Oleo Fats, Inc. v. Oleo Manufacturing Corp.

[SEC-SICD * CASE NO. 10-97-5800. August 10, 1998.] OLEO FATS, INC. , complainant , vs .OLEO MANUFACTURING CORP. , respondent . D E C I S I O N Complainant brings this action to compel respondent to change its corporate name. IaAHCE The facts of this case are undisputed. The complainant, OLEO-FATS, INC.,is a Philippine domestic corporation engaged in the business of manufacturing, importing, exporting, buying and selling, of products utilizing fats and oils as principal raw material. It was issued a Certificate of Incorporation on 04 May 1987 and from that day until the present, it has built a reputable business enterprise, has gained a substantial clientele and has been enjoying well earned patronage and goodwill in the oils and fats industry, under its corporate name. The respondent, OLEO MANUFACTURING CORPORATION, is likewise organized under Philippine law, and is also engaged in the business of manufacturing, importing, exporting, buying and selling, of products utilizing fats and oils as principal raw material. It was issued a Certificate of Incorporation on 22 December 1993, six years after Oleo-Fats, Inc. commenced its corporate existence. In the complaint filed on 27 October 1997, Oleo-Fats, Inc. alleged that the use by Oleo Manufacturing Corporation of the word "OLEO" in its corporate name makes the said name prejudicially similar to that of Oleo-Fats, Inc. and that the resultant similarity coupled with the identity of business purposes of these two corporations, does not only create a tendency to cause confusion, but also, on at least one occasion has actually caused confusion. In view thereof, Oleo-Fats, Inc. prays that Oleo Manufacturing Corporation be compelled to change its name, in accordance with the Corporation Code and with its written undertaking when it applied for the registration of its Articles of Incorporation. In its answer, dated 18 November 1997, the respondent admits that the names Oleo Manufacturing Corporation and Oleo-Fats, Inc. share the same essential or dominant feature the word "OLEO" but qualifies this admission by saying that the complainant's corporate name starts with a double-worded singular: OLEO-FATS, while that of respondent starts with only OLEO. Further, it raised the following affirmative defenses: (1) While it may be true, to a limited extent, that a common name or feature appears in both corporate names: OLEO, and the two entities are engaged in the same line of business, complainant's prayer should be denied. The corporate names of herein parties are totally distinct and distinguishable from each other. If the Philippine Dairy Products Corporation had a mistaken impression that OLEO-FATS INC. and OLEO MANUFACTURING CORPORATION are one and the same entities, the same is an isolated occurrence and such mistake is attributable to the client/customer. One can easily distinguish and discern that, taken and read in its entirety, respondent's corporate name casts a particular appeal and name to the public, thereby negating any confusion or tendency to cause confusion (ref: par. 4, p. 1, Answer); (2) That the fact that the Securities and Exchange Commission has approved the respondent's name, more than bolsters its stand that herein parties' corporate names are different from each other, and confusion or tendency to cause confusion has been ruled out (ref: par. 5, p. 2, answer); (3) That complainant should have directed its complaint against the Securities and Exchange Commission, the same agency that approved the use of the name (par. 6, p. 2, Answer). After examining all the evidence presented, and hearing the testimony of the witnesses offered by both parties, we find no merit in the respondent's assertions and hereby rule in favor of the complainant. The corporate name is a necessary incident to the very existence of a corporation. It identifies a corporation and distinguishes it from the others. It is under this name that the corporation exists, conducts its business, builds its goodwill, sues and is sued. Reasonably, therefore, the most important limitation upon the choice of a corporate name is that the name chosen as mandated in Section 18 of the Corporation Code must not be "identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive confusing or contrary to existing laws." Consonant with this the Securities and Exchange Commission, has opined as follows: Section 18 of the Corporation Code is a new provision embodying the general rule that no two identical or confusingly or deceptively similar names shall be allowed as earlier established in the SEC Guidelines in the Approval of Corporate and Partnership Names dated September 7, 1977. Applying Section 18 of the Corporation Code, the SEC having due notice of the prior right of a certain corporation earlier registered with it, shall refuse the registration of any other corporation bearing similar name, unless there is written consent by the earlier corporation (SEC opinions dtd. August 4, 1993, Atty. Teresita R. Sanchez, M.D. and May 25, 1993, Mr. Geronimo dela Rosa). Or the corporation which was later incorporated and whose name is identical or confusingly or deceptively similar to that of an existing corporation must amend its articles of incorporation pursuant to Section 16 of the Code in order to effectuate a change in corporate name under the principle of first in time, first in right". (Rosario N. Lopez, the Corporation Code of the Philippines, 1994 ed, Vol. 1, pages 300-301.) In the case of Philips Export B.V., et al. v. CA., et al., G.R. No. 96161, February 21, 1992, the Supreme Court had occasion to declare the requisites for the application of this statutory limitation: "A corporation acquires its name by choice and need not select a name identical with or similar to one already appropriated by a senior corporation while an individual's name is thrust upon him (See Standard Oil Co. of New Mexico, Inc. vs. Standard Oil Co. of California, 56 F 2d 973, 977).A corporation can no more use a corporate name in violation of the rights of others than an individual can use his name legally acquired so as to mislead the public and injure another (Armington vs. Palmer, 21 RI 109, 42 A 308) STcEIC Our own Corporation Code, in its Section 18, expressly provides that: "No corporate name may be allowed by the Securities and Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing law. Where a change in the corporate name is approved, the commission shall issue an amended certificate of incorporation under the amended name." The statutory prohibition cannot be any clearer. To come within its scope, two requisites must be proven, namely: (1) that the complainant corporation acquired a prior right over the use of such corporate name; and (2) the proposed name is either: (a) identical or (b) deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law; or (c) patently deceptive, confusing or contrary to existing law." There is no doubt as to the existence of the first requisite. The complainant's prior adoption of the key word "OLEO" as part of its corporate name is clear, being that complainant Oleo-Fats, Inc. was incorporated on 04 May 1987, while respondent Oleo Manufacturing Corporation was issued a Certificate of Registration on 22 December 1993, six years after Oleo-Fats, Inc. commenced its corporate existence. The existence of the second requisite is the only issue presented for resolution and, as will be demonstrated in the discussion that follows, its attendance is likewise beyond question. It is immediately apparent, and in fact even the respondent admits, that the corporate names OLEO MANUFACTURING CORPORATION and OLEO-FATS, INC. share the same essential or dominant feature the word "OLEO".The circumstances relied upon by the respondent, "that the complainants corporate name starts with a double-worded singular: OLEO-FATS while that of respondent starts with only OLEO",is of no moment, as it does not alter the verity of dominance of the word "OLEO".It bears stressing; at this point, that the names in question need not be identical. It is sufficient than they be similar, and that such similarity creates a tendency to mislead the public. "In determining the existence of confusing similarity in corporate names, the test is whether the similarity is such as to mislead a person using ordinary care and discrimination. In so doing, the Court must look to the record as well as the names themselves (Ohio Nat. Life Ins. Co. v. Ohio Life Ins. Co., 210 NE 2d 298). While the corporate names of Petitioners and Private Respondent are not identical, a reading of Petitioner's corporate names, to wit: PHILIPS EXPORT B.V. PHILIPS ELECTRICAL LAMPS, INC. and PHILIPS INDUSTRIAL DEVELOPMENT, INC., inevitably leads one to conclude that "PHILIPS" is indeed, the dominant word in that all the companies affiliated or associated with the principal corporation, PEBV, are known in the Philippines and abroad as the PHILIPS Group of Companies," [Philips Export B.V., et al. v. CA, et al., G.R. No. 96161, February 21, 1992] The prohibition is intended to avoid disorder and confusion on the part of the community dealing with corporations with similar and/or identical names. It is settled that proof of actual confusion need not be shown . It suffices that confusion is probably or likely to occur (Philips Export B.V. et al. vs. CA et al., G.R. No. 96161, February 21, 1992, supra, citing 6 Fletcher [Perm Ed], pp. 107-108, enumerating a long line of cases). The instant case has, however, gone a step further. Under the factual antecedents, confusion among the complainant's clients and prospective clients has actually occurred ,and it has occurred more than just once. In his affidavit, Vincent Dim Lao, the Sales Coordinator of Oleo-Fats, Inc.,stated that: "I went to the Nestle Philippines, Inc. office located at Pulilan Bulacan to collect payments due to Oleo-Fats, Inc. for products previously delivered. When I examined the bunch of checks and payment vouchers released to me. I found that there was one check for Oleo Manufacturing Corporation. I returned the check to the disbursing officer, upon which he responded: 'pareho kasing Oleo' (ref: Exhibit I) On cross-examination by respondent's counsel, he testified as follows: [p. 19-20, TSN, 27 January 1998, Vincent Dim Lao, witness]: Atty. Castillon: Other than that, there were no other checks payable to Oleo Manufacturing that reached your company? Dim Lao: It actually depends on the company because we are just citing here one (1) company. For the other companies, we have cases which I have received checks for Oleo Manufacturing which I returned. Q: Will you tell this Honorable Hearing Body what are these other companies which you said (checks) were actually intended to these companies but reached your company? A: For example, we have Nestle Philippines, the other company I can name is Philippine Dairy Products Corporation plants and they have consistently have been mistaken to be a representative of Oleo Manufacturing but we do return the checks upon receiving the checks of Oleo Manufacturing. Kasi collection is per plant basis. They have four (4) plants (from) whom we do collect. Per plant basis po iyong releasing of checks. SAHITC [p. 21-22, TSN, 27 January 1998, Vincent Dim Lao, witness] Q: You were not able to talk to one of the ...or the representative of ... A: I actually returned the check to the cashier. Sinabi ko po na the check is Oleo Manufacturing. Oleo-Fats and Oleo Manufacturing are not the same. Ang response niya: "kasi pareho kasing Oleo".So I returned the check. Q: You were not able to talk to one of the drawers of the check personally that they are really confused as to the name Oleo-Fats and Oleo Manufacturing Corporation, is that correct? A: The response would be actually ..."kasi parehong Oleo". Negating the respondent's claim that whatever mistake had been committed was merely an isolated transaction, Mr. Cesar Canes Ching, who was once upon a time Product Manager of complainant Oleo-Fats, Inc. declared: [p 35-36, TSN, 27 January 1998, Cesar Canes Ching, witness] Atty. Castillon: Mr. Ching, you said that this is not an isolated transaction, that there are even previous payments or erroneous payments made, is that correct? Ching: These are many instances. Q: With that experience, Mr. Witness, and then you continued collecting, you did not check again these checks being paid to you? A: No, right then and there from the window, we returned. This is only the first instance that I have accepted the check that I thought it was for us but after that, there is a lot of instances on our part to collect and then erroneously give us the check of Oleo Manufacturing. It appears that the confusion is not limited to the collection/disbursement of checks and vouchers. It happened also, that communications intended for respondent Oleo Manufacturing Corporation were erroneously sent by fax to the office of complainant Oleo-Fats, Inc. (ref: Exhibit H, in relation to Exhibit K) Furthermore, the confusing similarity of these two corporate names has created difficulties for the sales force of the complainant Oleo-Fats, Inc.:[p. 60-61, TSN 27 January 1998, Mr. Francis Tan, witness] Atty. Enriquez: We call your attention also to paragraph 3 of your Affidavit, which we offer as complainant's exhibit M-3. Your affidavit states: "Sometime in August 1997, when I offered Oleo-Fats products to Instapak, Inc. at their office in Grace Park, Caloocan City, the person I was speaking to said that they were already purchasing from us".Please give us an insight as to what really transpired in the incident that you narrated in paragraph 3. Tan: Actually Instapak, Inc. is a new company which is dealing in noodles and I am handling the noodles in our company so I made an offer to this company and when I called them up, one of the purchasing ...told me that we are already ordering from you so I was shocked when I heard it because I am the one handling the noodles and after asking question, I found out, she told me that they are ordering from Oleo Manufacturing and I told them that Oleo-Fats and Oleo Manufacturing again has no relation. The respondent's assertion, by way of defense, "that the fact that the Securities and Exchange Commission has approved the respondent's name, more than bolsters its stand that herein parties' corporate names are different from each other, and confusion or tendency to cause confusion has been ruled out" (ref: par. 5, p. 2, Answer. Emphasis supplied),holds no water. The SEC approval of the corporate name prior to use is in no wise conclusive as to the absence of confusion or tendency to cause confusion. Much less does such approval render the Commission estopped to compel the later corporation to change said name, as the respondent suggests. It would appear that the respondent has lost sight of the fact that the acid test of confusing similarity lies in the actual use the names involved .It is only when the name is used that it can be said with certainty that the similarity is such as to mislead a person using ordinary care and discrimination. For this reason, the Commission requires parties applying for the registration of their Articles of Incorporation to sign and submit, together with those articles, an undertaking manifesting their willingness to change their corporate name in the event that it be found out later on, that another person, firm or entity has acquired a prior right to the use of said firm name, or one deceptively or confusingly similar to it. This was made quite evident in the testimony of the respondent's lone witness the Chief of the Records Division of the Administrative and Finance Department of this Commission. [p. 16-17, TSN, 17 February 1998, Ms. Aida Gaetos, witness]: Atty. Gonzales: And in fact, when verifications are made in your office these are very preliminary, right? Gaetos: Yes. Q: And, in fact, as you read earlier with respect to Exhibit 2:,the verification slip of Oleo Manufacturing Corporation, the fact that a name is available at the date verified is not to be regarded in any way as an approval or reservation of the name and, in fact, as you also admitted this is subject to further approval by the Corporate and Legal Department? A: Yes. Q: And, in fact, after this very preliminary check with our office the applicant now would prepare his corporate papers and would attach thereto the usual undertaking to change the name in case there would be a subsequent confusion, is that correct? A: Yes. Q: So actually this undertaking is a measure to see to it that in case there is a failure in the system and there is actually confusion or the later corporation should be required to change per undertaking? A: Yes. All the foregoing considered, this Commission finds that the name OLEO MANUFACTURING CORPORATION is confusingly similar to the name OLEO-FATS, INC. which has been adopted by another entity who has acquired prior right to the use of the same, in violation of the prohibition contained in Section 18 of the Corporation Code. WHEREFORE, judgment is hereby rendered ENJOINING respondent Oleo Manufacturing Corporation from using "OLEO" as a feature of its corporate name, and ORDERING the said corporation to change its corporate name in accordance with the Corporation Code and with its written undertaking when it applied for the registration of its Articles of Incorporation within sixty (60) days from receipt of this Decision. EaIDAT Let a copy of this Decision be furnished the Corporate and Legal Department and Records Division, Administrative Services Department of the Securities and Exchange Commission. SO ORDERED. (SGD.) NATIVIDAD P. QUERIJERO Hearing Officer