11/19/2016

G.R.No.195549

TodayisSaturday,November19,2016

RepublicofthePhilippines
SUPREMECOURT
Manila
THIRDDIVISION
G.R.No.195549September3,2014
WILLAWAREPRODUCTSCORPORATION,Petitioner,
vs.
JESICHRISMANUFACTURINGCORPORATION,Respondent.
DECISION
PERALTA,J.:
BeforetheCourtisaPetitionforReviewonCertiorariunderRule45oftheRulesofCourtseekingtosetasidethe
Decision1datedNovember24,2010andResolution2datedFebruary10,2011oftheCourtofAppeals(CA)inCA
G.R.CVNo.86744.
Thefacts,asfoundbytheRegionalTrialCourt(RTC),areasfollows:
[Respondent]JesichrisManufacturingCompany([respondent]forshort)filedthispresentcomplaintfordamages
for unfair competition with prayer for permanent injunction to enjoin [petitioner] Willaware Products Corporation
([petitioner] for short) from manufacturing and distributing plasticmade automotive parts similar to those of
[respondent].
[Respondent]allegedthatitisadulyregisteredpartnershipengagedinthemanufactureanddistributionofplastic
andmetalproducts,withprincipalofficeatNo.100MithiStreet,Sampalukan,CaloocanCity.Sinceitsregistration
in 1992, [respondent] has been manufacturing in its Caloocan plant and distributing throughout the Philippines
plasticmade automotive parts. [Petitioner], on the other hand, which is engaged in the manufacture and
distributionofkitchenwareitemsmadeofplasticandmetalhasitsofficenearthatof[respondent].[Respondent]
furtherallegedthatinviewofthephysicalproximityof[petitioners]officeto[respondents]office,andinviewof
the fact that some of the [respondents] employeeshad transferred to [petitioner], [petitioner] had developed
familiaritywith[respondents]products,especiallyitsplasticmadeautomotiveparts.
That sometime in November 2000, [respondent] discovered that [petitioner] had been manufacturing and
distributingthesameautomotivepartswithexactlysimilardesign,samematerialandcolorsbutwassellingthese
productsatalowerpriceas[respondents]plasticmadeautomotivepartsandtothesamecustomers.
[Respondent]allegedthatithadoriginatedtheuseofplasticinplaceofrubberinthemanufactureofautomotive
underchassis parts such as spring eye bushing, stabilizer bushing, shock absorberbushing, center bearing
cushions,amongothers.[Petitioners]manufactureofthesameautomotivepartswithplasticmaterialwastaken
from[respondents]ideaofusingplasticforautomotiveparts.Also,[petitioner]deliberatelycopied[respondents]
products all of which acts constitute unfair competition, is and are contrary to law, morals, good customs and
publicpolicyandhavecaused[respondent]damagesintermsoflostandunrealizedprofitsintheamountofTWO
MILLIONPESOSasofthedateof[respondents]complaint.
Furthermore, [petitioners] tortuous conduct compelled [respondent] to institute this action and thereby to incur
expenses in the way of attorneys fees and other litigation expenses in the amount of FIVE HUNDRED
THOUSANDPESOS(P500,000.00).
In its Answer, [petitioner] denies all the allegations of the [respondent] except for the following facts: that it is
engaged in the manufacture and distribution of kitchenware items made of plastic and metal and that theres
physical proximity of [petitioners] office to [respondent]s office, and that someof [respondents] employees had
transferred to [petitioner] and that over the years [petitioner] had developed familiarity with [respondents]
products,especiallyitsplasticmadeautomotiveparts.

http://www.lawphil.net/judjuris/juri2014/sep2014/gr_195549_2014.html

1/6

11/19/2016

G.R.No.195549

As its Affirmative Defenses, [petitioner] claims that there can be no unfair competition as the plasticmade
automotivepartsaremerereproductionsoforiginalpartsandtheirconstructionandcompositionmerelyconforms
tothespecificationsoftheoriginalpartsofmotorvehiclestheyintendtoreplace.Thus,[respondent]cannotclaim
that it "originated" the use of plastic for these automotive parts. Even assuming for the sake of argument that
[respondent] indeed originated the use of these plastic automotive parts, it still has no exclusive right to use,
manufacture and sell these as it has no patent over these products. Furthermore, [respondent] is not the only
exclusive manufacturer of these plasticmade automotive parts as there are other establishments which were
alreadyopenlysellingthemtothepublic.3
Aftertrialonthemerits,theRTCruledinfavorofrespondent.Itruledthatpetitionerclearlyinvadedtherightsor
interest of respondent by deliberately copying and performing acts amounting to unfair competition. The RTC
furtheropinedthatunderthecircumstances,inorderforrespondentspropertyrightstobepreserved,petitioners
actsofmanufacturingsimilarplasticmadeautomotivepartssuchasthoseofrespondentsandthesellingofthe
sameproducts to respondents customers, which it cultivated over the years, will have to be enjoined. The
dispositiveportionofthedecisionreads:
WHEREFORE, premises considered, the court finds the defendant liable to plaintiff Two Million (P2,000,000.00)
Pesos,asactualdamages,OneHundredThousand(P100,000.00) Pesos as attorneys fees and One Hundred
Thousand(P100,000.00)Pesosforexemplarydamages.Thecourtherebypermanently[enjoins]defendantfrom
manufacturingtheplasticmadeautomotivepartsasthosemanufacturedbyplaintiffs.
SOORDERED.4
Thus,petitionerappealedtotheCA.
On appeal, petitioner asserts that ifthere is no intellectual property protecting a good belonging to another,the
copying thereof for production and selling does not add up to unfair competition as competition is promoted by
law to benefit consumers. Petitioner further contends that it did not lure away respondents employees to get
trade secrets. It points out that the plastic spare parts sold by respondent are traded in the market and the
copyingofthesecanbedonebysimplybuyingasampleforamoldtobemade.
Conversely, respondent averred that copyright and patent registrations are immaterial for an unfair competition
case to prosper under Article 28 of the Civil Code. It stresses that the characteristics of unfair competition are
presentintheinstantcaseasthepartiesaretraderivalsandpetitionersactsarecontrarytogoodconsciencefor
deliberatelycopyingitsproductsandemployingitsformeremployees.
InaDecisiondatedNovember24,2010,theCAaffirmedwithmodificationtherulingoftheRTC.Relevantportions
ofsaiddecisionread:
Despite the evidence showing thatWillaware took dishonest steps in advancing its business interest against
Jesichris,however,theCourtfindsnobasisfortheawardbytheRTCofactualdamages.Oneisentitledtoactual
damagesasonehasdulyproven.ThetestimonyofQuejada,whowasengagedbyJesichrisin2001toauditits
business, only revealed that there was a discrepancy between the sales of Jesichris from 2001 to 2002. No
amountwasmentioned.AsforExhibit"Q,"whichisacopyofthecomparativeincomestatementofJesichrisfor
19992002, it shows the decline of the sales in 2002 in comparison with those made in 2001 but it does not
discloseifthispertainstothesubjectautomotivepartsortotheotherproductsofJesichrislikeplates.
In any event, it was clearly shown that there was unfair competition on the part of Willaware that prejudiced
Jesichris. It is only proper that nominal damages be awarded in the amount of Two Hundred Thousand Pesos
(P200,000.00) in order to recognize and vindicate Jesichris rights. The RTCs award of attorneys fees and
exemplarydamagesisalsomaintained.
xxxx
WHEREFORE, premises considered, the Decision dated April 15, 2003 of the Regional Trial Court of Caloocan
City, Branch 131, in Civil Case No. C19771 is hereby MODIFIED. The award of Two Million Pesos
(P2,000,000.00)actualdamagesisdeletedandinitsplace,TwoHundredThousandPesosnominaldamagesis
awarded.
SOORDERED.5
Dissatisfied,petitionermovedforreconsideration.However,thesamewasdeniedforlackofmeritbytheCAina
ResolutiondatedFebruary10,2011.
Hence,thepresentPetitionforReviewwhereinpetitionerraisesthefollowingissuesforourresolution:
(1)Whetherornotthereisunfaircompetitionunderhumanrelationswhenthepartiesarenotcompetitors
andthereisactuallynodamageonthepartofJesichris?
http://www.lawphil.net/judjuris/juri2014/sep2014/gr_195549_2014.html

2/6

11/19/2016

G.R.No.195549

(2)Consequently,ifthereisnounfaircompetition,shouldtherebemoraldamagesandattorneysfees?
(3)Whetherornottheadditionofnominaldamagesisproperalthoughnorightshavebeenestablished?
(4)IfevertherightofJesichrisreferstoitscopyrightonautomotiveparts,shoulditbeconsideredinthelight
of the said copyrights were considered to be void by no less than this Honorable Court in SC GR No.
161295?
(5)Iftherightinvolvedis"goodwill"thentheissueis:whetherornotJesichrishasestablished"goodwill?"6
In essence, the issue for our resolution is: whether or not petitioner committed acts amounting to unfair
competitionunderArticle28oftheCivilCode.
Prefatorily,wewouldliketostressthattheinstantcasefallsunderArticle28oftheCivilCodeonhumanrelations,
andnotunfaircompetitionunderRepublicActNo.8293,7asthepresentsuitisadamagesuitandtheproducts
arenotcoveredbypatentregistration.Afortiori,theexistenceofpatentregistrationisimmaterialinthepresent
case.
The concept of "unfair competition"under Article 28 is very much broader than that covered by intellectual
propertylaws.Underthepresentarticle,whichfollowstheextendedconceptof"unfaircompetition"inAmerican
jurisdictions,thetermcoversevencasesofdiscoveryoftradesecretsofacompetitor,briberyofhisemployees,
misrepresentation of all kinds, interference with the fulfillment of a competitors contracts, or any malicious
interferencewiththelattersbusiness.8
With that settled, we now come to the issue of whether or not petitioner committed acts amounting tounfair
competitionunderArticle28oftheCivilCode.
Wefindthepetitionbereftofmerit.
Article28oftheCivilCodeprovidesthat"unfaircompetitioninagricultural,commercialorindustrialenterprisesor
inlaborthroughtheuseofforce,intimidation,deceit,machinationoranyotherunjust,oppressiveorhighhanded
methodshallgiverisetoarightofactionbythepersonwhotherebysuffersdamage."
From the foregoing, it is clear thatwhat is being sought to be prevented is not competitionper sebut the use of
unjust,oppressiveorhighhandedmethodswhichmaydepriveothersofafairchancetoengageinbusinessor
toearnaliving.Plainly,whatthelawprohibitsisunfaircompetitionandnotcompetitionwherethemeansusedare
fairandlegitimate.
In order to qualify the competition as "unfair," it must have two characteristics: (1) it must involve an injury to a
competitorortraderival,and(2)itmustinvolveactswhicharecharacterizedas"contrarytogoodconscience,"or
"shocking to judicial sensibilities," or otherwise unlawful in the language of our law, these include force,
intimidation, deceit, machination or any other unjust, oppressive or highhanded method. The public injury or
interestisaminorfactortheessenceofthematterappearstobeaprivatewrongperpetratedbyunconscionable
means.9
Here,bothcharacteristicsarepresent.
First, both parties are competitors or trade rivals, both being engaged in the manufacture of plasticmade
automotive parts. Second, the acts of the petitioner were clearly "contrary to good conscience" as petitioner
admitted having employed respondents formeremployees, deliberately copied respondents products and even
wenttotheextentofsellingtheseproductstorespondentscustomers.10
Tobolsterthispoint,theCAcorrectlypointedoutthatpetitionershiringoftheformeremployeesofrespondent
andpetitionersactofcopyingthesubjectplasticpartsofrespondentweretantamounttounfaircompetition,viz.:
The testimonies of the witnesses indicate that [petitioner] was in bad faith in competing with the business of
[respondent]. [Petitioners] acts can be characterized as executed with mischievous subtle calculation. To
illustrate,inadditiontothefindingsoftheRTC,theCourtobservesthat[petitioner]isengagedintheproductionof
plastickitchenwareprevioustoitsmanufacturingofplasticautomotivespareparts,itengagedtheservicesofthe
thenmoldsetterandmaintenanceoperatorof[respondent],DeGuzman,whilehewasemployedbythelatter.De
Guzmanwashiredby[petitioner]inordertoadjustitsmachinerysincequalityplasticautomotivesparepartswere
notbeingmade.ItbafflestheCourtwhy[petitioner]cannotrelyonitsownmoldsetterandmaintenanceoperator
to remedy its problem. [Petitioners] engagement of De Guzman indicates that it is banking on his experience
gainedfromworkingfor[respondent].
1 w p h i1

AnotherpointweobserveisthatYabut,whousedtobeawarehouseanddeliverymanof[respondent],wasfired
becausehewasblamedofspyinginfavorof[petitioner].Despitethisaccusation,hedidnotgetangry.Lateron,
http://www.lawphil.net/judjuris/juri2014/sep2014/gr_195549_2014.html

3/6

11/19/2016

G.R.No.195549

heappliedforandwashiredby[petitioner]forthesamepositionheoccupiedwith[respondent].Thesesequence
ofeventsrelatingtohisemploymentby[petitioner]issuspecttoolikethesituationwithDeGuzman.11
Thus, it is evident that petitioner isengaged in unfair competition as shown by his act of suddenly shifting his
business from manufacturing kitchenware to plasticmade automotive parts his luring the employees of the
respondenttotransfertohisemployandtryingtodiscoverthetradesecretsoftherespondent.12
Moreover, when a person starts an opposing place of business, not for the sake of profit to himself, but
regardlessoflossandforthesolepurposeofdrivinghiscompetitoroutofbusinesssothatlateronhecantake
advantage of the effects of his malevolent purpose, he is guilty of wanton wrong.13 As aptly observed by the
courtaquo,thetestimonyofpetitionerswitnessesindicatethatitactedinbadfaithincompetingwiththebusiness
of respondent, to wit: [Petitioner], thru its General Manager, William Salinas, Jr., admitted that it was never
engagedinthebusinessofplasticmadeautomotivepartsuntilrecently,year2000:
Atty.Bautista:ThebusinessnameofWillawareProductCorporationiskitchenware,itis(sic)not?Manufacturerof
kitchenware and distributor ofkitchenware, is it not? Mr. Salinas: Yes, sir. Atty. Bautista: And you said you have
known the [respondent] Jesichris Manufacturing Co., you have known it to be manufacturing plastic automotive
products,isitnot?Mr.Salinas:Yes,sir.Atty.Bautista:Infact,youhavebeen(sic)physicallybecomefamiliarwith
theseproducts,plasticautomotiveproductsofJesichris?Mr.Salinas:Yes,sir.
How [petitioner] was able to manufacture the same products, in terms of color, size, shape and composition as
thosesoldbyJesichriswasduelargelytothesuddentransferofJesichrisemployeestoWillaware.
Atty.Bautista:SincewhenhaveyoubeenfamiliarwithJesichrisManufacturingCompany?
Mr.Salinas:Sincetheytransferredthere(sic)ourplace.
Atty.Bautista:Andthatwasinwhatyear?Mr.Salinas:Maybefour(4)years.Idontknowtheexactdate.
Atty.Bautista:AndsomeoftheemployeesofJesichrisManufacturingCo.havetransferredtoyourcompany,isit
not?
Mr.Salinas:Yes,sir.
Atty.Bautista:Howmany,moreorless?
Mr.Salinas:Moreorless,three(3).
Atty.Bautista:Andwhen,inwhatyearormonthdidtheytransfertoyou?
Mr.Salinas:First,November1.
Atty.Bautista:Year2000?
Mr.Salinas:Yessir.AndthentheothermaybeFebruary,thisyear.Andtheotherone,justonemonthago.
That [petitioner] was clearly outto take [respondent] out of business was buttressed by the testimony of
[petitioners]witness,JoelTorres:
Q:Areyoufamiliarwiththe[petitioner],WillawareProductCorporation?
A:Yes,sir.
Q:WillyoukindlyinformthiscourtwhereistheofficeofthisWillawareProductCorporation(sic)?
A:AtMithiStreet,CaloocanCity,sir.
Q:AndMr.Witness,sometimesecondSaturdayofJanuary2001,willyoukindlyinformthiscourtwhatunusual
even(sic)transpiredbetweenyouandMr.Salinasonsaiddate?
A:Therewas,sir.
Q:Whatisthat?
A:Sir,IwaswalkingatthattimetogetherwithmywifegoingtothemarketandthenIpassedbytheplacewhere
theywerehavingadrinkingspree,sir.
Q:Youmentionedthey,whoweretheywhoweredrinkingatthattime?
http://www.lawphil.net/judjuris/juri2014/sep2014/gr_195549_2014.html

4/6

11/19/2016

G.R.No.195549

A:IknowoneJunMolina,sir.
Q:Andwhoelsewasthere?
A:WilliamSalinas,sir.
Q:Andwillyoukindlyinformuswhathappenedwhenyouspotteduponthemdrinking?
A:JunMolinacalledme,sir.
Q:Andwhathappenedafterthat?
A:Atthattime,heofferedmeaglassofwineandbeforeIwasabletodrinkthewine,Mr.Salinasuttered
something,sir.
Q:AndwhatwerethosewordsutteredbyMr.Salinastoyou?
A:"O,anonaapektuhannakayosaginaya(sic)kosainyo?"
Q:Andwhatdidyoudoafterthat,afterhearingthosewords?
A:Andheaddedthesewords,sir."sabihinmosaamomo,dalawangtaonnalangpababagsakinkonasiya."
Q:Alright,hearingthosewords,willyoukindlytellthiscourtwhomdidyougathertobereferredtoasyour"amo"?
A:Mr.JessieChing,sir.14
Insum,petitionerisguiltyofunfaircompetitionunderArticle28oftheCivilCode.
However,sincetheawardofTwoMillionPesos(P2,000,000.00)inactualdamageshadbeendeletedandinits
placeTwoHundredThousandPesos(P200,000.00)innominaldamagesisawarded,theattorney'sfeesshould
concomitantlybemodifiedandloweredtoFiftyThousandPesos(P50,000.00).
WHEREFORE, the instant petition is DENIED. The Decision dated November 24, 2010 and Resolution dated
February10,2011oftheCourtofAppealsinCAG.R.CVNo.86744areherebyAFFIRMEDwithMODIFICATION
thattheawardofattorney'sfeesbeloweredtoFiftyThousandPesos(P50,000.00).
SOORDERED.
DIOSDADOM.PERALTA
AssociateJustice
WECONCUR:
PRESBITEROJ.VELASCO,JR.
AssociateJustice
LUCASP.BERSAMIN*
AssociateJustice

MARTINS.VILLARAMA,JR.
AssociateJustice
BIENVENIDOL.REYES
AssociateJustice
ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was
assignedtothewriteroftheopinionoftheCourt'sDivision.
PRESBITEROJ.VELASCO,JR.
AssociateJustice
Chairerson,ThirdDivision
CERTIFICATION
PursuanttoSection13,ArticleVIIIoftheConstitutionandtheDivisionChairperson'sAttestation,Icertifythatthe
conclusionsintheaboveDecisionhadbeenreachedinconsultationbeforethecasewasassignedtothewriterof
theopinionoftheCourt'sDivision.

http://www.lawphil.net/judjuris/juri2014/sep2014/gr_195549_2014.html

5/6

11/19/2016

G.R.No.195549

ANTIONIOT.CARPIO
ActingChiefJustice

Footnotes
*

Designated as Acting Member in lieu of Associate Justice Francis H. Jardeleza, per Special Order No.
1777datedSeptember1,2014.
1

Penned by Associate Justice Fiorito S. Macalino, with Associate Justices Juan Q. Enriquez, Jr. and
RamonM.Bato,Jr.,concurringrollo,pp.128135.
2

Id.at145146.

Id.at3839.

Id.at45.

Id.at134135.(Emphasisintheoriginal)

Id.at1415.

AN ACT PRESCRIBING THE INTELLECTUAL PROPERTY CODE AND ESTABLISHING THE

INTELLECTUAL PROPERTY OFFICE, PROVIDING FOR ITS POWERS AND FUNCTIONS, AND FOR
OTHERPURPOSES.
8

Tolentino,CommentariesandJurisprudenceontheCivilCodeofthePhilippines,Vol.1,p.117.

Id.at116117.

10

Rollo,p.41.

11

Id.at133134.

12

Id.at44.

13

Supranote8.

14

Rollo,pp.4144.(Citationsomitted)

TheLawphilProjectArellanoLawFoundation

http://www.lawphil.net/judjuris/juri2014/sep2014/gr_195549_2014.html

6/6