 5, Emphasis supplied.)

From the above, it not only appears but is evident that the respondents were not concerned with the present rice situation confronting the consuming public, but were solely and exclusively after the stockpiling of rice for thefuture use of the army. The issue, therefore, in which the Government was interested is not whether rice is imported to give the people a bigger or greater supply to maintain the price at P.80 per ganta for, to quote again their contention: "the rice is not supposed to be poured into the open market to affect the price to be paid by the public, as it is not for the consuming public, regardless of whether there is or there is no emergency", but whether rice can legally be imported by the Armed Forces of the Philippines avowedly for its future use, notwithstanding the prohibitory provisions of Republic Acts Nos. 2207 and 3452. The majority opinion ably sets forth the reasons why this Court can not accept the contention of the respondents that this importation is beyond and outside the operation of these statutes. I can only emphasize that I see in the theory advanced by the Solicitor General a dangerous trend that because the policies enunciated in the cited laws are for the protection of the producers and the consumers, the army is removed from their application. To adopt this theory is to proclaim the existence in the Philippines of three economic groups or classes: the producers, the consumers, and the Armed Forces of the Philippines. What is more portentous is the effect to equate the army with the Government itself. Then again, the importation of this rice for military stockpiling is sought to be justified by the alleged threat of emergency in the Southeast Asian countries. But the existence of this supposed threat was unilaterally determined by the Department of National Defense alone. We recall that there exists a body called the National Security Council in which are represented the Executive as well as the Legislative department. In it sit not only members of the party in power but of the opposition as well. To our knowledge, this is the highest consultative body which deliberates precisely in times of emergency threatening to affect the security of the state. The democratic composition of this council is to guarantee that its deliberations would be non-partisan and only the best interests of the nation will be considered. Being a deliberative body, it insures against precipitate action. This is as it should be. Otherwise, in these days of ever present cold war, any change or development in the political climate in any region of the world is apt to be taken as an excuse for the military to conjure up a crisis or emergency and thereupon attempt to override our laws and legal processes, and imperceptibly institute some kind of martial law on the pretext of precautionary mobilization measure avowedly in the interest of the security of the state. One need not, be too imaginative to perceive a hint of this in the present case. The Supreme Court, in arriving at the conclusion unanimously reached, is fully aware of the difficult and delicate task it had to discharge. Its position is liable to be exploited by some for their own purposes by claiming and making it appear that the Court is unmindful of the plight of our people during these days of hardship; that it preferred to give substance to the "niceties of the law than heed the needs of the people. Our answer is that the Court was left no alternative. It had, in compliance with its duty, to decide the case upon the facts presented to it. The respondents, representing the administration, steadfastly maintained and insisted that there is no rice shortage; that the imported rice is not for the consuming public and is not supposed to be placed in the open market to affect the price to be paid by the public; that it is solely for stockpiling of the army for future use as a measure of mobilization in the face of what the Department of National Defense unilaterally deemed a threatened armed conflict in Southeast Asia. Confronted with these facts upon, which the Government has built and rested its case, we have searched in vain for legal authority or cogent reasons to justify this importation made admittedly contrary to the provisions of Republic Acts

Nos. 2207 and 3452. I say admittedly, because respondents never as much as pretended that the importation fulfills the conditions specified in these laws, but limited themselves to the contention, which is their sole defense that this importation does not fall within the scope of said laws. In our view, however, the laws are clear. The laws are comprehensive and their application does not admit of any exception. The laws are adequate. Compliance therewith is not difficult, much less impossible. The avowed emergency, if at all, is not urgently immediate. In this connection, it is pertinent to bear in mind that the Supreme Court has a duty to perform under the Constitution. It has to decide, when called upon to do so in an appropriate proceeding, all cases in which the constitutionality or validity of any treaty, law, ordinance, executive order or regulation is in question. We can not elude this duty. To do so would be culpable dereliction on our part. While we sympathize with the public that might be adversely affected as a result of this decision yet our sympathy does not authorize us to sanction an act contrary to applicable laws. The fault lies with those who stubbornly contended and represented before this Court that there is no rice shortage, that the imported rice is not intended for the consuming public, but for stockpiling of the army. And, if as now claimed before the public, contrary to the Government's stand in this case, that there is need for imported rice to stave off hunger, our legislature has provided for such a situation. As already stated, the laws are adequate. The importation of rice under the conditions set forth in the laws may be authorized not only where there is an existing shortage, but also when the shortage is imminent. In other words, lawful remedy to solve the situation is available, if only those who have the duty to execute the laws perform their duty. If there is really need for the importation of rice, who adopt some dubious means which necessitates resort to doubtful exercise of the power of the President as Commanderin-Chief of the Army? Why not comply with the mandate of the law? Ours is supposed to be a regime under the rule of law. Adoption as a government policy of the theory of the end justifies the means brushing aside constitutional and legal restraints, must be rejected, lest we end up with the end of freedom. For these reasons, I concur in the decision of the Court.

Separate Opinions Footnotes 1 The Secretary of National Defense, the Auditor General, the Secretary of Commerce and Industry, and the Secretary Justice. 2 275 hectares. 3 Tapales vs. The President and the Board of Regents of the U.P., L-17523, March 30, 1963. 4 Mangubat vs. Osmea, L-12837, April 30, 1959; Baguio vs. Hon. Jose Rodriguez, L-11078, May 27, 1959; Pascual Provincial Board, L-11959, October 31, 1959. 5 Marinduque Iron Mines Agents, Inc. vs. Secretary of Public Works, L15982, May 31, 1963. 6 In the present case, respondents allege in their answer that "the importation ... in question ... is authorized by the President. 7 Alzate vs. Aldaba, L-14407, February 29, 1960; Demaisip vs. Court of Appeals, L-13000, September 25, 1959. 8 Which provides that the national defense policy of the Philippines shall be follows: (a) The preservation of the state is the obligation of every citizen. The security of the Philippines and the freedom, independence and

perpetual neutrality of the Philippine Republic shall be guaranteed by the employment of all citizens, without distinction of sex or age, and all resources. (b) The employment of the nation's citizens and resources for national defense shall be effected by a national mobilization. (c) The national mobilization shall include the execution of all measures necessary to pass from a peace to a war footing. (d) The civil authority shall always be supreme. The President of the Philippines as the Commander-in-Chief of all military forces, shall be responsible that mobilization measures are prepared at all times. xxx xxx xxx 9 In line with the provisions of paragraphs b), c), e), and f) of section 2 of said Act. 10 The Constitution and What It Means Today, pp. 95-96. 11 The Power of the President as Commander-in-Chief is primarily that of military command in wartime, and as such includes, as against the persons and property of enemies of the United States encountered within the theater of military operations, all the powers allowed a military commander in such cases by the Law of Nations. President Lincoln's famous Proclamation of Emancipation rested upon this ground. It was effective within the theater of military operations while the war lasted, but no longer. (p. 93, Emphasis supplied.) 12 From an early date the Commander-in-Chief power came to be merged with the President's duty to take care that the laws be faithfully executed. So, while in using military force against unlawful combinations too strong to be dealt with through the ordinary processes of law the President acts by authorization of statute, his powers are still those of Commander-in-Chief. ... Under "preventive martial law", so-called because it authorizes "preventive" arrests and detentions, the military acts as an adjunct of the civil authorities but not necessarily subject to their orders. It may be established whenever the executive organ, State or national, deems it to be necessary for the restoration of good order. The concept, being of judicial origin, is of course for judicial application, and ultimately for application by the Supreme Court, in enforcement of the due process clauses. (See, also, Section III of this Article, and Article IV, Section IV.) (Pp. 95-96, Emphasis supplied.)

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-65366 November 9, 1983 JOSE B.L. REYES, in behalf of the ANTI-BASES COALITION (ABC), petitioner, vs. RAMON BAGATSING, as Mayor of the City of Manila, respondent. Lorenzo M. Taada Jose W. Diokno and Haydee B. Yorac for petitioner. The Solicitor General for respondent. FERNANDO, C.J.:+.wph!1 This Court, in this case of first impression, at least as to some aspects, is called upon to delineate the boundaries of the protected area of the cognate rights to free speech 1 and peaceable assembly, against an alleged intrusion by respondent Mayor Ramon Bagatsing. Petitioner, retired Justice JB L. Reyes, on behalf of the Anti-Bases Coalition sought a permit from the City of Manila to hold a peaceful march and rally on October 26, 1983 from 2:00 to 5:00 in the afternoon, starting from the Luneta, a public park, to the gates of the United States Embassy, hardly two blocks away. Once there, and in an open space of public property, a short program would be 2 3 held. During the course of the oral argument, it was stated that after the delivery of two brief speeches, a petition based on the resolution adopted on the last day by the International Conference for General Disbarmament, World Peace and the Removal of All Foreign Military Bases held in Manila, would be presented to a representative of the Embassy or any of its personnel who may be there so that it may be delivered to the United States Ambassador. The march would be attended by the local and foreign participants of such conference. There was likewise an assurance in the petition that in the exercise of the constitutional rights to free speech and assembly, all the 4 necessary steps would be taken by it "to ensure a peaceful march and rally." The filing of this suit for mandamus with alternative prayer for writ of preliminary mandatory injunction on October 20, 1983 was due to the fact that as of that date, petitioner had not been informed of any action taken on his request on behalf of the organization to hold a rally. On October 25, 1983, the answer of respondent Mayor 5 was filed on his behalf by Assistant Solicitor General Eduardo G. Montenegro. It turned out that on October 19, such permit was denied. Petitioner was unaware of such a fact as the denial was sent by ordinary mail. The reason for refusing a permit was due to police intelligence reports which strongly militate against the advisability of 6 issuing such permit at this time and at the place applied for." To be more specific, reference was made to persistent intelligence reports affirm[ing] the plans of subversive/criminal elements to infiltrate and/or disrupt any assembly or 7 congregations where a large number of people is expected to attend." Respondent Mayor suggested, however, in accordance with the recommendation of the police authorities, that "a permit may be issued for the rally if it is to be held at the Rizal Coliseum or any other enclosed area where the safety of the participants themselves 8 and the general public may be ensured." The oral argument was heard on October 25, 1983, the very same day the answer was filed. The Court then deliberated on the matter. That same afternoon, a minute resolution was issued by the Court granting the mandatory injunction prayed for on the ground that there was no showing of the existence of a clear and present danger of a substantive evil that could justify the denial of a permit. On this point, the Court was unanimous, but there was a dissent by Justice Aquino on the ground that the

holding of a rally in front of the US Embassy would be violative of Ordinance No. 7295 of the City of Manila. The last sentence of such minute resolution reads: "This 9 resolution is without prejudice to a more extended opinion." Hence this detailed exposition of the Court's stand on the matter. 1. It is thus clear that the Court is called upon to protect the exercise of the cognate rights to free speech and peaceful assembly, arising from the denial of a permit. The Constitution is quite explicit: "No law shall be passed abridging the freedom of speech, or of the press, or the right of the people peaceably to assemble and petition 10 the Government for redress of grievances." Free speech, like free press, may be Identified with the liberty to discuss publicly and truthfully any matter of public concern 11 without censorship or punishment. There is to be then no previous restraint on the 12 communication of views or subsequent liability whether in libel suits, prosecution for 13 14 15 sedition, or action for damages, or contempt proceedings unless there be a clear and present danger of a substantive evil that [the State] has a right to 16 prevent." Freedom of assembly connotes the right people to meet peaceably for 17 consultation and discussion of matters Of public concern. It is entitled to be accorded the utmost deference and respect. It is hot to be limited, much less denied, except on a showing, as 's the case with freedom of expression, of a clear and 18 present danger of a substantive evil that the state has a right to prevent. Even prior to the 1935 Constitution, Justice Maicolm had occasion to stress that it is a necessary consequence of our republican institutions and complements the right of free 19 speech. To paraphrase opinion of Justice Rutledge speaking for the majority of 20 the American Supreme Court Thomas v. Collins, it was not by accident or coincidence that the right to freedom of speech and of the press were toupled in a single guarantee with the and to petition the rights of the people peaceably to assemble and to petition the government for redress of grievances. All these rights, while not Identical, are inseparable. the every case, therefo re there is a limitation placed on the exercise of this right, the judiciary is called upon to examine the effects of the challenged governmental actuation. The sole justification for a limitation on the exercise of this right, so fundamental to the maintenance of democratic institutions, is the danger, of a character both grave and imminent, of a serious evil to public safety, 21 public morals, public health, or any other legitimate public interest. 2. Nowhere is the rationale that underlies the freedom of expression and peaceable assembly better expressed than in this excerpt from an opinion of Justice Frankfurter: "It must never be forgotten, however, that the Bill of Rights was the child of the Enlightenment. Back of the guaranty of free speech lay faith in the power of an appeal to reason by all the peaceful means for gaining access to the mind. It was in order to avert force and explosions due to restrictions upon rational modes of communication that the guaranty of free speech was given a generous scope. But utterance in a context of violence can lose its significance as an appeal to reason and become part of an instrument of force. Such utterance was not meant to be sheltered by the 22 Constitution." What was rightfully stressed is the abandonment of reason, the utterance, whether verbal or printed, being in a context of violence. It must always be remembered that this right likewise provides for a safety valve, allowing parties the opportunity to give vent to their-views, even if contrary to the prevailing climate of opinion. For if the peaceful means of communication cannot be availed of, resort to non-peaceful means may be the only alternative. Nor is this the sole reason for the expression of dissent. It means more than just the right to be heard of the person who feels aggrieved or who is dissatisfied with things as they are. Its value may lie in the fact that there may be something worth hearing from the dissenter. That is to ensure a true ferment of Ideas. There are, of course, well-defined limits. What is guaranteed is peaceable assembly. One may not advocate disorder in the name of protest, much

less preach rebellion under the cloak of dissent. The Constitution frowns on disorder or tumult attending a rally or assembly. resort to force is ruled out and outbreaks of violence to be avoided. The utmost calm though is not required. As pointed out in an 23 early Philippine case, penned in 1907 to be precise, United States v. Apurado: "It is rather to be expected that more or less disorder will mark the public assembly of the people to protest against grievances whether real or imaginary, because on such occasions feeling is always wrought to a high pitch of excitement, and the greater the grievance and the more intense the feeling, the less perfect, as a rule, will be the 24 disciplinary control of the leaders over their irresponsible followers." It bears repeating that for the constitutional right to be invoked, riotous conduct, injury to property, and acts of vandalism must be avoided, To give free rein to one's destructive urges is to call for condemnation. It is to make a mockery of the high estate occupied by intellectual liberty in our scheme of values. 3. There can be no legal objection, absent the existence of a clear and present danger of a substantive evil, on the choice of Luneta as the place where the peace rally would start. The Philippines is committed to the view expressed in the plurality 25 opinion, of 1939 vintage, of Justice Roberts in Hague v. CIO: Whenever the title of streets and parks may rest, they have immemorially been held in trust for the use of the public and, time out of mind, have been used for purposes of assembly, communicating thoughts between citizens, and discussing public questions. Such use of the streets and public places has, from ancient times, been a part of the privileges, immunities, rights, and liberties of citizens. The privilege of a citizen of the United States to use the streets and parks for communication of views on national questions may be regulated in the interest of all; it is not absolute, but relative, and must be exercised in subordination to the general comfort and convenience, and in consonance with peace and good order; but it must not, in the guise of regulation, be 26 abridged or denied. The above excerpt was quoted with approval in Primicias v. 27 Fugoso. Primicias made explicit what was implicit in Municipality of Cavite v. 28 Rojas," a 1915 decision, where this Court categorically affirmed that plazas or parks and streets are outside the commerce of man and thus nullified a contract that leased Plaza Soledad of plaintiff-municipality. Reference was made to such plaza 29 "being a promenade for public use," which certainly is not the only purpose that it could serve. To repeat, there can be no valid reason why a permit should not be granted for the or oposed march and rally starting from a public dark that is the Luneta. 4. Neither can there be any valid objection to the use of the streets, to the gates of the US Embassy, hardly two block-away at the Roxas Boulevard. Primicias v. Fugoso has resolved any lurking doubt on the matter. In holding that the then Mayor Fugoso of the City of Manila should grant a permit for a public meeting at Plaza Miranda in Quiapo, this Court categorically declared: "Our conclusion finds support in the decision in the case of Willis Cox vs. State of New Hampshire, 312 U.S., 569. In that case, the statute of New Hampshire P. L. chap. 145, section 2, providing that 'no parade or procession upon any ground abutting thereon, shall 'De permitted unless a special license therefor shall first be explained from the selectmen of the town or from licensing committee,' was construed by the Supreme Court of New Hampshire as not conferring upon the licensing board unfettered discretion to refuse to grant the license, and held valid. And the Supreme Court of the United States, in its decision (1941) penned by Chief Justice Hughes affirming the judgment of the State Supreme Court, held that 'a statute requiring persons using the public streets for a parade or procession to procure a special license therefor from the local authorities is not an unconstitutional abridgment of the rights of assembly or of freedom of speech and press, where, as the statute is construed by the state courts, the licensing authorities

are strictly limited, in the issuance of licenses, to a consideration of the time, place, and manner of the parade or procession, with a view to conserving the public convenience and of affording an opportunity to provide proper policing, and are not 30 invested with arbitrary discretion to issue or refuse license, ... " Nor should the point made by Chief Justice Hughes in a subsequent portion of the opinion be ignored, "Civil liberties, as guaranteed by the Constitution, imply the existence of an organized society maintaining public order without which liberty itself would be lost in the excesses of unrestricted abuses. The authority of a municipality to impose regulations in order to assure the safety and convenience of the people in the use of public highways has never been regarded as inconsistent with civil liberties but rather as one of the means of safeguarding the good order upon which they ultimately depend. The control of travel on the streets of cities is the most familiar illustration of this recognition of social need. Where a restriction of the use of highways in that relation is designed to promote the public convenience in the interest of all, it cannot be disregarded by the attempted exercise of some civil right which in other 31 circumstances would be entitled to protection." 5. There is a novel aspect to this case, If the rally were confined to Luneta, no question, as noted, would have arisen. So, too, if the march would end at another park. As previously mentioned though, there would be a short program upon reaching the public space between the two gates of the United States Embassy at Roxas Boulevard. That would be followed by the handing over of a petition based on the resolution adopted at the closing session of the Anti-Bases Coalition. The Philippines is a signatory of the Vienna Convention on Diplomatic Relations adopted in 1961. It was concurred in by the then Philippine Senate on May 3, 1965 and the instrument of ratification was signed by the President on October 11, 1965, and was thereafter deposited with the Secretary General of the United Nations on November 15. As of that date then, it was binding on the Philippines. The second paragraph of the Article 22 reads: "2. The receiving State is under a special duty to take appropriate steps to protect the premises of the mission against any intrusion or damage and to prevent 32 any disturbance of the peace of the mission or impairment of its dignity. " The Constitution "adopts the generally accepted principles of international law as part of 33 the law of the land. ..." To the extent that the Vienna Convention is a restatement of the generally accepted principles of international law, it should be a part of the law of 34 the land. That being the case, if there were a clear and present danger of any intrusion or damage, or disturbance of the peace of the mission, or impairment of its dignity, there would be a justification for the denial of the permit insofar as the terminal point would be the Embassy. Moreover, respondent Mayor relied on Ordinance No. 7295 of the City of Manila prohibiting the holding or staging of rallies or demonstrations within a radius of five hundred (500) feet from any foreign mission or chancery and for other purposes. Unless the ordinance is nullified, or declared ultra vires, its invocation as a defense is understandable but not decisive, in view of the primacy accorded the constitutional rights of free speech and peaceable assembly. Even if shown then to be applicable, that question the confronts this Court. 6. There is merit to the observation that except as to the novel aspects of a litigation, the judgment must be confined within the limits of previous decisions. The law declared on past occasions is, on the whole, a safe guide, So it has been here. Hence, as noted, on the afternoon of the hearing, October 25, 1983, this Court issued the minute resolution granting the mandatory injunction allowing the proposed march and rally scheduled for the next day. That conclusion was inevitable ill the absence of a clear and present danger of a substantive, evil to a legitimate public interest. There was no justification then to deny the exercise of the constitutional rights of tree speech and peaceable assembly. These rights are assured by our Constitution and

the Universal Declaration of Human Rights. The participants to such assembly, composed primarily of those in attendance at the International Conference for General Disbarmament, World Peace and the Removal of All Foreign Military Bases would start from the Luneta. proceeding through Roxas Boulevard to the gates of the United States Embassy located at the same street. To repeat, it is settled law that as to public places, especially so as to parks and streets, there is freedom of access. Nor is their use dependent on who is the applicant for the permit, whether an individual or a group. If it were, then the freedom of access becomes discriminatory access, giving rise to an equal protection question. The principle under American doctrines was given utterance by Chief Justice Hughes in these words: "The question, if the rights of free speech and peaceable assembly are to be preserved, is not as to the auspices under which the meeting is held but as to its purpose; not as to The relations of the speakers, but whether their utterances transcend the bounds of the 36 freedom of speech which the Constitution protects." There could be danger to public peace and safety if such a gathering were marked by turbulence. That would deprive it of its peaceful character. Even then, only the guilty parties should be held accountable. It is true that the licensing official, here respondent Mayor, is not devoid of discretion in determining whether or not a permit would be granted. It is not, however, unfettered discretion. While prudence requires that there be a realistic appraisal not of what may possibly occur but of what may probably occur, given all the relevant circumstances, still the assumption especially so where the assembly is scheduled for a specific public place is that the permit must be for the assembly being held there. The exercise of such a right, in the language of Justice Roberts, speaking for the American Supreme Court, is not to be "abridged on the plea that it 37 may be exercised in some other place." 7. In fairness to respondent Mayor, he acted on the belief that Navarro v. 38 39 Villegas and Pagkakaisa ng Manggagawang Pilipino (PMP.) v. Bagatsing, called for application. While the General rule is that a permit should recognize the right of the applicants to hold their assembly at a public place of their choice, another place may be designated by the licensing authority if it be shown that there is a clear and present danger of a substantive evil if no such change were made. In the Navarro and the Pagkakaisa decisions, this Court was persuaded that the clear and present danger test was satisfied. The present situation is quite different. Hence the decision reached by the Court. The mere assertion that subversives may infiltrate the ranks of the demonstrators does not suffice. Not that it should be overlooked. There was in this case, however, the assurance of General Narciso Cabrera, Superintendent, Western Police District, Metropolitan Police Force, that the police force is in a position to cope with such emergency should it arise That is to comply with its duty to extend protection to the participants of such peaceable assembly. Also from him came the commendable admission that there were the least five previous demonstrations at the Bayview hotel Area and Plaza Ferguson in front of the United States Embassy where no untoward event occurred. It was made clear by petitioner, through counsel, that no act offensive to the dignity of the United States Mission in the Philippines would take place and that, as mentioned at the outset of this opinion, "all the necessary steps 40 would be taken by it 'to ensure a peaceful march and rally.' " Assistant Solicitor General Montenegro expressed the view that the presence of policemen may in itself be a provocation. It is a sufficient answer that they should stay at a discreet distance, but ever ready and alert to cope with any contingency. There is no need to repeat what was pointed out by Chief Justice Hughes in Cox that precisely, it is the duty of the city authorities to provide the proper police protection to those exercising their right to peaceable assembly and freedom of expression.

35

8. By way of a summary The applicants for a permit to hold an assembly should inform the licensing authority of the date, the public place where and the time when it will take place. If it were a private place, only the consent of the owner or the one entitled to its legal possession is required. Such application should be filed well ahead in time to enable the public official concerned to appraise whether there may be valid objections to the grant of the permit or to its grant but at another public place. It is an indispensable condition to such refusal or modification that the clear and present danger test be the standard for the decision reached. If he is of the view that there is such an imminent and grave danger of a substantive evil, the applicants must be heard on the matter. Thereafter, his decision, whether favorable or adverse, must be transmitted to them at the earliest opportunity. Thus if so minded, then, can have recourse to the proper judicial authority. Free speech and peaceable assembly, along with the other intellectual freedoms, are highly ranked in our scheme of constitutional values. It cannot be too strongly stressed that on the judiciary, even more so than on the other departments rests the grave and delicate responsibility of assuring respect for and deference to such preferred rights. No verbal formula, no sanctifying phrase can, of course, dispense with what has been so felicitiously termed by Justice Holmes "as the sovereign prerogative of judgment." Nonetheless, the presumption must be to incline the weight of the scales of justice on the side of such rights, enjoying as they do precedence and primacy. Clearly then, to the extent that there may be inconsistencies between this resolution and that of Navarro v. Villegas, that case is pro tanto modified. So it was made clear in the original resolution of October 25, 1983. 9. Respondent Mayor posed the issue of the applicability of Ordinance No. 7295 of the City of Manila prohibiting the holding or staging of rallies or demonstrations within a radius of five hundred (500) feet from any foreign mission or chancery and for other purposes. It is to be admitted that it finds support In the previously quoted Article 22 of the Vienna Convention on Diplomatic Relations. There was no showing, however, that the distance between the chancery and the embassy gate is less than 500 feet. Even if it could be shown that such a condition is satisfied. it does not follow that respondent Mayor could legally act the way he did. The validity of his denial of the permit sought could still be challenged. It could be argued that a case of unconstitutional application of such ordinance to the exercise of the right of peaceable assembly presents itself. As in this case there was no proof that the distance is less than 500 feet, the need to pass on that issue was obviated, Should it come, then the qualification and observation of Justices Makasiar and Plana certainly cannot be summarily brushed aside. The high estate accorded the rights to free speech and peaceable assembly demands nothing less. 10. Ordinarily, the remedy in cases of this character is to set aside the denial or the modification of the permit sought and order the respondent official, to grant it. Nonetheless, as there was urgency in this case, the proposed march and rally being scheduled for the next day after the hearing, this Court. in the exercise of its conceded authority, granted the mandatory injunction in the resolution of October 25, 1983. It may be noted that the peaceful character of the peace march and rally on October 26 was not marred by any untoward incident. So it has been in other assemblies held elsewhere. It is quite reassuring such that both on the part of the national government and the citizens, reason and moderation have prevailed. That is as it should be. WHEREFORE, the mandatory injunction prayed for is granted. No costs. Concepcion, Jr., Guerrero, Melencio-Herrera, Escolin, Relova and Gutierrez, , Jr.,JJ., concur. De Castro, J, is on leave.

Separate Opinions TEEHANKEE, J., concurring: The Chief Justice's opinion of the Court reaffirms the doctrine of Primicias vs. 1 Fugoso that "the right to freedom of speech and to peacefully assemble and petition the government for redress of grievances are fundamental personal rights of the people recognized and guaranteed by the constitutions of democratic countries" and that the city or town mayors are not conferred "the power to refuse to grant the permit, but only the discretion, in issuing the permit, to determine or specify the streets or public places where the parade or procession may pass or the meeting may be held." The most recent graphic demonstration of what this great right of peaceful assembly and petition for redress of grievances could accomplish was the civil rights march on Washington twenty years ago under the late assassinated black leader Martin Luther King, Jr. (whose birthday has now been declared an American national holiday) which subpoenaed the conscience of the nation," and awakened the conscience of millions of previously indifferent Americans and eventually (after many disorders and riots yet to come) was to put an end to segregation and discrimination against the American Negro. The procedure for the securing of such permits for peaceable assembly is succintly set forth in the summary given by the Court Justice in paragraph 8 of the Court's opinion, with the injunction that "the presumption must be to incline the weight of the scales of justice on the side of such rights, enjoying as they do, precedence and primacy," The exception of the clear and present danger rule, which alone would warrant a limitation of these fundamental rights, is therein restated in paragraph 1, thus: "The sole justification for a limitation on the exercise of this right, so fundamental to the maintenance of democratic institutions, is the danger, of a character both grave and imminent, of a serious evil to public safety, public morals, public health, or any other legitimate public interest. " It bears emphasis that the burden to show the existence of grave and imminent danger that would justify adverse action on the application lies on the mayor as licensing authority. There must be objective and convincing, not subjective or conjectural proof of the existence of such clear and present danger. As stated in our Resolution of October 25, 1983, which granted the mandatory injunction as prayed for, "It is essential for the validity of a denial of a permit which amounts to a previous restraint or censorship that the licensing authority does not rely solely on his own appraisal of what public welfare, peace or safety may require. To justify such a limitation there must be proof of such weight and sufficiency to satisfy the clear and present danger test. The possibility that subversives may infiltrate the ranks of the demonstrators is not enough." As stated by Justice Brandeis in his concurring opinion 2 in Whitney vs. California. t.hqw Fear of serious injury cannot alone justify suppression of free speech and assembly. Men feared witches and burned women. It is the function of speech to free men from the bondage of irrational fears. To justify suppression of free speech there must be reasonable ground to fear that serious evil will result if free speech is practiced. There must be reasonable ground to believe that the danger apprehended is imminent. There must be reasonable ground to believe that the evil to be prevented is a serious one * * *.

Those who won our independence by revolution were not cowards. They did not fear political change. They did not exalt order at the cost of liberty. * * * Moreover, even imminent danger cannot justify resort to prohibition of these functions essential (for) effective democracy, unless the evil apprehended is relatively serious. Prohibition of free speech and assembly is a measure so stringent that it would be inappropriate as the means for averting a relatively trivial harm to a society. * * * The fact that speech is likely to result in some violence or in destruction of property is not enough to justify its suppression. There must be the probability of serious injury to the state. Among freemen the deterrents ordinarily to be applied to prevent crimes are education and punishment for violations of the law, not abridgment of the rights of free speech and assembly. (Emphasis supplied) The Court's opinion underscores that the exercise of the right is not to be "abridged on the plea that it may be exercised in some other place" (paragraph 6), and that "it is the duty of the city authorities to provide the proper police protection to those exercising their right to peaceable assembly and freedom of expression," (at page 14) The U.S. Supreme Court's pronouncement in Hague vs. Committee for 3 Industrial Organization cited in Fugoso is worth repeating: t.hqw * * * Wherever the title of streets and parks may rest, they have immemorially been held in trust for the use of the public and, time out of mind, have been used for purposes of assembly, communicating thoughts between citizens, and discussing public questions. Such use of the streets and public places has, from ancient times, been a part of the privileges, immunities, rights, and liberties of citizens. The privilege of a citizen * * * to use the streets and parks for communication of views on national questions may be regulated in the interest of all; it is not absolute, but relative, and must be exercised in subordination to the general comfort and convenience, and in consonance with peace and good order; but it must not, in the guise of regulation, be abridged or denied. We think the court below was right in holding the ordinance quoted in Note I void upon its face. It does not make comfort or convenience in the use of streets or parks the standard of official action. It enables the Director of Safety to refuse a permit on his mere opinion that such refusal will prevent 'riots, disturbances or disorderly assemblage. It can thus, as the record discloses, be made theinstrument of arbitrary suppression of free expression of views on national affairs for the prohibition of all speaking will undoubtedly 'prevent' such eventualities. But uncontrolled official suppression of the privilege cannot be made a substitute for the duty to maintain order in connection with the exercise of the right. (Emphasis supplied) Needless to say, the leaders of the peaceable assembly should take all the necessary measures to ensure a peaceful march and assembly and to avoid the possibility of infiltrators and troublemakers disrupting the same, concommitantly with the duty of the police to extend protection to the participants "staying at a discreet distance, but ever ready and alert to perform their duty." But should any disorderly conduct or incidents occur, whether provoked or otherwise, it is well to recall former Chief Justice Ricardo Paras' injunction in his concurring opinion inFugoso, citing the 1907 case

of U.S. vs. Apurado, that such instances of "disorderly conduct by individual members of a crowd (be not seized) as an excuse to characterize the assembly as a seditious and tumultuous rising against the authorities" and render illusory the right of peaceable assembly, thus: t.hqw It is rather to be expected that more or less disorder will mark the public assembly of the people to protest against grievances whether real or imaginary, because on such occasions feeling is always wrought to a high pitch of excitement, and the greater the grievance and the more intense the feeling, the less perfect, as a rule, will the disciplinary control of the leaders over their irresponsible followers.But if the prosecution be permitted to seize upon every instance of such disorderly conduct by individual members of a crowd as an excuse to characterize the assembly as a seditious and tumultous rising against the authorities, 'then the right to assemble and to petition for redress of grievances would become a delusion and snare and the attempt to exercise it on the most righteous occasion and in the most peaceable manner would expose all those who took part therein to the severest and most unmerited punishment, if the purposes which they sought to attain did not happen to be pleasing to the prosecuting authorities. If instances of disorderly conduct occur on such occasions, the guilty individuals should be sought out and punished therefor. (Emphasis supplied). As it turned out, the demonstration was held on October 26, 1983 peaceably and without any untoward event or evil result, as pledged by the organizers (like at least five previous peaceful demonstrations in the area). However, even if there had been any incidents of disorder, this would in no way show the Court's mandatory injunction to have been wrongfully issued. The salutary desire on the part of respondent to prevent disorder cannot be pursued by the unjustified denial and suppression of the people's basic rights, which would thereby turn out to be mere paper rights. MAKASIAR, J., concurring: With the justification that in case of conflict, the Philippine Constitution particularly the Bill of Rights should prevail over the Vienna Convention. ABAD SANTOS, J., concurring: To add anything to the learned opinion of the Chief Justice is like bringing coal to Newcastle, I just want to state for the record that I voted for the issuance ex-parte of a preliminary mandatory injunction. PLANA, J., concurring: On the whole, I concur in the learned views of the distinguished Chief Justice. I would like however to voice a reservation regarding Ordinance No. 7295 of the City of Manila which has been invoked by the respondent. The main opinion yields the implication that a rally or demonstration made within 500 feet from the chancery of a foreign embassy would be banned for coming within the terms of the prohibition of the cited Ordinance which was adopted, so it is said, precisely to implement a treaty obligation of the Philippines under the 1961 Vienna Convention on Diplomatic Relations. In my view, without saying that the Ordinance is obnoxious per se to the constitution, it cannot be validly invoked whenever its application would collide with a constitutionally guaranteed right such as freedom of assembly and/or expression, as

in the case at bar, regardless of whether the chancery of any foreign embassy is beyond or within 500 feet from the situs of the rally or demonstration. AQUINO, J., dissenting: Voted to dismiss the petition on the ground that the holding of the rally in front of the US Embassy violates Ordinance No. 7295 of the City of Manila. Separate Opinions TEEHANKEE, J., concurring: The Chief Justice's opinion of the Court reaffirms the doctrine of Primicias vs. 1 Fugoso that "the right to freedom of speech and to peacefully assemble and petition the government for redress of grievances are fundamental personal rights of the people recognized and guaranteed by the constitutions of democratic countries" and that the city or town mayors are not conferred "the power to refuse to grant the permit, but only the discretion, in issuing the permit, to determine or specify the streets or public places where the parade or procession may pass or the meeting may be held." The most recent graphic demonstration of what this great right of peaceful assembly and petition for redress of grievances could accomplish was the civil rights march on Washington twenty years ago under the late assassinated black leader Martin Luther King, Jr. (whose birthday has now been declared an American national holiday) which subpoenaed the conscience of the nation," and awakened the conscience of millions of previously indifferent Americans and eventually (after many disorders and riots yet to come) was to put an end to segregation and discrimination against the American Negro. The procedure for the securing of such permits for peaceable assembly is succintly set forth in the summary given by the Court Justice in paragraph 8 of the Court's opinion, with the injunction that "the presumption must be to incline the weight of the scales of justice on the side of such rights, enjoying as they do, precedence and primacy," The exception of the clear and present danger rule, which alone would warrant a limitation of these fundamental rights, is therein restated in paragraph 1, thus: "The sole justification for a limitation on the exercise of this right, so fundamental to the maintenance of democratic institutions, is the danger, of a character both grave and imminent, of a serious evil to public safety, public morals, public health, or any other legitimate public interest. " It bears emphasis that the burden to show the existence of grave and imminent danger that would justify adverse action on the application lies on the mayor as licensing authority. There must be objective and convincing, not subjective or conjectural proof of the existence of such clear and present danger. As stated in our Resolution of October 25, 1983, which granted the mandatory injunction as prayed for, "It is essential for the validity of a denial of a permit which amounts to a previous restraint or censorship that the licensing authority does not rely solely on his own appraisal of what public welfare, peace or safety may require. To justify such a limitation there must be proof of such weight and sufficiency to satisfy the clear and present danger test. The possibility that subversives may infiltrate the ranks of the demonstrators is not enough." As stated by Justice Brandeis in his concurring opinion 2 in Whitney vs. California. t.hqw Fear of serious injury cannot alone justify suppression of free speech and assembly. Men feared witches and burned women. It is the function of speech to free men from the bondage of irrational fears. To justify suppression of free speech there must be reasonable ground to fear that serious evil will result if free speech

is practiced. There must be reasonable ground to believe that the danger apprehended is imminent. There must be reasonable ground to believe that the evil to be prevented is a serious one * * *. Those who won our independence by revolution were not cowards. They did not fear political change. They did not exalt order at the cost of liberty. * * * Moreover, even imminent danger cannot justify resort to prohibition of these functions essential (for) effective democracy, unless the evil apprehended is relatively serious. Prohibition of free speech and assembly is a measure so stringent that it would be inappropriate as the means for averting a relatively trivial harm to a society. * * * The fact that speech is likely to result in some violence or in destruction of property is not enough to justify its suppression. There must be the probability of serious injury to the state. Among freemen the deterrents ordinarily to be applied to prevent crimes are education and punishment for violations of the law, not abridgment of the rights of free speech and assembly. (Emphasis supplied) The Court's opinion underscores that the exercise of the right is not to be "abridged on the plea that it may be exercised in some other place" (paragraph 6), and that "it is the duty of the city authorities to provide the proper police protection to those exercising their right to peaceable assembly and freedom of expression," (at page 14) The U.S. Supreme Court's pronouncement in Hague vs. Committee for 3 Industrial Organization cited in Fugoso is worth repeating: t.hqw * * * Wherever the title of streets and parks may rest, they have immemorially been held in trust for the use of the public and, time out of mind, have been used for purposes of assembly, communicating thoughts between citizens, and discussing public questions. Such use of the streets and public places has, from ancient times, been a part of the privileges, immunities, rights, and liberties of citizens. The privilege of a citizen * * * to use the streets and parks for communication of views on national questions may be regulated in the interest of all; it is not absolute, but relative, and must be exercised in subordination to the general comfort and convenience, and in consonance with peace and good order; but it must not, in the guise of regulation, be abridged or denied. We think the court below was right in holding the ordinance quoted in Note I void upon its face. It does not make comfort or convenience in the use of streets or parks the standard of official action. It enables the Director of Safety to refuse a permit on his mere opinion that such refusal will prevent 'riots, disturbances or disorderly assemblage. It can thus, as the record discloses, be made theinstrument of arbitrary suppression of free expression of views on national affairs for the prohibition of all speaking will undoubtedly 'prevent' such eventualities. But uncontrolled official suppression of the privilege cannot be made a substitute for the duty to maintain order in connection with the exercise of the right. (Emphasis supplied) Needless to say, the leaders of the peaceable assembly should take all the necessary measures to ensure a peaceful march and assembly and to avoid the possibility of infiltrators and troublemakers disrupting the same, concommitantly with the duty of the police to extend protection to the participants "staying at a discreet distance, but

ever ready and alert to perform their duty." But should any disorderly conduct or incidents occur, whether provoked or otherwise, it is well to recall former Chief Justice Ricardo Paras' injunction in his concurring opinion inFugoso, citing the 1907 case 4 of U.S. vs. Apurado, that such instances of "disorderly conduct by individual members of a crowd (be not seized) as an excuse to characterize the assembly as a seditious and tumultuous rising against the authorities" and render illusory the right of peaceable assembly, thus: t.hqw It is rather to be expected that more or less disorder will mark the public assembly of the people to protest against grievances whether real or imaginary, because on such occasions feeling is always wrought to a high pitch of excitement, and the greater the grievance and the more intense the feeling, the less perfect, as a rule, will the disciplinary control of the leaders over their irresponsible followers.But if the prosecution be permitted to seize upon every instance of such disorderly conduct by individual members of a crowd as an excuse to characterize the assembly as a seditious and tumultous rising against the authorities, 'then the right to assemble and to petition for redress of grievances would become a delusion and snare and the attempt to exercise it on the most righteous occasion and in the most peaceable manner would expose all those who took part therein to the severest and most unmerited punishment, if the purposes which they sought to attain did not happen to be pleasing to the prosecuting authorities. If instances of disorderly conduct occur on such occasions, the guilty individuals should be sought out and punished therefor. (Emphasis supplied). As it turned out, the demonstration was held on October 26, 1983 peaceably and without any untoward event or evil result, as pledged by the organizers (like at least five previous peaceful demonstrations in the area). However, even if there had been any incidents of disorder, this would in no way show the Court's mandatory injunction to have been wrongfully issued. The salutary desire on the part of respondent to prevent disorder cannot be pursued by the unjustified denial and suppression of the people's basic rights, which would thereby turn out to be mere paper rights. MAKASIAR, J., concurring: With the justification that in case of conflict, the Philippine Constitution particularly the Bill of Rights should prevail over the Vienna Convention. ABAD SANTOS, J., concurring: To add anything to the learned opinion of the Chief Justice is like bringing coal to Newcastle, I just want to state for the record that I voted for the issuance ex-parte of a preliminary mandatory injunction. PLANA, J., concurring: On the whole, I concur in the learned views of the distinguished Chief Justice. I would like however to voice a reservation regarding Ordinance No. 7295 of the City of Manila which has been invoked by the respondent. The main opinion yields the implication that a rally or demonstration made within 500 feet from the chancery of a foreign embassy would be banned for coming within the terms of the prohibition of the cited Ordinance which was adopted, so it is said, precisely to implement a treaty obligation of the Philippines under the 1961 Vienna Convention on Diplomatic Relations.

In my view, without saying that the Ordinance is obnoxious per se to the constitution, it cannot be validly invoked whenever its application would collide with a constitutionally guaranteed right such as freedom of assembly and/or expression, as in the case at bar, regardless of whether the chancery of any foreign embassy is beyond or within 500 feet from the situs of the rally or demonstration. AQUINO, J., dissenting: Voted to dismiss the petition on the ground that the holding of the rally in front of the US Embassy violates Ordinance No. 7295 of the City of Manila. Footnotest.hqw 1 Section 9, Article IV of the Constitution. 2 Petition. par. 4. 3 Petitioner was represented by Professor Haydee Yorac of the College of Law, University of the Philippines, assisted by former Senator Jose W. Diokno. Respondent was represented by Assistant Solicitor General Montenegro. 4 Petition, 2. 5 He was assisted by Solicitor Roberto A. Abad. 6 Answer of Respondent, 2, Annex 1. 7 Ibid, Annex 1-A. 8 Ibid, Annex 1. 9 Minute resolution dated October 25, 1983, 4. 10 Article IV, Section 9 of the Constitution. 11 Cf. Thornhill v. Alabama, 310 US 88 (1940). Justice Malcolm identified freedom of expression with the right to a full discussion of public affairs." (U.S. v. Bustos, 37 Phil. 731, 740 [1918]). Justice Laurel was partial to the ringing words of John Milton, "the liberty to know, to utter, and to argue freely according to conscience, above all liberties." (Planas v. Gil, 67 Phil. 81 [1939]). Justice Johnson spoke of freedom of expression in terms of "a full and free discussion of all affairs of public interest." For him then, free speech includes complete liberty to "comment upon the administration of Government as well as the conduct of public men." U S. v. Perfecto, 43 Phil. 58, 62 [1922]). When it is remembered further that time has upset many fighting faiths" there is like] to be a more widespread acceptance of the view of Justice Holmes "that the ultimate good, desired is better reached by free trade in ideas that the best test of truth is the power of the thought to get accepted that the competition of the market; and that truth is the only ground upon which their wishes safely can be carried out." (Abrams v. United States, 250 US 616, 630 [1919]). 12 U.S. v. Bustos, 37 Phil. 1131 (1918); Quisumbing v. Lopez, 96 Phil. 510 (1935). 13 U.S. v. Perfecto, 43 Phil. 58 (1922). 14 Yap v. Boltron 100 Phil. 324 (1956). 15 People v. Alarcon, 69 Phil. 265 (1939); Cabansag v. Fernandez, 102 Phil. 152 (1957); People v. Castelo H. Abaya, 114 Phil. 892 (1962); Bridges v. California, 314 US 252 (1941); Pennekamp v. Florida, 328 US 331 (1946); Craio v. Harney 331 US 367 (1947); Woods v. Georgia, 370 US 375 (1962).

16 Gonzales v. Commission on Elections, L-27833, April 18, 1969, 27 SCRA 835, 857. 17 Cf. Ibid. 18 Ibid. 19 Cf. United States v. Bustos, 37 Phil. 731 (1918). 20 323 US 516 (1945). 21 Cf. Schneider v. Irvington 308 US 147 (1939). 22 Milk Wagon Drivers Union of Chicago, Local 753 v Meadowmoor Dairies, Inc., 312 US 287, 293 (1940). 23 7 Phil. 422. 24 Ibid, 426. 25 307 US 495. 26 ibid 515. 27 80 Phil. 71 (1948). 28 30 Phil. 602. 29 Ibid, 606. 30 80 Phil. at 78. 31 312 US at 524. 32 Cf. Brownlie Principles of Public International Law, 2nd ed., 339341. 3,3 33 Article 11, Section 3 reads in full: 34 The Philippines renounces war as an instrument of national policy, adopts the generally accepted principles of international law as part of the law of the land, and adheres to the policy of peace, equality, justice, freedom, cooperation, and amity with all nations," 31 The Philippines can rightfully take credit for the acceptance, as early as 1951, of the binding force of the Universal Declaration of Human Rights even if the rights and freedoms therein declared are considered by other jurisdictions as merely a statement of aspirations and not law until translated into the appropriate covenants. In the following cases decided in 1951, Mejoff v. Director of Prisons, 90 Phil. 70; Borovsky v. Commissioner of Immigration, 90 Phil. 107; Chirskoff v. Commissioner of Immigration, 90 Phil. 256; Andreu v. Commissioner of Immigration, 90 Phil. 347, the Supreme Court applied the Universal Declaration of Human Rights. 35 According to its Article 19: "Everyone has the right to freedom of opinion and expression; this right includes freedom to hold opinions without interference and to seek, receive, and impart information and Ideas through any media and regardless of frontiers." The first paragraph of Article 20 reads; "Everyone has the right to freedom of peaceful assembly and association. 36 De Jorge v. Oregon, 299 US 353, 364 (1937). 37 Schneider v. IrvIngton 308 US 147,163 (1939). 38 G.R. No. L-31687, February 26, 1970, 31 SCRA 731. Two justices dissented, Justice, later Chief Justice, Castro and the present Chief Justice, then a Justice. 39 G.R. No. 60294, April 30, 1982. 40 Opinion citing par. 4 of Petition. t.hqw Teehankee, J.:+.wph!1 1 80 Phil. 1. 2 71 U.S. Law ed., 1105-1107.

3 307 U.S. 496, 515, 83 Law ed., 1423.