9/11/21, 9:17 PM 246 CORPORATION v. REYNALDO B.

DAWAY

461 Phil. 830

FIRST DIVISION

[ G.R. No. 157216, November 20, 2003 ]

246 CORPORATION, DOING BUSINESS UNDER THE NAME AND STYLE OF

ROLEX MUSIC LOUNGE, PETITIONER, VS. HON. REYNALDO B. DAWAY, IN HIS
CAPACITY AS PRESIDING JUDGE OF BRANCH 90 OF THE REGIONAL TRIAL
COURT OF QUEZON CITY, MONTRES ROLEX S.A. AND ROLEX CENTRE PHIL.
LIMITED,
RESPONDENTS.

DECISION
YNARES-SANTIAGO, J.:
This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
[1]
Procedure assailing the November 28, 2002 Decision of the Court of Appeals in
CA-G.R. SP No. 64660 which dismissed the petition for
certiorari filed by petitioner,
[2]
as well as the Resolution dated February 13, 2003 denying its motion for
reconsideration.

The undisputed facts show that on November 26, 1998, respondents Montres Rolex
S.A. and Rolex Centre Phil., Limited, owners/proprietors of Rolex and Crown Device,
filed against petitioner 246 Corporation the instant suit for trademark infringement
and damages with prayer for the
issuance of a restraining order or writ of preliminary
[3]
injunction before the Regional Trial Court of Quezon City, Branch 90. Respondents
alleged that sometime in July 1996, petitioner adopted and, since then, has been using
without authority the mark
"Rolex" in its business name "Rolex Music Lounge" as well
as in its newspaper advertisements as - "Rolex Music Lounge, KTV, Disco & Party
Club."

In its answer raising special affirmative defenses, petitioner argued that respondents
have no cause of action because no trademark infringement exist; that no confusion
would arise from the use by petitioner of the mark "Rolex" considering that its
entertainment business is
totally unrelated to the items catered by respondents such
as watches, clocks, bracelets and parts thereof. It also contended that the complaint
was not properly verified and certified against forum shopping considering that Atty.
Alonzo Ancheta, the counsel of record of
respondents who signed the verification and
[4]
certification, was not authorized to represent respondents.

On July 21, 2000, petitioner filed a motion for preliminary hearing on its affirmative
[5]
defenses. Subsequently, on motion of petitioner, the trial court issued a subpoena
ad testificandum requiring Atty. Alonzo Ancheta to appear at the preliminary
hearing.
[6] [7]
Respondents, in the meantime, filed a Comment and Opposition to the motion
for preliminary hearing and a motion to quash the subpoena ad testificandum.

In an Order dated October 27, 2000, the trial court quashed the subpoena ad

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testificandum and denied petitioner's motion for preliminary hearing on affirmative

defenses with motion to dismiss.[8]

With the denial of the motion for reconsideration on March 16, 2001, petitioner filed a
petition for certiorari with the Court of Appeals contending that the trial court gravely
abused its discretion in issuing the October 27, 2000 and March 16, 2001 orders.

On November 28, 2002, the Court of Appeals dismissed the petition. The motion for
reconsideration filed by petitioner was denied. Hence, the instant petition anchored
on the following grounds:

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IN ISSUING THE ASSAILED DECISIONS, THE HONORABLE COURT OF

APPEALS PERFUNCTORILY BRUSHED ASIDE THE CONTROLLING
PRECEDENTS LAID DOWN BY THIS HONORABLE COURT IN ESSO
STANDARD EASTERN, INC. VS. COURT OF APPEALS AND UNITED
CIGARETTE CORPORATION AND OTHER COMPANION CASES HOLDING
THAT
NO TRADEMARK INFRINGEMENT CAN POSSIBLY OCCUR WHERE
THE CONTENDING PARTIES DEAL WITH GOODS AND SERVICES THAT
ARE TOTALLY UNRELATED AND NON-COMPETING WITH EACH OTHER.

II

IN ARBITRARILY AND CAPRICIOUSLY RULING THAT THE ISSUES RAISED

IN PETITIONER'S CERTIORARI PETITION ARE QUESTIONS OF FACT, THE
HONORABLE COURT OF APPEALS VIOLATED NOT ONLY PETITIONERS
SUBSTANTIVE DUE PROCESS RIGHTS BUT ALSO THE WELL-SETTLED
RULE THAT THE ALLEGATIONS OF THE
COMPLAINT IS
HYPOTHETICALLY ADMITTED WHEN THE MOTION TO DISMISS IS
GROUNDED UPON LACK OF CAUSE OF ACTION. MOREOVER,
INDEPENDENT OF THE HYPOTHETICALLY ADMITTED FACTS EMBODIED
IN THE COMPLAINT A QUO, THERE ARE SELF-EVIDENT FACTS AND
IMPLIEDLY ADMITTED FACTS CONTAINED IN PRIVATE
RESPONDENTS'
PLEADINGS THAT WOULD CLEARLY AND UNMISTAKABLY SHOW
PRIVATE RESPONDENTS' LACK OF CAUSE OF ACTION AGAINST HEREIN
PETITIONER.

III

THE HONORABLE COURT OF APPEALS VIOLATED PETITIONER'S RIGHT

TO SUBSTANTIVE DUE PROCESS WHEN IT ARBITRARILY AND
CAPRICIOUSLY RULED THAT WHAT WAS SPECIFICALLY DENIED IN THE
ASSAILED OCTOBER 20, 2000 ORDER IS PETITIONER'S MOTION FOR
PRELIMINARY HEARING ON DEFENDANT'S AFFIRMATIVE
DEFENSES
AND NOT PETITIONER'S MOTION TO DISMISS PER SE CONSIDERING
THAT:

A. THERE IS ABSOLUTELY NOTHING IN THE ORDER DATED OCTOBER

20, 2000 OF RESPONDENT JUDGE WHICH SUGGESTS THAT THE
RESOLUTION OF PETITIONER'S MOTION TO DISMISS PER SE WAS
HELD IN ABEYANCE BY THE RESPONDENT JUDGE. HENCE THE SAID
ORDER DATED OCTOBER 20, 2000 ALSO CONSTITUTES A DENIAL
ON
THE MERITS OF PETITIONER'S MOTION TO DISMISS PER SE AND
NOT MERELY OF PETITIONER'S MOTION FOR PRELIMINARY
HEARING THEREON.

B. PRIVATE RESPONDENTS' COMMENT AND OPPOSITION DATED 11

AUGUST 2000, WHICH WAS CITED AND SUSTAINED BY RESPONDENT
JUDGE, CLEARLY TRAVERSED THE MERITS OF THE GROUNDS FOR
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PETITIONER'S MOTION TO DISMISS PER SE. HENCE, THE SAID 20

OCTOBER 2000 ORDER'S DENIAL OF PETITIONER'S MOTION
IS NOT
LIMITED TO THE MOTION FOR PRELIMINARY HEARING BUT ALSO
CONSTITUTES A DENIAL OF PETITIONER'S MOTION TO DISMISS PER
SE.

IV

IN ARBITRARILY AND CAPRICIOUSLY RULING THAT ATTY. ALONZO

ANCHETA PROPERLY VERIFIED AND CERTIFIED PRIVATE
RESPONDENTS' COMPLAINT A QUO, THE HONORABLE COURT OF
APPEALS VIOLATED NOT ONLY PETITIONER'S SUBSTANTIVE DUE
PROCESS RIGHTS, BUT ALSO THE DOCTRINE OF SEPARATE CORPORATE
PERSONALITY; CONSIDERING THAT THE RECORDS OF THIS CASE IS (sic)
COMPLETELY BEREFT AND DEVOID OF ANY DULY EXECUTED SPECIAL
POWER OF ATTORNEY, EMANATING FROM PRIVATE RESPONDENTS,
WHICH EXPLICITLY AND SPECIFICALLY AUTHORIZES ATTY. ALONZO
ANCHETA TO REPRESENT PRIVATE RESPONDENTS
MONTRES ROLEX S.A.
IN THE FILING OF THE COMPLAINT A QUO. BY REASON THEREOF,
PRIVATE RESPONDENTS COULD NOT BE DEEMED TO HAVE
VOLUNTARILY APPEARED BEFORE THE RESPONDENT JUDGE;
CONSEQUENTLY, THE TRIAL COURT COULD NOT HAVE VALIDLY
ACQUIRED JURISDICTION OVER THE PERSON OF PRIVATE
RESPONDENTS.

IN ARBITRARILY AND CAPRICIOUSLY AFFIRMING RESPONDENT JUDGE'S

QUASHAL OF THE SUBPOENA DATED 14 AUGUST 2000 DIRECTED
AGAINST ATTY. ALONZO ANCHETA, THE HONORABLE COURT OF
APPEALS VIOLATED NOT ONLY PETITIONER'S SUBSTANTIVE DUE
PROCESS RIGHTS, BUT ALSO SECTION 9, RULE 132 AND SECTION
7 RULE
133 OF THE 1989 REVISED RULES ON EVIDENCE, AND THE RULING OF
[9]
THIS HONORABLE COURT IN THE CASE OF PEOPLE VS. RIVERA.

Simply put, the issues are as follows - (1) whether the trial court denied not only
petitioner's motion for preliminary hearing on its affirmative defenses but its motion
to dismiss as well; (2) if the answer is in the affirmative, whether or not the trial court
gravely abused
its discretion in denying said motions; and (3) whether the trial court
gravely abused its discretion in quashing the subpoena ad testificandum issued
against Atty. Ancheta.

Anent the first issue, we find that what was denied in the order dated October 27,
2000 was not only the motion for preliminary hearing but the motion to dismiss as
well. A reading of the dispositive portion of said order shows that the trial court
neither qualified its denial
nor held in abeyance the ruling on petitioner's motion to
dismiss thus -

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IN VIEW OF THE FOREGOING, the aforecited Motion To Quash Subpoena Ad

Testificandum is granted; and the aforecited Motion For Preliminary Hearing On
Defendant's Affirmative Defenses With Motion To dismiss The Instant
[10]
Complaint Based On Said Affirmative Defenses is
denied.
(Emphasis supplied)

In issuing the assailed order, the trial court ruled on the merits of petitioner's Motion
to Dismiss vis-à-vis respondents' Comment and Opposition which clearly traversed
the affirmative defenses raised by petitioner, to wit:

After carefully going over the pleadings, this Court finds, on the first motion that
the arguments raised in the said motion and the reply filed in connection thereto
appear to be meritorious; and on the second motion, that the arguments raised
in the comments and
opposition and the rejoinder filed by the plaintiffs likewise
[11]
appear to be meritorious.

Moreover, it is presumed that all matters within an issue raised in a case were passed
upon by the court. In the absence of evidence to the contrary, the presumption is that
the court a quo discharged its task properly.[12]

In Municipality of Biñan Laguna v. Court of Appeals,[13] decided under the old

Rules of Civil Procedure, it was held that a preliminary hearing permitted under Rule
16, Section 5, is not mandatory even when the same is prayed for. It rests largely on
the sound discretion of the trial court, thus -

SEC. 5. Pleading grounds as affirmative defenses. -- Any of the grounds for

dismissal provided for in this Rule, except improper venue, may be pleaded as an
affirmative defense, and a preliminary hearing may be had thereon as if a
motion to dismiss had been
filed. (Emphasis supplied)

The use of the word "may" in the aforequoted provision shows that such a hearing is
not a matter of right demandable from the trial court; it is not mandatory but
discretionary. "May" is an auxiliary verb indicating liberty, opportunity, permission
and possibility.[14] Such interpretation is specifically stated under the 1997 Rules of
Civil Procedure. Rule 16, Section 6, now provides that a grant of a preliminary hearing
rests on the sound discretion of the court, to wit -

SEC. 6. Pleading grounds as affirmative defenses.-- If no motion to

dismiss has been filed, any of the grounds for dismissal provided for in this Rule
may be pleaded as an affirmative defense in the answer and, in the discretion
of the court, a preliminary
hearing may be had thereon as if a motion
to dismiss had been filed. (Emphasis supplied)

In the case at bar, the Court of Appeals did not err in finding that no abuse of
discretion could be ascribed to the trial court's denial of petitioner's motion for
preliminary hearing on its affirmative defenses with motion to dismiss. The issue of
whether or not a trademark
infringement exists, is a question of fact that could best be
determined by the trial court.

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Under the old Trademark Law [15] where the goods for which the identical marks are
used are unrelated, there can be no likelihood of confusion and there is therefore no
infringement in the use by the junior user of the registered mark on the entirely
different goods.[16] This ruling, however, has been to some extent, modified by
Section 123.1(f) of the Intellectual Property Code (Republic Act No. 8293), which took
effect on January 1, 1998. The said section reads:

Sec. 123. Registrability. - 123.1. A mark cannot be registered if it:

xxxxxxxxx

(f) Is identical with, or confusingly similar to, or constitutes a translation of a

mark considered well-known in accordance with the preceding paragraph, which
is registered in the Philippines with respect to goods or services which are not
similar to those with respect to
which registration is applied for: Provided, That
use of the mark in relation to those goods or services would indicate a connection
between those goods or services, and the owner of the registered mark:
Provided, further, That the
interest of the owner of the registered mark are
likely to be damaged by such use; (Emphasis supplied

A junior user of a well-known mark on goods or services which are not similar to the
goods or services, and are therefore unrelated, to those specified in the certificate of
registration of the well-known mark is precluded from using the same on the entirely
unrelated goods or
services, subject to the following requisites, to wit:

1. The mark is well-known internationally and in the Philippines. Under Rule 102
of the Rules and Regulations on Trademarks, Service Marks, Trade Names and
Marked or Stamped Containers,[17] in determining whether a mark is well
known, the following
criteria or any combination thereof may be taken into
account:

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(a) the duration, extent and geographical area of any use of the mark, in
particular, the duration, extent and geographical area of any promotion of
the mark, including advertising or publicity and presentation, at fairs or
exhibitions, of the goods and/or services
to which the mark applies;

(b) the market share in the Philippines and in other countries, of the goods
and/or services to which the mark applies;

(c) the degree of the inherent or acquired distinction of the mark;

(d) the quality-image or reputation acquired by the mark;

(e) the extent to which the mark has been registered in the world;

(f) the exclusivity of the registration attained by the mark in the world;

(g) the extent to which the mark has been used in the world;

(h) the exclusivity of use attained by the mark in the world;

(i) the commercial value attributed to the mark in the world;

(j) the record of successful protection of the rights in the mark;

(k) the outcome of litigations dealing with the issue of whether the mark is a
well-known mark; and

(l) the presence of absence of identical or similar marks validly registered

for or used on identical or similar goods or services and owned by persons
other than the person claiming that his mark is a well-known mark.

2. The use of the well-known mark on the entirely unrelated goods or services
would indicate a connection between such unrelated goods or services and those
goods or services specified in the certificate of registration in the well known
mark. This requirement refers to the
likelihood of confusion of origin or business
or some business connection or relationship between the registrant and the user
of the mark.

3. The interests of the owner of the well-known mark are likely to be damaged. For
instance, if the registrant will be precluded from expanding its business to those
unrelated good or services, or if the interests of the registrant of the well-known
mark will be damaged because
of the inferior quality of the good or services of
the user.[18]

Section 123.1(f) is clearly in point because the Music Lounge of petitioner is entirely
unrelated to respondents' business involving watches, clocks, bracelets, etc. However,
the Court cannot yet resolve the merits of the present controversy considering that the
requisites for
the application of Section 123.1(f), which constitute the kernel issue at

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bar, clearly require determination facts of which need to be resolved at the trial court.
The existence or absence of these requisites should be addressed in a full blown
hearing and not on a mere
preliminary hearing. The respondent must be given ample
opportunity to prove its claim, and the petitioner to debunk the same.

The same is true with respect to the issue of whether Atty. Alonzo Ancheta was
properly authorized to sign the verification and certification against forum shopping
in behalf of respondents. This could be properly resolved during the trial together
with the substantive issues
raised by petitioner.

Considering that the trial court correctly denied petitioner's motion for preliminary
hearing on its affirmative defenses with motion to dismiss, there exists no reason to
compel Atty. Ancheta to testify. Hence, no abuse of discretion was committed by the
trial court in quashing
the subpoena ad testificandum issued against Atty. Ancheta.

Grave abuse of discretion implies such capricious and whimsical exercise of judgment
as equivalent to lack of jurisdiction, or, in other words, where the power is exercised
in an arbitrary or despotic manner by reason of passion or personal hostility, and it
must be so patent
and gross as to amount to an evasion of positive duty or to a virtual
refusal to perform the duty enjoined or to act at all in contemplation of law. None of
these was committed by the trial court; hence, the Court of Appeals correctly
dismissed the petition.

WHEREFORE, in view of all the foregoing, the petition for review on certiorari filed
by petitioner is DENIED. The November 28, 2002 Decision and the February 13,
2003 Resolution of the Court of Appeals in CA-G.R. SP No. 64660 which dismissed
the petition for certiorari
filed by petitioner are AFFIRMED.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Panganiban, Carpio and Azcuna, JJ., concur.

[1] Rollo, p. 51, penned by Associate Justice Romeo A. Brawner and concurred in by
Associate Justices Bienvenido L. Reyes and Danilo B. Pine.

[2] Rollo, p. 61.

[3] Docketed as Civil Case No. Q-98-36172, Rollo, p. 62.

[4] Answer, Rollo, pp. 138-139; See also pp. 134-137.

[5] Rollo, p. 147.

[6] Petition, Rollo, p. 10.

[7] Rollo, p. 170.

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[8] Rollo, p. 214.

[9] Petition, pp. 17-19.

[10] Op. cit., note 8.

[11] Id.

[12] Spouses Vicky Tan Toh v. Solid Bank Corporation, G.R. No. 154183, 7 August
2003.

[13] G.R. No. 94733, 17 February 1993, 219 SCRA 69.

[14] Municipality of Binan Laguna, supra, pp. 75-76.

[15] Republic Act No. 166.

[16] Esso Standard Eastern, Inc. v. Court of Appeals, 201 Phil. 803 (1982); Hickok
Manufacturing Co., Inc. v. Court of Appeals, 201 Phil. 853 (1982); Faberge, Inc. v.
Intermediate Appellate Court, G.R. No. 71189, 4 November 1992, 215 SCRA 316.

[17] Amended by Office Order No. 17 dated 1 December 1998.

[18] Ruben E. Agpalo, The Law on Trademark Infringement and Unfair Competition,
2000 Edition, pp. 168-170.

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