Distilleria Washington, Inc. v. Court of Appeals

G.R. No. 120961 (October 17, 1996)

Supreme Court upheld LTDI's claim on 18,157 bottles; Washington must compensate under RA 623.

Facts:

The case originated from a complaint filed by La TondeAa Distillers, Inc. (LTDI) against Distilleria Washington, Inc. (Washington) on November 2, 1987, in the Regional Trial Court, which was docketed as Civil Case No. 87-42639. LTDI claimed ownership of 18,157 empty "350 c.c. white flint bottles" that bore the blown-in marks of "La TondeAa Inc." and "Ginebra San Miguel." LTDI alleged that Washington was using these bottles for its own product, "Gin Seven," without LTDI's consent. The trial court issued an order of replevin on November 5, 1987, allowing LTDI to seize the bottles from Washington.

LTDI argued that as the owner and registrant of the bottles, it was entitled to protection under Republic Act No. 623, as amended, despite having sold the gin product contained in those bottles. Washington countered that R.A. No. 623 did not apply to gin, asserting that ownership of the bottles transferred to the buyers upon the sale of the gin and its containers at a single price.

After hearing the parties, the trial court ruled in favor of Washington on December 3, 1991, dismissing LTDI's complaint and ordering LTDI to return the seized bottles or indemnify Washington for their value. LTDI appealed this decision to the Court of Appeals, which reversed the trial court's ruling, allowing LTDI to retain possession of the bottles.

Washington then brought the case before the Supreme Court, challenging the appellate court's decision.

Legal Issues:

  1. Whether LTDI, as the owner and registrant of the bottles, was entitled to protection under R.A. No. 623.
  2. Whether the sale of gin in marked containers included the transfer of ownership of the containers to the buyer.
  3. The applicability of R.A. No. 623 to alcoholic beverages, specifically gin.

Arguments:

  • LTDI's Arguments:

    • LTDI claimed ownership of the bottles and asserted that it was entitled to protection under R.A. No. 623, which governs the registration and use of marked containers.
    • LTDI contended that Washington's use of the bottles without consent constituted a violation of its rights as the registered owner.

  • Washington's Arguments:

    • Washington argued that R.A. No. 623 did not apply to gin, as it was not included in the categories of beverages specified in the law.
    • Washington maintained that ownership of the bottles transferred to the buyers upon the sale of the gin, as they were sold at a single price, and thus LTDI could not claim ownership of the bottles.

Court's Decision and Legal Reasoning:

The Supreme Court upheld the appellate court's decision but modified it by ordering LTDI to pay Washington just compensation for the seized bottles. The Court reaffirmed the principles established in previous jurisprudence, particularly the case of Cagayan Valley Enterprises, Inc. v. Court of Appeals, which held that R.A. No. 623 provides protection to registered manufacturers against unauthorized use of their marked containers.

The Court reasoned that the legislative intent of R.A. No. 623 was to protect all marked containers of lawful beverages, including alcoholic beverages like gin. The Court clarified that the mere sale of a beverage in a marked container does not automatically transfer ownership of the container unless explicitly stated. It emphasized that the statutory provisions create a presumption of illegal use when marked containers are possessed without the manufacturer's consent.

The Court concluded that while LTDI's seizure of the bottles was not justified, Washington's insistence on retaining the bottles was equally untenable. The Court determined that just compensation for the bottles was the appropriate remedy, adopting the trial court's valuation of P18,157.00.

Significant Legal Principles Established:

  1. R.A. No. 623 provides trademark protection to registered manufacturers against unauthorized use of their marked containers, including those used for alcoholic beverages.
  2. Ownership of marked containers does not automatically transfer to the buyer upon the sale of the beverage unless explicitly stated in the sale agreement.
  3. The law creates a presumption of illegal use when marked containers are possessed without the written consent of the registered manufacturer.