Private International Law: Property
When a conflict of law situation arises
Laurel v. Garcia, G.R. Nos. 92013 & 92047, [July 25, 1990]
A conflict of law situation arises only when:
There is a dispute over the title or ownership of an immovable, such that the capacity to take and transfer immovables, the formalities of conveyance, the essential validity and effect of the transfer, or the interpretation and effect of a conveyance, are to be determined; and
A foreign law on land ownership and its conveyance is asserted to conflict with a domestic law on the same matters.
The Philippine Government owns properties in Japan under the Reparations Agreement.
One property, the Roppongi property, was intended for sale, including to non-Filipinos.
The first bidding to sell the property failed; a second bidding was stopped by the Court.
The Secretary of Justice argued that Japanese law should apply to the sale.
Whether Japanese or Philippine law governs the Roppongi property.
Philippine law governs the Roppongi property.
It is unusual that government officials argued for Japanese law over Philippine law in selling a valuable government property.
A conflict of law does not arise here because:
There is no dispute over title or ownership.
There is no foreign law on ownership or conveyance that conflicts with Philippine law.
The issue is not ownership validity but the authority of officials to sell state property, governed by Philippine law.
The Secretary of Justice’s opinion on who can acquire the property is irrelevant, as there is no proof the property can legally be sold.
Rules as to real and personal property
The Philippines adhere to the rule of lex rei sitae or the law of the place where the property is situated. This rule applies to both real and personal properties. The same is provided under Article 16 of the Civil Code, viz:
Article 16. Real property as well as personal property is subject to the law of the country where it is situated.
However, intestate and testamentary successions, both with respect to the order of succession and to the amount of successional rights and to the intrinsic validity of testamentary provisions, shall be regulated by the national law of the person whose succession is under consideration, whatever may be the nature of the property and regardless of the country wherein said property may be found.
Mobilia sequntur personam
This principle provides that where tangible or movable, property was regarded as being located at the legal domicile of the owner for the purpose of applying the law of that place to it in many situations.
United Gas Corp. v. Fontenot, 241 La. 488, 501, 129 So. 2d 748, 753 (1961)
Under the mobilia maxim, held their situs to be the domicile of the owner of the intangible and usually taxable there, Unless there existed a specific law to the contrary. Thus, under this fiction, identification and association in the mind of intangibles with their owners (as in the case of movable tangibles and personalty) gave them, in the law, a ‘situs' at the legal domicile of the owner.
When can a court in another jurisdiction subject property to its power and authority
When it has jurisdiction over the parties – it can order the parties to perform any act affecting the title to or ownership of the property thereby effectively subjecting the property to its power and tutelage.
When the parties agreed to.
Roberts v. Locke
A court of equity having jurisdiction over a person may act indirectly upon that person’s extraterritorial real estate by ordering him or her to act or to cease to act in some particular way in relation to the property.
Roberts filed for divorce in Wyoming and requested an equitable division of assets, including a valuable beachfront property in Costa Rica.
Locke proposed selling the Costa Rican property to pay off related debt, with the balance split equally.
Roberts preferred keeping the property with Locke covering the debt.
The court ruled in favor of Locke, ordering the sale if an offer of $600,000 or more was received.
An offer was received, but Roberts refused to sell and leased the property, resulting in a contempt citation.
Whether the Wyoming district court had authority to order the sale of the Costa Rican property.
Yes, the Wyoming district court had authority to order the sale.
While courts cannot directly control title to out-of-state property, they can order parties under their jurisdiction to take actions regarding such property.
So long as the court has jurisdiction over the parties, it can order the parties to perform any act affecting the title to or ownership of the property thereby effectively subjecting the property to its power and tutelage.
Allowing the court’s order prevents the need for separate divorce proceedings in each location where the parties own property, avoiding legal complexity and inconsistency.
Roberts argued that Costa Rican law should govern but did not provide the actual text or interpretation of relevant Costa Rican laws, weakening her claim.
Under Wyoming rules, foreign laws must be clearly proven to be considered, which Roberts did not do. Consequently, the court dismissed her argument regarding Costa Rican law.
Tayag v. Benguet Consolidated
Philippine courts have power and authority over shares of stock held by a domiciliary administrator.
Idonah Slade Perkins passed away in New York, leaving 33,002 shares in Benguet Consolidated, represented by two stock certificates.
County Trust Company of New York was appointed domiciliary administrator of her estate.
Tayag was appointed ancillary administrator in the Philippines.
The Philippine Court of First Instance (CFI) ordered the domiciliary administrator to produce the stock certificates, but County Trust did not comply.
The CFI then declared the certificates lost, canceled them, and ordered the issuance of new certificates to the ancillary administrator.
Whether Philippine courts have authority over shares of stock held by a domiciliary administrator.
Yes, Philippine courts have authority over shares of stock held by a domiciliary administrator.
The ancillary administrator has the inherent authority to control and manage the decedent’s assets within the Philippines to settle the estate and address local creditors' claims.
Administration of an estate typically requires both principal administration (in the decedent’s domicile) and ancillary administration in other locations with property, as administrators appointed abroad have no authority in the Philippines.
Philippine courts have jurisdiction over the stock certificates of Benguet Consolidated, a Philippine corporation, as they are local assets and therefore subject to Philippine law and court orders.
A corporation, as a creation of the state, must comply with lawful orders from state organs, including the judiciary, and cannot selectively obey court orders.
Allowing a corporation to disregard court authority undermines the state's sovereignty, as corporations exist by virtue of the state's recognition and must adhere to its laws and judicial rulings.
Specific rules as to ownership of real property
1. Section 7, Article XII, 1987 Constitution
Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain.
Prohibits the transfer of private lands to individuals, corporations, or associations who or which are not qualified to hold lands of the public domain.
It allows transfer to qualified individuals through hereditary succession, which is limited to intestate succession only.
As such, devises or agreements which have the effect of divesting Filipinos of ownership of lands in favor of aliens cannot be given effect.
The provision is intended to prevent Filipinos from transferring their landholdings to foreigners.
It allows leases of private lands to aliens except when the terms make the lease one of sale or conveyance such as one by:
Making the lease perpetual; or
Coupled with an option to buy.
Testate Estate of Ramirez v. Vda. de Ramirez, G.R. No. L-27952, [February 15, 1982]
Testamentary dispositions in favor of an alien violates the Constitution and cannot be given effect.
Jose Ramirez, a Filipino national, died in Spain, leaving a will that granted a usufruct (right to use and fruits from property) over a real property to Wanda Wrobleski, an alien.
This disposition was opposed, arguing it violated the Philippine Constitution.
Whether the usufruct in favor of Wanda Wrobleski, a foreigner, was constitutionally valid.
The Supreme Court ruled that the usufruct grant violated the Constitution.
The Court emphasized that the constitutional prohibition on aliens acquiring private lands includes both legal (by law) and testamentary succession.
Allowing aliens to acquire property via testamentary succession would undermine the constitutional prohibition, as it would enable foreigners to acquire Philippine land indirectly through wills, thereby rendering the prohibition ineffective.
Citing Krivenko v. Register of Deeds of Manila, the Court held that the prohibition against aliens owning land is comprehensive and cannot be circumvented by testamentary disposition.
The court rejects the argument that aliens can acquire land through testamentary succession.
Allowing this would render the constitutional prohibition meaningless and provide a loophole for aliens to indirectly acquire land ownership.
On the Usufruct in Favor of Wanda
The court distinguishes between ownership and usufruct. While the Constitution bars aliens from owning land, it does not prohibit them from holding other real rights, such as a usufruct.
Since a usufruct does not transfer ownership or title of the land to Wanda, it is not covered by the constitutional prohibition.
Matthews v. Taylor
A British citizen (alien) has no capacity or personality to question the lease of property by his wife (spouse).
Benjamin Taylor, a British citizen, and Joselyn C. Taylor, a Filipino, purchased property on Boracay Island, built a resort, and later had marital issues.
Joselyn leased the property to Philip Matthews without Benjamin’s consent.
Benjamin filed for nullification of the lease, claiming he funded the property's purchase and should have a say in the lease decision.
Whether Benjamin, an alien, has the right to nullify the lease agreement made by his wife, Joselyn.
The Supreme Court ruled that Benjamin has no right to nullify the lease.
As a foreigner, Benjamin is constitutionally barred from acquiring land in the Philippines.
The property was solely owned by Joselyn, despite Benjamin’s financial contribution, as he knowingly entered an illegal transaction.
No implied trust was created in Benjamin’s favor, and he cannot seek reimbursement or claim conjugal ownership.
Declaring the property as conjugal would violate the constitutional prohibition by indirectly giving an alien control over land ownership, which the Constitution does not allow.
Cheesman v. Intermediate Appellate Court
An alien has no capacity nor personality to question the subsequent sale of the same property by his/her spouse.
Thomas Cheesman, an American, married to Criselda Cheesman, a Filipino, separated from her.
Criselda bought a parcel of land from Armando Altares without any objection from Thomas.
Criselda later sold the land to Estelita Padilla without Thomas’s consent.
Thomas challenged the sale in the Court of First Instance (CFI), which upheld the validity of the sale to Estelita. The Intermediate Appellate Court affirmed this decision on appeal.
Whether Thomas Cheesman can challenge the sale executed by his wife, Criselda, in favor of Estelita.
No, Thomas has no legal standing to question the sale.
The Philippine Constitution prohibits aliens from owning residential land, except through hereditary succession.
Even if Thomas intended to purchase the property with his wife, he acquired no rights over it due to the constitutional prohibition.
Thomas’s attempt to indirectly acquire an interest in the property through Criselda violated the Constitution, rendering any interest he claimed null and void.
Allowing Thomas to exercise rights over the sale as conjugal property would indirectly violate the constitutional ban on foreign land ownership by giving him influence over its transfer or disposition, a right the Constitution does not grant to aliens.
Llantino v. Co Liong Chong
Aliens are allowed to lease private property so long as the lease do not operate to divest Filipinos of ownership over the property in favor of the alien.
Gregorio and Belinda Llantino leased their land in Catanduanes to Juan Molina (Co Liong Chong), initially a Chinese national, in 1954.
The Llantinos argued the lease was for 13 years, while Chong claimed it was for 60 years. Chong also argued he had already built a commercial structure on the property and had since become a Filipino citizen.
Whether the 60-year lease agreement with an alien is valid.
Yes, the 60-year lease is valid.
The court affirmed that Chong, though a Chinese national, had the right to lease the property without violating the constitutional prohibition against foreign land ownership.
There was no scheme to transfer ownership or circumvent the Constitution, as Chong was only granted a lease, not an option to buy.
Leasing land to an alien for a reasonable period is permissible under the Constitution, as aliens can temporarily use land for residential purposes without owning it.
A lease becomes invalid only if it includes an option or condition that effectively transfers ownership rights to an alien over time.
Even assuming, arguendo, that the subject contract is prohibited, the same can no longer be questioned presently upon the acquisition by the private respondent of Filipino citizenship.
It was held that sale of a residential land to an alien which is now in the hands of a naturalized Filipino citizen is valid .
A contract is the law between the contracting parties, and when there is nothing in it which is contrary to law, morals, good customs, public policy or public order, the validity of the contract must be sustained
2. Section 8, Article XII, 1987 Constitution
Section 8. Notwithstanding the provisions of Section 7 of this Article, a natural-born citizen of the Philippines who has lost his Philippine citizenship may be a transferee of private lands, subject to limitations provided by law.
This allows former natural-born citizens of the Philippines to be transferees of private lands subject only to area exceptions:
BP Blg 185
Urban Land – Maximum:
1,000 square meters
Rural Land – Maximum:
1 hectare
RA 8179 or Foreign Investments Act
Urban Land – Maximum:
5,000 square meters
Rural Land – Maximum:
3 hectares
These limitations are enforced by the Register of Deeds through a sworn statement stating, among other things, the area of the property former natural-born citizens are acquiring.
It is important to distinguish that Section 8 applies to former natural-born citizens of the Philippines.
It is different with those former natural-born citizens who have reacquired their Philippine Citizenship. In a way, if you are a former natural-born citizen, then you have limited rights, while if you reacquired Philippine citizenship, then you are no longer bound by the limitations.
Condominium Act of the Philippines
This allows foreigners to own units in the condominium building, which the latter is owned bya condominium corporation subject to ownership requirements of the Constitution. There is still need to comply with the 60-40 ownership ration in favor the Filipino citizens or corporations.
Section 5. Any transfer or conveyance of a unit or an apartment, office or store or other space therein, shall include the transfer or conveyance of the undivided interests in the common areas or, in a proper case, the membership or shareholdings in the condominium corporation: Provided, however, That where the common areas in the condominium project are owned by the owners of separate units as co-owners thereof, no condominium unit therein shall be conveyed or transferred to persons other than Filipino citizens, or corporations at least sixty percent of the capital stock of which belong to Filipino citizens, except in cases of hereditary succession. Where the common areas in a condominium project are held by a corporation, no transfer or conveyance of a unit shall be valid if the concomitant transfer of the appurtenant membership or stockholding in the corporation will cause the alien interest in such corporation to exceed the limits imposed by existing laws.
Choice of Law in Property
The Controlling Law
Exceptions to Lex Situs Rule
There are at least three exceptions to the application of lex situs rule, namely:
Where the transaction does not affect transfer of title to or ownership of the land. In this case the proper law of the transfer which is the lex intentionis or lex voluntatis is the governing law.
In contracts where real property is offered by way of a security for the performance of an obligation such as loan, the principal contract is the loan while the mortgage of the land is only an accessory. The mortgage of the land is governed by the rule of lex situs but the loan contract is governed by the rules on ordinary contracts.
Testate or intestate succession and capacity to succeed are governed by the national law of the decedent.
Under a policy-centered approach the forum court is not bound to look to the law of the situs when the situs of the movable property at the time of transfer was insignificant or accidental.
For instance, when such place was chosen for mere convenience of one of the parties and they both knew that the movable property would be used principally in another location such as the transferee's place of business, then all questions relating to the validity and effect of the transfer of the movable property should be determined by the law of the place of principal use.
Likewise, where the issue involves considerations other than the validity and effect of the transfer itself, the courts may look to the law of another state which has a real interest in applying its law.
In the U.S. case of Rudow v. Fogel, the state where the property was situated, noting that the issue did not relate to land title but to whether the conveyance would result in a constructive trust among family members, all residing in another state, applied the law of the domicile of the trustorand trustee instead of the lex situs of the property.
Situs of Certain Properties
Situs of Personal Property for Tax Purposes
The maxim mobilia sequuntur personam has been viewed as a mere "fiction of law" having its origins in considerations of general convenience and public policy.
It cannot be applied to limit the right of the state to tax property within its jurisdiction.
It yields to established facts of:
legal ownership
actual presence and
control elsewhere.
It cannot be applied if it would result in inescapable and patent injustice.
Asiatic Petroleum v. Co Quico 69 Phil. 433 (1940)
In 1927, Co Quico entered into an agency contract with Asiatic Petroleum, agreeing to sell its petroleum products and remit commissions.
Co Quico defaulted on P2,123 and failed to account for the amount before leaving for China.
Asiatic filed a complaint to recover the unremitted sum and requested a preliminary attachment of Co Quico’s properties.
The trial court granted the attachment on Co’s deposit at the Mercantile Bank of China.
Co Quico was summoned by publication as he was out of the country and did not respond, resulting in his default.
The court issued a judgment ordering Co Quico to pay the amount owed.
A writ of execution was issued, but it was unsatisfied due to the transfer of Co's deposits to his son.
Whether the court lacked jurisdiction over Co Quico as he was a non-resident and had been summoned by publication.
While Co Quico was outside the Philippines, he owned property within the country, and such property was subject to the jurisdiction of Philippine courts.
A property within a state is under the jurisdiction of its courts, regardless of the owner's residency.
The proceedings, whether classified as in rem or quasi in rem, were legally valid because the property (the deposit) was within the Philippine jurisdiction.
The publication of summons provided reasonable notice, and the court's actions were deemed proper.
Situs of Money
In Leon v. Manufacturers Life Insurance Co., the court held that the funds in question were outside the jurisdiction of the probate court of Manila.
Having been endorsed in an annuity in Canada under a contract executed in that country, Canada was the situs of the money. The party whose appearance the appellant sought was only a branch or agency of the company which held the funds in its possession, the agency's intervention being limited to delivering to the annuitant the checks made out and issued from the home office.
The court concluded that there was no showing or allegation that the funds have been transferred to the Manila branch.
Situs of Debts
There are two kinds of movable property:
Choses in possession
which embraces all types of tangible physical objects
Choses in action
which refers to intangible objects
can be further classified into rights which are:
mere rights of actions such as a debt arising from a loan
rights which are represented by a document that is both capable of delivery and susceptible to negotiation as a separate legal entity
Situs of Corporate Shares of Stocks
The Corporation Code of the Philippines reads—
Section 63. The capital stock of corporations shall be divided into shares for which certificates signed by the President or Vice President, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the bylaws. Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney in fact or other persons legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation showing the names of the parties to the transaction, the date of transfer, the number of certificate or certificates and the number of shares transferred.
CIR v. Anglo California National Bank
The Court distinguished between the rules that controlled the issue of the situs of shares of stock from those of the situs of income derived from the sale of such shares.
CIR v. Anglo California National Bank 106 Phil 903 (1960)
Calamba Sugar Estate Inc. (CSEI), a foreign corporation organized in California, was licensed to do business in the Philippines and filed its tax returns here.
It sold P250,000 shares of Pampanga Sugar Mills to Pasumil Planters, Inc., and received a $500,000 promissory note.
The sale occurred in San Francisco, California, where the negotiations, perfection, and consummation of the sale were completed. The sale was made under the laws of California, and the payments were made there as well.
The Collector of Internal Revenue (CIR) assessed CSEI for alleged deficiency income taxes for 1953-1955, based on:
the capital gains from the sale of shares and
the promissory note.
Court of Tax Appeals: Absolved CSEI from the tax liability, stating that the capital gains were derived from a transaction outside the Philippines and were not subject to Philippine income tax.
CSEI’s capital gains were not subject to Philippine income tax as the sale occurred abroad.
Intangible Property.
Shares of stock are considered intangible personal property under Philippine law.
Taxation of Foreign Corporations:
Under the National Internal Revenue Code (NIRC), foreign corporations are only taxed on income derived from sources within the Philippines.
Capital Gains on Sale of Personal Property.
The place of sale determines the source of capital gains.
In this case, the sale occurred in California, thus the capital gain was derived from outside the Philippines.
U.S. case law supports this approach, indicating that the location of the sale is where title passes and capital gains are realized.
Recording in the Corporation Books.
The CIR argued that the transfer needed to be recorded in the corporation’s books to validate the sale, but the court found this requirement irrelevant to the taxation of capital gains from a foreign sale.
Patent, Trademarks, Trade Name and Copyright
On 27 September 1965, the Philippines became a party to the Union Convention for the Protection of Industrial Property adopted in Paris on 20 March 1993 and revised in Brussels, 14 December 1900; Washington, 2 June 1911; the Hague, 6 November 1925; London, 2 June 1954; and Lisbon, 31 October 1958.
Article 8 of said Convention states that —
trade name (corporation name) shall be protected in all the countries of the Union without the obligation of filing of registration, whether or not it forms part of the trade name.
Western Equipment and Supply Co. v. Reyes, 51 Phil. 115 (1927):
A foreign corporation organized under the laws of Nevada, USA, was issued a provisional license by the Director of Bureau of Commerce and Industry (BCI).
It thereafter engaged in importing and selling in the Philippines of electrical and telephone apparatus and supplies manufactured by Western Electric Co. (WEC), Inc., a foreign corporation organized under the laws of New York, USA, which has never been licensed nor has ever engaged in business in the Philippines.
These equipment and supplies have been sold in foreign and interstate commerce for the past 50 years and have acquired high trade reputation.
In 1926, defendants Herman, et al. filed articles of incorporation with the intention of organizing a domestic corporation under the Philippine Corporation Law, to be known as the "Western Electric Company, Inc.," for the purpose of manufacturing, and dealing in electrical and telephone apparatus and supplies.
WEC prayed for a temporary injunction to restrain the issuance of the certificate of incorporation to the defendants.
The Court decided that although the company has not done business in the Philippines, it has the right to protect its reputation. The Court sustained the well established rule that the right to the use of the company's corporate and trade name is a property right which may be asserted against the whole world.
Citing Hanover Star Milling Co. vs. Allen and Wheeler Co. (208 Fed. 213) the Court reiterated that:
Since it is the trade and not the mark that is to be protected, a trademark acknowledges no territorial boundaries of municipalities or states or nations, but extends to every market where the trader's goods have become known and identified by the use of the mark.
In 1998, Congress passed Republic Act 8293, a new law prescribing the Intellectual Property Code and establishing the Intellectual Property Office.
Sec. 123 of the Act enumerates which cannot be registered and among these are those which are considered—
well known internationally and in the Philippines, whether or not it is registered here, as being already a mark of a person other than the applicant for registration, and used for identical or similar goods or services.
Under Sec. 3, any foreign corporation which is a national or domiciliary of a country which is a party to a convention, treaty or agreement relating to intellectual property rights to which the Philippines is also a party or extends reciprocal rights to our nationals by law "shall be entitled to benefits to the extent necessary to give effect to any provision of such convention…"
Such foreign corporation which does not engage in business in the Philippines may nevertheless bring a civil or administrative action for opposition, cancellation, infringement or unfair competition as provided for in Sec. 160.
However, Sec. 156 of the Act allows only owners of registered marks to recover damages from any person who infringes his rights.
Philips Export B.V. v. CA (1992)
Philips Export B.V. (PEBV), a foreign corporation from the Netherlands, is the registered owner of the trademark PHILIPS and PHILIPS SHIELD EMBLEM. Philips Electrical Lamps and Philips Industrial Development, Inc., authorized users of the trademark, incorporated and registered with the SEC.
Standard Philips Corporation was issued a Certificate of Registration by the SEC.
Philips Export B.V. filed with the SEC for the cancellation of the word “Philips” the corporate name of Standard Philips Corporation in view of its prior registration with the Bureau of Patents and the SEC. However, Standard Philips refused to amend its Articles of Incorporation so PEBV filed with the SEC a petition for the issuance of a Writ of Preliminary Injunction.
SEC: Denied. The corporate names are not identical, having at least two words different.
Property Right.
The right to use a corporate and trade name is considered a property right, a right in rem, meaning the corporation can protect its name against others in the same field.
A corporation’s name is integral to its identity and existence, essential for its legal actions, and can be protected against unauthorized use by another entity.
The right to a corporate name is as significant as the right to any other property or privilege granted to a corporation.
For the prohibition to apply, two requisites must be present:
the complainant corporation must have acquired a prior right over the use of such corporate name and
the proposed name is either identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or patently deceptive, confusing or contrary to existing law.
PEBV adopted the name “Philips” part of its name 26 years before Standard Philips.
The test for the existence of confusing similarity is whether the similarity is such as to mislead a person using ordinary care and discrimination.
Standard Philips only contains one word, “Standard”, different from that of PEBV.
The two companies’ products are also the same, or cover the same line of products.
Although PEBV primarily deals with electrical products, it has also shipped to its subsidiaries machines and parts which fall under the classification of “chains, rollers, belts, bearings and cutting saw”, the goods which Standard Philips also produce.
Also, among Standard Philips’ primary purposes are to buy, sell trade x x x electrical wiring devices, electrical component, electrical supplies. Given these, there is nothing to prevent Standard Philips from dealing in the same line of business of electrical devices.
The use of “Philips” by Standard Philips tends to show its intention to ride on the popularity and established goodwill of PEBV.
Emerald Garment Manufacturing v. CA
H.D. Lee Co., Inc., a Delaware corporation, filed a Petition for Cancellation with the Bureau of Patents, Trademarks & Technology Transfer (BPTTT) against Registration No. SR 5054 for the trademark "STYLISTIC MR. LEE."
Trademark was registered on 27 October 1980 under Emerald Garment Manufacturing Corporation, a Philippine company.
H.D. Lee Co., Inc., claimed "STYLISTIC MR. LEE" closely resembled H.D. Lee Co.’s trademark "LEE," causing likely confusion, mistake, or deception among consumers.
Director of Patents: Ruled in favor of H.D. Lee Co., granting the petition for cancellation and opposition to registration.
Found H.D. Lee Co. to be the prior registrant and user of the "LEE" trademark in the Philippines.
CA: Affirmed the Director of Patents' decision.
Issue on Prior Registration vs. Actual Use
The Court of Appeals erred in relying solely on H.D. Lee Co.'s prior registration of the "LEE" trademark.
Actual use in commerce in the Philippines, as required under Sec. 2 and Sec. 2-A of R.A. No. 166 (Philippine Trademark Law), was not proven by H.D. Lee Co. before its registration.
Trademark Distinction
Petitioner (Emerald Garment Manufacturing Corp.) argued that its trademark "STYLISTIC MR. LEE" should be considered as a whole, rather than focusing on the word "LEE."
Differences between "STYLISTIC MR. LEE" and "LEE" were substantial, reducing the likelihood of confusion.
Requirement of Actual Use
The law mandates at least two months of actual use in commerce in the Philippines before filing for trademark registration.
Evidence presented by H.D. Lee Co. (e.g., sales through U.S. military Post Exchanges in the 1960s) was deemed insufficient to prove local commercial use.
International Law Considerations
Although the Paris Convention allows foreign corporations to assert trademark rights, compliance with Philippine municipal law, specifically the actual use requirement, remains paramount.
Registration under the Paris Convention does not override the necessity for local use to establish exclusive ownership rights.
Petitioner’s Evidence
Emerald Garment sufficiently demonstrated use of "STYLISTIC MR. LEE" in commerce since 1975 through sales invoices and records of distribution in the Philippines.
This established prior use over H.D. Lee Co.'s "LEE" trademark.