Mechanical Handling Equipment Co. Inc. vs. Mechanical Handling Engineering (Philippines)

[SEC-AC NO. 452. December 5, 1994.] MECHANICAL HANDLING EQUIPMENT CO. INC. (MHECO) , petitioner , vs . MECHANICAL HANDLING ENGINEERING (PHILIPPINES), INC. (MHE), respondent, MECHANICAL HANDLING ENGINEERING(S), PTE., LTD., ET AL., respondent-in-intervention . D E C I S I O N This is an appeal by Mechanical Handling Equipment Co., Inc. (MHECO for short), petitioner in SEC Case No. 4053 , from the decision rendered therein dated October 12, 1993 dismissing its petition against Mechanical Handling Engineering (Philippines), Inc. (MHEPHIL for short) for the latter to change its corporate name on the ground that it is confusingly similar with its own name. In its petition filed with this Commission on August 8, 1991 MHECO averred that it was incorporated on December 20, 1984 while respondent MHEPHIL was incorporated on August 10, 1990; that MHECO was formed for the primary purpose of importing and exporting merchandise and of manufacturing, purchasing, handling, selling and distributing all kinds of equipment, supplies, commodities and articles; that MHEPHIL, on the other hand, was incorporated with the following primary purpose; to design, manufacture, process, install, service, import, export, distribute, sell, handle, store, promote or otherwise deal in goods, commodities, wares, and merchandise of every kind, class, nature, and description including without limitation, industrial cranes, electric hoists, material handling equipment and systems, and engineering products; that the corporate names of petitioner and respondent, including their respective initials, are strikingly and confusingly similar; that the confusing similarity in the corporate names of the parties herein was further exacerbated by the fact that they are engaged in the same line of business and share common customers or clients; that petitioner MHECO has acquired a prior vested right to the exclusive use of its corporate name, it having registered with this Commission six years earlier than respondent MHEPHIL; that respondent MHEPHIL's act of adopting or substantially copying petitioner's name was motivated by bad faith and is violative of petitioner's right and interest which are protected under Section 18 of the Corporation Code; that respondent MHEPHIL had bound itself to this Commission prior to the registration of its articles of incorporation to change its corporate name in the event that another person, firm or entity has acquired right to the use of the said name or one confusingly or deceptively similar to it and that petitioner had sent a demand letter to respondent urging it to change its name but the latter ignored the said demand. On September 3, 1991 respondent MHEPHIL filed a motion to dismiss the petition on the ground that there is a case pending before, the RTC of Makati entitled "Mechanical Handling Engineering (Phil.) Inc., vs. Mechanical Handling Equipment Co., Inc.(SEC AC No. 452, December 5, 1994) (Civil Case No. 91-2115) involving the same issue as in the case at bar and which was instituted by the respondents herein prior to the filing of the instant petition. On September 13, 1991 MHE (Singapore) Pte. Ltd and MHE (Malaysia) Sdn. Bhd. filed a motion to intervene in the instant case. Said motion was granted in an order dated October 2, 1991. On October 16, 1991 the RTC of Makati issued an order granting therein respondent MHECO's motion to dismiss the said case on the ground that jurisdiction over the dispute belongs to this Commission. On October 17, 1991 respondent MHEPHIL together with intervenor MHE Singapore and MHE Malaysia filed their answer to the petition with compulsory counterclaim. In their answer the respondents denied that MHEPHIL adopted or substantially copied petitioner's corporate name. They further alleged that MHEPHIL is an affiliate of respondents/intervenors and is a member of the MHE Group of Companies which, for more than a decade prior to petitioner's incorporations had expanded their business operations in the ASEAN region including the Philippines. Thus, respondents aver, the use by petitioner MHECO of the intervenors' name was done with full knowledge and awareness on the part of petitioner of the goodwill and reputation of the MHE Group of Companies and such adoption by petitioner of the intervenors' name has greatly undermined their hard-earned international reputation and has caused confusion among its clients here and abroad. By way of counterclaim the respondents prayed that the petitioner be ordered to change its corporate name by deleting the words or phrase "mechanical handling" therefrom, consistent with its undertaking before this Commission to change its corporate name should it be found to be confusingly similar to an existing corporate name or one already protected by law. Respondents also prayed for the award of attorney's fees. On February 12, 1992 petitioner filed an amended petition praying for the award of moral and exemplary damages. On October 12, 1992 the hearing officer rendered the decision subject of this appeal dismissing the petition as well as the counterclaims on the basis of his finding that none of the contending parties Successfully established its right to use the phrase "mechanical handling" in its corporate name to the exclusion of all others. MHECO moved for the reconsideration of the aforesaid decision but its motion was denied in an order dated December 14, 1993. On December 27, 1993 MHECO filed the instant appeal before this Commission En Banc assigning the following errors in support thereof: 1. The Hearing officer erred in holding that petitioner MHECO had not acquired prior and vested right over its corporate name. 2. The hearing officer erred in applying the doctrine of secondary meaning to the case at bar. 3. The hearing officer erred in finding that the corporate names of the parties herein are not confusingly similar. 4. The hearing officer erred in not applying Section 18 of the Corporation Code to the case at bar. 5. The hearing officer erred in dismissing the petitioner's claim for damages and attorney's fees. Appellant's first four assignments of error, which are interrelated, are impressed with merit. It was error for the hearing officer to have ruled that appellant had not acquired a prior and vested right over its corporate name. We have consistently held in a number of cases earlier brought before us involving corporate name that priority in the adoption and registration of a corporate name confers upon the registrant a vested right to the exclusive use thereof. Having undisputedly adopted and registered its corporate name ahead of appellee by almost six years, appellant has earned the right to the exclusive use thereof as well as the corollary right to have the registration or continued use of a name confusingly similar to its own prevented or enjoined. It was likewise error for the hearing officer to have applied the doctrine of secondary meaning to this case. The said doctrine finds no application herein because although the words "mechanical" and "handling" taken separately are admittedly common or generic words, the phrase "mechanical handling" itself is certainly not of common or widespread use. To allow another entity engaged in the same business as appellant to likewise use the same phrase in its Corporate name would likely create confusion in the minds of the public, as has actually happened in this case. Appellant has cited several specific instances of confusion, not refuted by appellee, occasioned by the confusing similarity of its corporate name with that of appellee, and these consisted mostly of mix-ups or of job orders, correspondences, etc. intended for appellant being mistakenly sent to the offices of appellee and vice versa. Now inasmuch as appellant has acquired a prior and vested right to the exclusive use of its corporate name and inasmuch as the corporate names of appellant and appellee are confusingly similar, then Section 18 of the Corporation Code is applicable to the instant case. This means that appellant is entitled to the relief prayed for by it, i.e., the change in the corporate name of appellee to another name not confusingly or deceptively similar to appellant's name. As regards appellant's claim for damages and attorney's fees, however, we find no basis for the award of the same. Appellee cannot be accused of bad faith in the choice of the corporate name it has adopted for itself because being an affiliate of the MHE group of companies operating in Asia, it merely carried the name commonly shared by the entities belonging to the aggrupation. There being no bad faith on the part of appellee, there is no justification for the award of damages, much less attorney's fees, in favor of appellant. WHEREFORE, the decision appealed from is hereby REVERSED in part and respondent-appellee MHEPHIL is hereby ordered to change its corporate name to another name not confusingly or deceptively similar to petitioner-appellant MHECO's corporate name. SO ORDERED. (SGD.) ROSARIO N. LOPEZ Chairman (SGD.) RODOLFO L. SAMARISTA (SGD.) MERLE O. MANUEL Associate Commissioner Associate Commissioner (did not participate during the deliberation) (SGD.) FE ELOISA C. GLORIA (SGD.) PERFECTO R. YASAY, JR. Associate Commissioner Associate Commissioner