Twin Ace Holdings Corporation vs. Rufina and Company

The exemption in Section 6 of Republic Act No. 623, as amended by Republic Act No. 5700, applies to all manufacturers of “sisi,” “bagoong,” “patis,” and similar native products without distinction or qualification as to whether they are small, medium, or large scale. An act specifically allowed by law cannot be the subject of injunctive relief and damages.

Twin Ace Holdings Corporation is a domestic corporation engaged in the manufacture of rhum, wines, and liquor under the name and style “Tanduay Distillers,” and it registered its mark of ownership over its bottles with the Bureau of Patent, Trademarks and Technology Transfer under Republic Act No. 623. Rufina and Company is engaged in the production, extraction, fermentation, and manufacture of patis and other food seasonings and in the buying and selling of food products and merchandise. Republic Act No. 623, as amended by Republic Act No. 5700, regulates the use of duly stamped or marked bottles and similar containers, and Section 6 provides that the Act shall not be interpreted as prohibiting the use of bottles as containers for “sisi,” “bagoong,” “patis,” and similar native products.

On 3 December 1991, Twin Ace Holdings Corporation filed a Complaint for recovery of possession of personal property, permanent injunction, and damages, with a prayer for a writ of replevin, temporary restraining order, and writ of preliminary injunction, against Rufina and Company. Twin Ace alleged that it is a private domestic corporation engaged in the manufacture of rhum, wines, and liquor under the name and style “Tanduay Distillers”; that it registered its mark of ownership of its bottles with the Bureau of Patent, Trademarks and Technology Transfer under Republic Act No. 623; that in the conduct of its business it sells its products to the public excluding the bottles; that it makes substantial investments in brand new bottles bought from glass factories and uses them about five times to recover the cost of acquisition; and that it retrieves its used empty bottles, washes them, and uses them over and over again as containers for its products.

Rufina is engaged in the production, extraction, fermentation, and manufacture of patis and other food seasonings and in the buying and selling of all kinds of foods, merchandise, and products for domestic use or for export to other countries. In producing patis and other food seasonings, Rufina uses as containers bottles owned by Twin Ace without any authority or permission from Twin Ace, and in the process Rufina is unduly benefited from the use of the bottles. Rufina admitted in its Answer that it produces patis on a large scale at its big factory in 290 C. Arellano Street, Malabon, Metro Manila and distributes the same to supermarkets and big grocery stores and exports the same. In its Answer with counter-application for a writ of preliminary injunction, Rufina claimed that the marked bottles it used as containers for its products were purchased from junk dealers and that it thereby became the owner thereof.

Upon Twin Ace’s posting of the required bond, the RTC of Manila, Branch 26, issued an Order dated 5 February 1992 granting the application for the issuance of a writ of replevin. Upon implementation of the writ, Deputy Sheriff Amado P. Sevilla seized a total of 26,241 empty bottles marked “TANDUAY DISTILLERY, INC.,” at the address of Rufina.

After hearing, the RTC, in its decision dated 20 May 1995, found that Rufina was engaged on a large-scale basis in the production and manufacture of food seasonings, as admitted in its Answer and affirmed in the RTC’s decision.

• Scope of Section 6 Exemption: Petitioner argued that the exemption under Section 6 of RA 623, as amended by RA 5700, affords protection only to small-scale producers or manufacturers who do not have the capacity to buy new bottles for their products, and cannot extend to Rufina, which admitted large-scale production and manufacture of food seasonings.
• Nominal Damages: Petitioner argued that the CA erred in awarding nominal damages against Twin Ace because Twin Ace was the party whose rights had been violated or invaded by Rufina.
• Ownership and Compensation: Petitioner argued that as owner of the subject bottles, it is entitled to compensation for Rufina’s unauthorized use.

• Scope of Section 6 Exemption: Respondent countered that the law did not distinguish between large-scale manufacturers and small-time producers.
• Ownership of Bottles: Respondent claimed that the marked bottles it used as containers for its products were purchased from junk dealers, so it became the owner thereof.

• Scope of Section 6 Exemption: Whether the exemption in Section 6 of RA 623, as amended by RA 5700, applies to all manufacturers of “sisi,” “bagoong,” “patis,” and similar native products regardless of scale, or only to small-scale producers or manufacturers.
• Nominal Damages: Whether the CA erred in awarding nominal damages against Twin Ace despite its claim that its rights were violated or invaded by Rufina.
• Ownership and Compensation: Whether Twin Ace, as owner of the subject bottles, is entitled to compensation for Rufina’s unauthorized use.

• Scope of Section 6 Exemption: Yes. The exemption is unqualified and applies to all manufacturers of “sisi,” “bagoong,” “patis,” and similar native products without distinction as to whether they are small, medium, or large scale.
• Nominal Damages: No. The CA did not err; nominal damages may be awarded where a property right has been invaded, and the P50,000 award to Rufina is reasonable, warranted, and justified.
• Ownership and Compensation: No. Twin Ace failed to show entitlement to possession under Rule 60, Section 2(a), and without that basis there is no basis for its demand for compensation.

• Scope of Section 6 Exemption: The SC applied Twin Ace Holdings Corporation vs. Court of Appeals, 345 Phil. 1133 (1997), where Twin Ace sued Lorenzana Food Corporation over 380,000 bottles used as containers for native products. The SC there acknowledged that the exemption under the law is unqualified because the law did not distinguish small-scale industries from large-scale manufacturers; even if the exemption was primarily meant to protect small-scale industries, the protection was not limited to them. Section 6 squarely applied because Lorenzana used the bottles as containers for patis, toyo, bagoong, vinegar, and other food seasonings. The contention that the exemption covers only criminal liability and not civil liability is without merit: an act specifically allowed by law cannot be the subject of injunctive relief and damages, and the contrary interpretation would defeat the purpose of the exemption. RA 623 was meant to protect intellectual property rights of registrants and prevent unfair trade practices and fraud, but the Section 6 exemption was deemed necessary to assist backyard, cottage, and small-scale manufacturers of indigenous native products who lack capital to buy new bottles or pass added cost to poor Filipinos. If the exemption were limited to criminal liability, the protected small-scale manufacturers would not use registered bottles if vulnerable to civil suits, virtually eliminating the clear and unqualified exemption. House Bill No. 20585 was rejected because it sought to expressly eliminate what Twin Ace indirectly proposed. Lorenzana was not a small-scale industry; like Rufina, it manufactured and exported processed foods. The SC also applied the rule that when the law is clear and free from doubt or ambiguity, there is no room for construction or interpretation; where the law speaks in clear and categorical language, there is only room for application. Attempts to amend Section 6 to protect only small-scale manufacturers or those with capitalization of P500,000 or less through House Bill No. 20585 and House Bill No. 30400 failed. Thus, the exemption applies to all manufacturers without distinction.
• Nominal Damages: Article 2222 of the Civil Code provides that the court may award nominal damages in every obligation arising from any source enumerated in Article 1157, or in every other case where any property right has been invaded. Nominal damages are given so that a right of the plaintiff, violated or invaded by the defendant, may be vindicated or recognized, not to indemnify the plaintiff for loss. The SC held that when the plaintiff suffers some species of injury not enough to warrant actual damages, the court may award nominal damages. Considering the foregoing, the award of P50,000 nominal damages to Rufina is reasonable, warranted, and justified.
• Ownership and Compensation: Rule 60, Section 2(a), Revised Rules of Court requires a party praying for recovery of possession of personal property to show by his own affidavit or that of another person who personally knows the facts that he is the owner of the property claimed, particularly describing it, or is entitled to possession. Replevin is a possessory action whose gist focuses on the right of possession, which depends on a legal basis that often looks to ownership. Wrongful detention by the defendant must be satisfactorily established; a mechanistic averment is insufficient and the writ should not issue. Twin Ace did not show that it was entitled to possession of the bottles, so there was no basis for its demand for due compensation. The SC also held that Twin Ace cannot seek refuge in Section 5 of RA 623 to support a claim of continuing ownership over the bottles. In United States vs. Manuel, 7 Phil. 221 (1906), the SC held that since the purchaser at his discretion could either retain or return the bottles, the transaction must be regarded as a sale of the bottles when the purchaser actually exercised that discretion and decided not to return them to the vendor. The SC also took judicial notice of the standard practice that the cost of the container is included in the selling price, so the buyer of liquor or any such product is not required to return the bottle.

• Unqualified Section 6 Exemption under RA 623 — Section 6 of RA 623, as amended by RA 5700, provides that the Act shall not be interpreted as prohibiting the use of bottles as containers for “sisi,” “bagoong,” “patis,” and similar native products. The SC held the exemption applies to all manufacturers of such products without distinction as to whether they are small, medium, or large scale; Rufina’s large-scale production did not exclude it.
• Plain Meaning Rule in Statutory Construction — When a law is clear and free from doubt or ambiguity, there is no room for construction or interpretation; where it speaks in clear and categorical language, there is only room for application. The SC applied this to Section 6’s unqualified wording and refused to read a small-scale limitation into it.
• Nominal Damages under Article 2222 — Nominal damages may be awarded in every obligation arising from a source enumerated in Article 1157 or in every other case where any property right has been invaded. They are given to vindicate or recognize a violated or invaded right, not to indemnify loss; when the injury is not enough to warrant actual damages, nominal damages may be awarded. The SC sustained P50,000 nominal damages to Rufina.
• Replevin as a Possessory Action — Replevin focuses on the right of possession, which depends on a legal basis that often looks to ownership. The applicant must show by affidavit ownership or entitlement to possession and must satisfactorily establish wrongful detention; a mechanistic averment is insufficient. Twin Ace failed to show entitlement to possession, so no compensation was due.
• Sale of Containers and Ownership of Bottles — Where the purchaser has discretion to retain or return the bottles, the transaction is regarded as a sale of the bottles when the purchaser exercises that discretion and decides not to return them. The SC also noted the standard practice that the cost of the container is included in the selling price, so the buyer is not required to return the bottle. Twin Ace could not invoke Section 5 of RA 623 to claim continuing ownership.

• “The provisions of this Act shall not be interpreted as prohibiting the use of bottles as containers for “sisi,” “bagoong,” “patis,” and similar native products.” — This is Section 6 of RA 623; the SC held it is an unqualified exemption, not limited to small-scale manufacturers.
• “In view of these considerations, we find and so hold that the exemption contained in Section 6 of Rep. Act No. 623 applies to all manufacturers of sisi, bagoong, patis and similar native products without distinction or qualification as to whether they are small, medium or large scale.” — This is the core holding, rejecting Twin Ace’s attempt to limit the exemption to small-scale producers.
• “It is a basic rule in statutory construction that when the law is clear and free from any doubt or ambiguity, there is no room for construction or interpretation. As has been our consistent ruling, where the law speaks in clear and categorical language, there is no occasion for interpretation; there is only room for application.” — This states the plain meaning rule the SC used to enforce Section 6 as written.
• “Wrongful detention by the defendant of the properties sought in an action for replevin must be satisfactorily established. If only a mechanistic averment thereof is offered, the writ should not be issued.” — This defines the replevin requirement that Twin Ace failed to satisfy, supporting the denial of compensation.

• Twin Ace Holdings Corporation vs. Court of Appeals, 345 Phil. 1133 (1997) — Controlling precedent; followed. The SC applied it to hold the Section 6 exemption unqualified and to reject Twin Ace’s claim of continuing ownership under Section 5.
• Rizal Commercial Banking Corporation vs. Intermediate Appellate Court, 378 Phil. 10, 22 (1999) — Cited for the plain meaning rule in statutory construction.
• China Airlines, Ltd. vs. Court of Appeals, G.R. No. 129988, 14 July 2003, 406 SCRA 113, 134 — Cited for the rule that nominal damages may be awarded when the plaintiff suffers some species of injury not enough to warrant actual damages.
• Distilleria Washington, Inc. vs. Court of Appeals, 331 Phil. 622, 630 (1996) — Cited for the nature of replevin as a possessory action focusing on the right of possession dependent on a legal basis often looking to ownership.
• Factoran, Jr. vs. Court of Appeals, 378 Phil. 282, 294 (1999) — Cited for the requirement that wrongful detention in replevin must be satisfactorily established; a mechanistic averment is insufficient.
• United States vs. Manuel, 7 Phil. 221 (1906) — Cited in the controlling Twin Ace precedent for the rule that the transaction is a sale of the bottles when the purchaser decides not to return them.
• Cogeo-Cubao Operators and Drivers Association vs. Court of Appeals, G.R. No. 100727, 18 March 1992, 207 SCRA 343, 347 — Cited for the award of nominal damages under Article 2222 where a property right has been invaded.

• Section 2, Republic Act No. 623 — Makes it unlawful, without written consent of the registered manufacturer, bottler, or seller, to fill marked bottles or similar containers for sale, sell, dispose of, buy or traffic in, wantonly destroy, or use for purposes other than those registered. The SC quoted it but applied Section 6’s exemption to Rufina’s use.
• Section 3, Republic Act No. 623 — Provides that use or possession of duly marked, stamped, and registered containers by a person other than the registered manufacturer without written permission, or by a junk dealer or dealer in such containers, gives rise to a prima facie presumption that the use or possession is unlawful. The SC quoted it but did not use it to defeat the Section 6 exemption.
• Section 4, Republic Act No. 623 — Provides that the criminal action under the Act shall not affect any civil action to which the registered manufacturer, bottler, or seller may be entitled by law or contract. The SC quoted it, but Twin Ace’s civil claim failed because the use was exempt under Section 6.
• Section 5, Republic Act No. 623 — Provides that no action shall be brought against a person to whom the registered manufacturer, bottler, or seller has transferred by sale any of the containers, but the sale of the beverage does not include the sale of the containers unless specifically provided. Twin Ace could not invoke it to support continuing ownership over the bottles.
• Section 6, Republic Act No. 623, as amended by Republic Act No. 5700 — Provides that the Act shall not be interpreted as prohibiting the use of bottles as containers for “sisi,” “bagoong,” “patis,” and similar native products. The SC held the exemption is unqualified and applies to all manufacturers regardless of scale.
• Article 2222, Civil Code — Provides that the court may award nominal damages in every obligation arising from a source enumerated in Article 1157, or in every other case where any property right has been invaded. The SC applied it to sustain the P50,000 nominal damages awarded to Rufina.
• Article 1157, Civil Code — Lists the sources of obligations: law, contracts, quasi-contracts, acts or omissions punished by law, and quasi-delicts. It is the cross-referenced provision in Article 2222.
• Section 2(a), Rule 60, Revised Rules of Court — Requires the applicant for replevin to show by affidavit that he is the owner of the property claimed, particularly describing it, or is entitled to possession thereof. The SC applied it to hold Twin Ace failed to show entitlement to possession.