Case Summary (G.R. No. 47701)
Key Dates
• June 26, 1919 and January 21, 1921 – Registration of “Mentholatum” trademark with Philippine authorities
• October 1, 1935 – Filing of original complaint in the Court of First Instance of Manila
• October 29, 1937 – Trial court judgment in favor of petitioners
• June 29, 1940 – Court of Appeals reversal
• June 27, 1941 – Decision by the Supreme Court of the Philippines
Applicable Law
Act No. 1459 (Corporation Law), Section 69: No foreign corporation may transact business or maintain any suit in the Philippines without a license from the Secretary of Commerce and Police.
Factual Background
The Mentholatum Co., Inc. produces a medicated salve called “Mentholatum.” It granted the Philippine-American Drug Co., Inc. exclusive rights to import, distribute, and protect its interests in the Philippines. The Mangaliman brothers manufactured a competing salve named “Mentholiman,” sold in packaging identical in size, color, and shape to “Mentholatum,” causing confusion and alleged damage to petitioners’ goodwill and sales.
Procedural History
• CFI Manila: After a brief dismissal for counsel’s absence and reinstatement, the trial court permanently enjoined the Mangalimans from using “Mentholiman,” ordered an accounting of profits (from March 1, 1934 to judgment), imposed P50 contempt fine, awarded damages equal to profits, and taxed costs.
• Court of Appeals: Reversed on the ground that Mentholatum Co. had transacted business in the Philippines via its distributor without the license required by Section 69, thus lacked standing.
• Supreme Court: Petitioners sought certiorari to set aside the reversal.
Legal Issue
Whether the Mentholatum Co., Inc. and its agent, the Philippine-American Drug Co., Inc., could maintain a suit for trademark infringement and unfair competition without securing the license required by Section 69 of the Corporation Law.
Supreme Court’s Analysis
- “Transacting business” under Section 69 requires a continuing commercial enterprise in the Philippines, judged by whether the foreign corporation retains the substance of its business or has effectively delegated it to another.
- Petitioners admitted in their complaint and testimony that the Philippine-American Drug Co., Inc. was the exclusive distributor of Mentholatum products since at least 1929, making the acts of the distributor the acts of the Kansas corporation.
- Pleadings bind parties on material admissions; therefore, whatever business the distributor conducted was legally attributable to the foreign corporation.
- As an unlicensed foreign corporation doing business locally, Mentholatum Co., Inc. could not maintain any suit in Philippine courts.
- The Philippine-American Drug Co., Inc., as agent, cannot assert independent standing; its authority and actions derive solely from the principal.
- Western Equipment & Supply Co. v. Reyes was distinguished because the fore
Case Syllabus (G.R. No. 47701)
Facts
- On October 1, 1935, The Mentholatum Co., Inc. (a Kansas corporation) and Philippine-American Drug Co., Inc. (its exclusive distributing agent in the Philippines) filed Civil Case No. 48855 in the Court of First Instance of Manila against Anacleto Mangaliman, Florencio Mangaliman, and the Director of the Bureau of Commerce.
- Petitioners alleged infringement of the registered trademark “Mentholatum” (registered June 26, 1919 and January 21, 1921) and unfair competition by defendants, who marketed a salve called “Mentholiman” in containers identical in size, color, and shape to those of “Mentholatum.”
- Plaintiffs prayed for:
- A permanent injunction restraining the Mangaliman brothers from selling “Mentholiman” or otherwise competing unfairly.
- An accounting of defendants’ sales and profits from March 1, 1934.
- Payment of damages and costs.
Procedural History
- March 9, 1936: Case dismissed for failure of plaintiffs’ counsel to appear.
- April 4, 1936: Trial court reinstated the action upon motion.
- October 29, 1937: Court of First Instance rendered judgment in favor of petitioners, ordering:
- A perpetual injunction against the sale of “Mentholiman” and use of the mark “MENTHOLIMAN.”
- Accounting of profits from March 1, 1934, with damages equal to those profits.
- A ₱50 fine against Anacleto Mangaliman for contempt and award of costs.
- Dismissal of defendants’ counterclaim.
- June 29, 1940: Court of Appeals (CA-G.R. No. 46067) reversed the trial court, holding that The Mentholatum Co., Inc. was “transacting business” in the Philippines without a license as required by Section 69 of the Corporation Law, and therefore lacked standing to sue.
- June 27, 1941: Supreme Court decision on petition for certiorari.
Legal Issues
- Whether The Mentholatum Co., Inc., a foreign corporation, “transact