Tan vs. Bausch & Lomb, Inc.

Supreme Court administrative orders designating Regional Trial Court branches as exclusive courts for intellectual property rights violations and transferring jurisdiction over such offenses from first-level courts to the RTC are valid exercises of the Court’s constitutional power to promulgate rules of procedure, provided they do not diminish, increase, or modify substantive rights; these orders have the force and effect of law and may not be collaterally attacked. A trial court that disregards such orders and dismisses the case for lack of jurisdiction commits a patent nullity, and certiorari lies to correct the error even if procedural requirements are not strictly observed.

An information for violation of Article 189 of the Revised Penal Code (unfair competition) was filed against Andrea Tan, Clarita Llamas, Victor Espina, and Luisa Espina, officers of Best Buy Mart, Inc., for distributing and selling counterfeit Ray-Ban sunglasses bearing the trademark owned by Bausch & Lomb, Inc. The case was docketed in Branch 21, Regional Trial Court, Cebu City. Prior to the filing, the Supreme Court had issued Administrative Order No. 113-95 designating certain RTC branches as special intellectual property courts, and Administrative Order No. 104-96, which shifted exclusive jurisdiction over intellectual property violations to the RTC and withdrew the earlier designation of Metropolitan Trial Courts and Municipal Trial Courts in Cities as such special courts. The trial court’s subsequent order quashing the information on jurisdictional grounds placed in issue the validity and binding effect of these administrative orders.

• Nature of the Charge: On April 8, 1997, an information was filed against Andrea Tan, Clarita Llamas, Victor Espina, and Luisa Espina, who were connected with Best Buy Mart, Inc., for unfair competition under paragraph 1, Article 189 of the Revised Penal Code. The information alleged that on or about June 27, 1996, the accused, conspiring together, willfully and unlawfully distributed and sold counterfeit Ray-Ban sunglasses bearing the genuine trademark, thereby inducing the public to believe the goods were those of Bausch & Lomb, Inc., the exclusive trademark owner. The prescribed penalty was prision correccional in its minimum period or a fine ranging from ₱500 to ₱2,000, or both.

• Administrative Designations: Before the information was filed, the Supreme Court had issued A.O. No. 113-95 on October 2, 1995, designating certain branches of the RTC as special courts for intellectual property rights. On October 21, 1996, the Court issued A.O. No. 104-96, which expressly provided that violations of intellectual property rights—including Article 189—shall be “tried exclusively by the RTC” and deleted and withdrew the previous designation of MTC and MTCC as special intellectual property courts. The latter order was anchored on Section 23 of BP 129, which allows the Supreme Court to designate RTC branches to handle special cases in the interest of a speedy and efficient administration of justice.

• Motions before the Trial Court: Respondent Bausch & Lomb, Inc. moved to transfer the case to Branch 9, RTC, Cebu City, the special intellectual property court under A.O. No. 113-95. Petitioners filed a motion to quash, arguing that the penalty for unfair competition fell within the exclusive original jurisdiction of the MTCC under Section 32(2) of BP 129, and that the Supreme Court’s administrative orders could not prevail over a statute enacted by Congress.

• Trial Court’s Order: On December 22, 1998, the trial court denied the motion to transfer and granted the motion to quash. It ruled that the penalty placed the offense within the jurisdiction of the metropolitan and municipal trial courts, that jurisdiction is a matter of substantive law that cannot be altered by administrative orders, and that if the court had no jurisdiction, then Branch 9 likewise lacked it. The case was dismissed.

• Certiorari in the Court of Appeals: Respondent received the order on January 21, 1999. It did not appeal or move for reconsideration. Instead, it filed a petition for certiorari in the Court of Appeals on March 23, 1999, one day beyond the 60-day period fixed in Section 4, Rule 65 of the Rules of Court. The appellate court nonetheless gave due course and granted the petition, vacating the trial court’s order and directing transfer of the case to Branch 9.

• Supervening Administrative Issuance: During the pendency of the petition before the Supreme Court, the Court issued A.M. No. 03-03-03-SC on June 23, 2003, consolidating intellectual property courts and commercial SEC courts into a single special commercial court per locality. In Region VII, Branch 11, RTC, Cebu City was designated as the special commercial court.

• Procedural Defects in Certiorari: Petitioners argued that the Court of Appeals seriously erred in entertaining the petition for certiorari because respondent failed to file a motion for reconsideration of the trial court’s order and filed the petition one day beyond the reglementary 60-day period.

• Lack of RTC Jurisdiction: Petitioners maintained that jurisdiction is a matter of substantive law belonging exclusively to Congress, and that the RTC had no jurisdiction because the penalty under Article 189 placed the offense within the exclusive original jurisdiction of the MTCC under Section 32(2) of BP 129. The Supreme Court’s administrative orders could not override the statutory grant of jurisdiction.

• Patent Nullity Justifying Certiorari: Respondent countered that the trial court’s order was a patent nullity, an exception to the requirement of a prior motion for reconsideration, and that the one-day delay should be relaxed in equity to prevent a manifest failure of justice.

• Validity of Administrative Orders: Respondent contended that BP 129 already transferred exclusive jurisdiction over intellectual property right violations to the RTC, and that A.O. Nos. 113-95 and 104-96 were validly issued under the Supreme Court’s constitutional rule-making power and Section 23 of BP 129, designating RTC branches to exclusively handle such cases. The trial court could not collaterally invalidate those orders in a motion to quash.

• Propriety of Certiorari: Whether the Court of Appeals committed reversible error in giving due course to the petition for certiorari despite the absence of a motion for reconsideration and the one-day late filing.

• Jurisdiction over Unfair Competition: Whether the Regional Trial Court has jurisdiction to try and decide a violation of Article 189 of the Revised Penal Code considering Supreme Court Administrative Orders Nos. 113-95 and 104-96, and whether the trial court’s dismissal of the case constituted grave abuse of discretion.

• Propriety of Certiorari: The petition for certiorari was properly entertained. The acceptance of a certiorari petition lies within the sound discretion of the court, and technical rules may be relaxed where rigid application would result in a manifest miscarriage of justice. The trial court’s order was a patent nullity—a recognized exception to the requirement of a prior motion for reconsideration—and the one-day delay was excusable on equitable grounds to allow respondent the fullest opportunity to prove the merits of its cause, consistent with Yao v. Court of Appeals.

• Jurisdiction over Unfair Competition: The RTC has exclusive original jurisdiction over intellectual property rights violations, including unfair competition under Article 189, by virtue of valid administrative orders. Section 5(5), Article VIII of the 1987 Constitution empowers the Supreme Court to promulgate rules of procedure, subject only to the limitations that the rules provide a simplified and inexpensive procedure, be uniform for courts of the same grade, and not diminish, increase, or modify substantive rights. A.O. No. 104-96, issued pursuant to Section 23 of BP 129, transferred jurisdiction over such crimes to the RTC and withdrew the earlier designation of first-level courts. These orders did not alter the definition or scope of the crime; they merely allocated jurisdiction, a procedural matter. Accordingly, the administrative orders have the force and effect of law and were binding on the lower court. The trial court’s order was a patent nullity because it collaterally attacked the validity of these orders, a course impermissible under the rule that the constitutionality or validity of laws and rules having the force of law cannot be attacked collaterally. The appellate court correctly found grave abuse of discretion.

• Transfer to Special Commercial Court: While the Court of Appeals directed transfer to Branch 9, the subsequent issuance of A.M. No. 03-03-03-SC consolidated intellectual property and SEC cases into special commercial courts, designating Branch 11, RTC, Cebu City for Region VII. Transfer to Branch 11 was therefore warranted.

• Rule-Making Power of the Supreme Court, Section 5(5), Article VIII, 1987 Constitution — The Supreme Court has the exclusive authority to promulgate rules concerning pleading, practice, and procedure in all courts, provided such rules afford a simplified and inexpensive procedure for the speedy disposition of cases, are uniform for courts of the same grade, and do not diminish, increase, or modify substantive rights. Administrative orders designating special courts and transferring jurisdiction over particular cases fall within this power when issued to promote the efficient administration of justice and do not affect substantive rights. The orders here merely allocated jurisdiction and did not alter the crime’s scope or penalty.

• Collateral Attack on the Validity of Administrative Rules — The constitutionality or validity of laws, orders, or other rules with the force of law cannot be attacked collaterally. A legal presumption of validity attaches unless the rule is directly annulled in a proper proceeding. In a motion to quash, a trial court cannot declare a Supreme Court administrative order void; to do so is a patent nullity.

• Exceptions to the Requirement of a Prior Motion for Reconsideration in Certiorari — A petition for certiorari may be given due course even without a prior motion for reconsideration where the assailed order is a patent nullity, the issue raised is purely one of law, public interest is involved, the matter is one of urgency, or the question of jurisdiction was squarely raised and decided by the lower court.

• Relaxation of Procedural Rules in Substantial Justice — When strict adherence to procedural rules would result in manifest injustice or where the merits of a party’s cause outweigh non-compliance with formal requirements, the rules may be liberally construed to afford a party the fullest opportunity to establish the merits of its case. A one-day delay in filing may be excused on equitable grounds.

• Administrative Orders as Law — Administrative orders validly issued by the Supreme Court in the exercise of its constitutional rule-making power have the force and effect of law and are binding on all subordinate courts.

• “Where a rigid application of the rule that certiorari cannot be a substitute for appeal will result in a manifest failure or miscarriage of justice, it is within our power to suspend the rules or exempt a particular case from its operation.” — This passage explains the Court’s basis for relaxing procedural requirements when the trial court’s order was a patent nullity.

• “Both administrative orders therefore have the force and effect of law, having been validly issued by the Supreme Court in the exercise of its constitutional rule-making power.” — The core pronouncement vesting the administrative orders with binding legal authority over jurisdictional allocation.

• “We have ruled time and again that the constitutionality or validity of laws, orders, or such other rules with the force of law cannot be attacked collaterally. There is a legal presumption of validity of these laws and rules. Unless a law or rule is annulled in a direct proceeding, the legal presumption of its validity stands.” — The definitive statement prohibiting collateral attacks on Supreme Court administrative issuances.

• “In the interest of substantial justice, procedural rules of the most mandatory character in terms of compliance may be relaxed. … A party-litigant is to be given the fullest opportunity to establish the merits of his complaint or defense rather than for him to lose life, liberty, honor or property on mere technicalities.” (Quoting Yao v. Court of Appeals) — The guiding principle behind excusing respondent’s procedural missteps.

• Yao v. Court of Appeals, G.R. No. 132428, October 24, 2000 — Applied for the rule that procedural requirements may be relaxed in the interest of substantial justice when a party’s cause is meritorious and strict compliance would result in manifest injustice.

• Far East Bank and Trust Co. v. Toh, Sr., G.R. No. 144018, June 23, 2003 — Enumerated the exceptions to the requirement of a prior motion for reconsideration in certiorari, including where the assailed order is a patent nullity; applied to justify entertaining the petition.

• Serrano v. Galant Maritime Services, Inc., G.R. No. 151833, August 7, 2003, and Nala v. Barroso, Jr., G.R. No. 153087, August 7, 2003 — Confirmed that acceptance of a certiorari petition is addressed to the sound discretion of the court and that technical rules may be relaxed.

• Olsen and Co. v. Aldanese, 43 Phil. 259 (1922) and San Miguel Brewery v. Magno, 128 Phil. 328 (1967) — Established the long-standing rule that the validity of laws and administrative rules cannot be collaterally attacked; cited to declare the trial court’s order a patent nullity.

• Article VIII, Section 5(5), 1987 Constitution — Basis of the Supreme Court’s rule-making power; the administrative orders were upheld as a valid exercise of this power because they did not diminish, increase, or modify substantive rights.

• Section 23, Batas Pambansa Blg. 129 — Authorizes the Supreme Court to designate RTC branches to handle exclusively criminal cases and other special cases in the interest of a speedy and efficient administration of justice; served as the statutory foundation for A.O. No. 104-96 transferring jurisdiction over intellectual property violations to the RTC.

• Article 189, Revised Penal Code — Defines and penalizes unfair competition; its penalty structure was cited by petitioners to argue for MTCC jurisdiction, but the Court held that the penalty did not preclude the RTC from acquiring jurisdiction under the administrative orders.

• Administrative Order No. 113-95 (October 2, 1995) — Designated specific RTC branches as special courts for intellectual property rights.

• Administrative Order No. 104-96 (October 21, 1996) — Transferred exclusive jurisdiction over intellectual property rights violations, including Article 189, to the RTC and deleted/withdrew the previous designation of first-level courts as special intellectual property courts.

• A.M. No. 03-03-03-SC (June 23, 2003) — Consolidated intellectual property and SEC courts into special commercial courts; designated Branch 11, RTC, Cebu City as the special commercial court for Region VII, thereby necessitating the modification of the appellate court’s transfer order.

• Section 4, Rule 65, Rules of Court — Prescribes the 60-day period for filing a petition for certiorari; the one-day delay was excused under the liberal application justified by equity and the patent nullity of the trial court’s order.

Artemio V. Panganiban (Chairman), Angelina Sandoval-Gutierrez, Conchita Carpio Morales, Cancio C. Garcia.