WESTERN EQUIPMENT AND SUPPLY CO. VS.

REYES
(G.R. No. 27897, 2 December 1927)
On Property

FACTS:
Western Equipment and Supply Company and Western Electric Company were foreign corporations
engaged in the business of selling and manufacturing electrical and telephone apparatus respectively.
Western Equipment applied to Fidel Reyes, the Director of the Bureau of Commerce and Industry for the
issuance of a license to engage in business in the Philippines and was issued a provisional license which
was made permanent later on. However, Western Electric has never been licensed to engage in business
in the Philippines, and has never engaged in business therein.

From and since the issuance of said provisional license to Western Equipment, it has been and still is
engaged in importing and selling in the Philippines electrical and telephone apparatus and supplies
manufactured by Western Electric. Electrical and telephone apparatus and supplies manufactured by
Western Electric have been sold in foreign and interstate commerce for the past 50 years, and have
acquired a high trade reputation throughout the world. The words “Western Electric” have been registered
by Western Electric Company, Inc., as a trademark under the provisions of the Act of Congress in the office
of the Commissioner of Patents at Washington, District of Columbia, and said trade-mark remains in force.

On the other hand, a Philippine Corporation known as the Electric Supply Company, Inc. has been
importing the manufactures into the Philippines for the purpose of selling the same. Henry Herman, its
President and General Manager, et al signed and filed articles of incorporation with Reyes, with the
intention of organizing a domestic corporation under the Philippine Corporation Law to be known as the
Western Electric Company, Inc., for the purpose, among other things, of manufacturing, buying, selling
and dealing generally in electrical and telephone apparatus and supplies.

Consequently, Western Electric lodged a protest with the Director of the Bureau of Commerce and against
the registration of the proposed corporation by Henry Herman, et al, and filed with the CFI a complaint and
prayed for preliminary injunction alleging that the purpose of the latter in attempting to incorporate under
the corporate name of Western Electric Company, Inc., is to profit and trade upon Western Electric’s
business and reputation, by misleading and deceiving the public into purchasing the goods manufactured
or sold by them as those of Western Electric, in violation of the provisions of Act 666 of the Philippine
Commission, particularly section 4 thereof.

The lower court rendered judgment for Western Equipment and Western Electric as prayed for in their
complaint, and made the temporary injunction permanent, from which Herman, et. al. appealed. The
Supreme Court affirmed the judgment of the lower court, with costs.

ISSUES:
W/N a foreign corporation which has never done business in the Philippine Islands, and which is unlicensed
and unregistered therein, has any right to maintain an action to restrain residents and inhabitants from
organizing a corporation therein bearing the same name as such foreign corporation.

RULING:
YES.
RATIO:
Citing the case of Marshall-Wells Co. vs. Henry W. Elser this court held that the noncompliance of a foreign
corporation with the statute may be pleaded as an affirmative defense. Thereafter, it must appear from the
evidence, first, that the plaintiff is a foreign corporation, second, that it is doing business in the Philippines,
and third, that it has not obtained the proper license as provided by the statute.

However, the company is not here seeking to enforce any legal or contract rights arising from, or growing
out of, any business which it has transacted in the Philippine Islands. The sole purpose of the action is to
protect its reputation, its corporate name, its goodwill, whenever that reputation, corporate name or goodwill
have, through the natural development of its trade, established themselves.

The right to use its corporate name is a property right, a right in rem, which may assert and protect
against all the world, in any of the courts of the world — even in jurisdictions where it does not
transact business — just the same as it may protect its tangible property, real or personal, against
trespass, or conversion. Since it is the trade and not the mark that is to be protected, a trade-mark
acknowledges no territorial boundaries of municipalities or states or nations, but extends to every market
where the trader's goods have become known and identified by the use of the mark.

Western Electric Company, Inc., has been in existence as a corporation for over fifty years, during which
time it has established a reputation all over the world including the Philippine Islands, for the kind and
quality of its manufactured articles, and it is very apparent that the whole purpose and intent of Herman and
his associates in seeking to incorporate another corporation under the identical name of Western Electric
Company, Inc., and for the same identical purpose as that of the plaintiff, is to trespass upon and profit by
its good name and business reputation. The very fact that Herman and his associates have sought the use
of that particular name for that identical purpose is conclusive evidence of the fraudulent intent with which it
is done.