FIRST DIVISION

[G.R. No. 157216. November 20, 2003.]

246 CORPORATION, doing business under the name and style of

ROLEX MUSIC LOUNGE, petitioner, vs. HON. REYNALDO B. DAWAY, in
his capacity as Presiding Judge of Branch 90 of the Regional Trial
Court of Quezon City, MONTES ROLEX S.A. and ROLEX CENTRE PHIL.
LIMITED, respondents.

Galo Orlando L. Deang for petitioner.

Quasha Ancheta Peña & Nolasco for private respondents.

DECISION

YNARES-SANTIAGO, J : p

This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure assailing the November 28, 2002 Decision 1 of the Court of Appeals in CA-
G.R. SP No. 64660 which dismissed the petition for certiorari filed by petitioner, as well
as the Resolution 2 dated February 13, 2003 denying its motion for reconsideration.
The undisputed facts show that on November 26, 1998, respondents Montres
Rolex S.A. and Rolex Centre Phil., Limited, owners/proprietors of Rolex and Crown
Device, filed against petitioner 246 Corporation the instant suit for trademark
infringement and damages with prayer for the issuance of a restraining order or writ of
preliminary injunction 3 before the Regional Trial Court of Quezon City, Branch 90.
Respondents alleged that sometime in July 1996, petitioner adopted and, since then,
has been using without authority the mark "Rolex" in its business name "Rolex Music
Lounge" as well as in its newspaper advertisements as — "Rolex Music Lounge, KTV,
Disco & Party Club."
In its answer raising special affirmative defenses, petitioner argued that
respondents have no cause of action because no trademark infringement exist; that no
confusion would arise from the use by petitioner of the mark "Rolex" considering that its
entertainment business is totally unrelated to the items catered by respondents such as
watches, clocks, bracelets and parts thereof. It also contended that the complaint was
not properly verified and certified against forum shopping considering that Atty. Alonzo
Ancheta, the counsel of record of respondents who signed the verification and
certification, was not authorized to represent respondents. 4

On July 21, 2000, petitioner filed a motion for preliminary hearing on its
affirmative defenses. 5 Subsequently, on motion of petitioner, the trial court issued a
subpoena ad testificandum requiring Atty. Alonzo Ancheta to appear at the preliminary
hearing. 6 Respondents, in the meantime, filed a Comment and Opposition 7 to the
motion for preliminary hearing and a motion to quash the subpoena ad testificandum.
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 In an Order dated October 27, 2000, the trial court quashed the subpoena ad
testificandum and denied petitioner's motion for preliminary hearing on affirmative
defenses with motion to dismiss. 8
With the denial of the motion for reconsideration on March 16, 2001, petitioner
filed a petition for certiorari with the Court of Appeals contending that the trial court
gravely abused its discretion in issuing the October 27, 2000 and March 16, 2001
orders.
On November 28, 2002, the Court of Appeals dismissed the petition. The motion
for reconsideration filed by petitioner was denied. Hence, the instant petition anchored
on the following grounds:
I

IN ISSUING THE ASSAILED DECISIONS, THE HONORABLE COURT OF

APPEALS PERFUNCTORILY BRUSHED ASIDE THE CONTROLLING
PRECEDENTS LAID DOWN BY THIS HONORABLE COURT IN ESSO
STANDARD EASTERN, INC. VS. COURT OF APPEALS AND UNITED
CIGARETTE CORPORATION AND OTHER COMPANION CASES HOLDING
THAT NO TRADEMARK INFRINGEMENT CAN POSSIBLY OCCUR WHERE
THE CONTENDING PARTIES DEAL WITH GOODS AND SERVICES THAT
ARE TOTALLY UNRELATED AND NON-COMPETING WITH EACH OTHER.

II

IN ARBITRARILY AND CAPRICIOUSLY RULING THAT THE ISSUES RAISED

IN PETITIONER'S CERTIORARI PETITION ARE QUESTIONS OF FACT, THE
HONORABLE COURT OF APPEALS VIOLATED NOT ONLY PETITIONERS
SUBSTANTIVE DUE PROCESS RIGHTS BUT ALSO THE WELL-SETTLED
RULE THAT THE ALLEGATIONS OF THE COMPLAINT IS HYPOTHETICALLY
ADMITTED WHEN THE MOTION TO DISMISS IS GROUNDED UPON LACK
OF CAUSE OF ACTION. MOREOVER, INDEPENDENT OF THE
HYPOTHETICALLY ADMITTED FACTS EMBODIED IN THE COMPLAINT A
QUO, THERE ARE SELF-EVIDENT FACTS AND IMPLIEDLY ADMITTED
FACTS CONTAINED IN PRIVATE RESPONDENTS' PLEADINGS THAT
WOULD CLEARLY AND UNMISTAKABLY SHOW PRIVATE RESPONDENTS'
LACK OF CAUSE OF ACTION AGAINST HEREIN PETITIONER.

III
THE HONORABLE COURT OF APPEALS VIOLATED PETITIONER'S RIGHT
TO SUBSTANTIVE DUE PROCESS WHEN IT ARBITRARILY AND
CAPRICIOUSLY RULED THAT WHAT WAS SPECIFICALLY DENIED IN THE
ASSAILED OCTOBER 20, 2000 ORDER IS PETITIONER'S MOTION FOR
PRELIMINARY HEARING ON DEFENDANT'S AFFIRMATIVE DEFENSES AND
NOT PETITIONER'S MOTION TO DISMISS PER SE CONSIDERING THAT:

A. THERE IS ABSOLUTELY NOTHING IN THE ORDER DATED OCTOBER

20, 2000 OF RESPONDENT JUDGE WHICH SUGGESTS THAT THE
RESOLUTION OF PETITIONER'S MOTION TO DISMISS PER SE WAS
HELD IN ABEYANCE BY THE RESPONDENT JUDGE. HENCE THE
SAID ORDER DATED OCTOBER 20, 2000 ALSO CONSTITUTES A
DENIAL ON THE MERITS OF PETITIONER'S MOTION TO DISMISS
PER SE AND NOT MERELY OF PETITIONER'S MOTION FOR
PRELIMINARY HEARING THEREON.
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 B. PRIVATE RESPONDENTS' COMMENT AND OPPOSITION DATED 11
AUGUST 2000, WHICH WAS CITED AND SUSTAINED BY
RESPONDENT JUDGE, CLEARLY TRAVERSED THE MERITS OF THE
GROUNDS FOR PETITIONER'S MOTION TO DISMISS PER SE.
HENCE, THE SAID 20 OCTOBER 2000 ORDER'S DENIAL OF
PETITIONER'S MOTION IS NOT LIMITED TO THE MOTION FOR
PRELIMINARY HEARING BUT ALSO CONSTITUTES A DENIAL OF
PETITIONER'S MOTION TO DISMISS PER SE.
IV

IN ARBITRARILY AND CAPRICIOUSLY RULING THAT ATTY. ALONZO

ANCHETA PROPERLY VERIFIED AND CERTIFIED PRIVATE RESPONDENTS'
COMPLAINT A QUO, THE HONORABLE COURT OF APPEALS VIOLATED
NOT ONLY PETITIONER'S SUBSTANTIVE DUE PROCESS RIGHTS, BUT
ALSO THE DOCTRINE OF SEPARATE CORPORATE PERSONALITY;
CONSIDERING THAT THE RECORDS OF THIS CASE IS (sic) COMPLETELY
BEREFT AND DEVOID OF ANY DULY EXECUTED SPECIAL POWER OF
ATTORNEY, EMANATING FROM PRIVATE RESPONDENTS, WHICH
EXPLICITLY AND SPECIFICALLY AUTHORIZES ATTY. ALONZO ANCHETA
TO REPRESENT PRIVATE RESPONDENTS MONTRES ROLEX S.A. IN THE
FILING OF THE COMPLAINT A QUO. BY REASON THEREOF, PRIVATE
RESPONDENTS COULD NOT BE DEEMED TO HAVE VOLUNTARILY
APPEARED BEFORE THE RESPONDENT JUDGE; CONSEQUENTLY, THE
TRIAL COURT COULD NOT HAVE VALIDLY ACQUIRED JURISDICTION
OVER THE PERSON OF PRIVATE RESPONDENTS.

V
IN ARBITRARILY AND CAPRICIOUSLY AFFIRMING RESPONDENT JUDGE'S
QUASHAL OF THE SUBPOENA DATED 14 AUGUST 2000 DIRECTED
AGAINST ATTY. ALONZO ANCHETA, THE HONORABLE COURT OF
APPEALS VIOLATED NOT ONLY PETITIONER'S SUBSTANTIVE DUE
PROCESS RIGHTS, BUT ALSO SECTION 9, RULE 132 AND SECTION 7 RULE
133 OF THE 1989 REVISED RULES ON EVIDENCE, AND THE RULING OF
THIS HONORABLE COURT IN THE CASE OF PEOPLE VS. RIVERA. 9

Simply put, the issues are as follows — (1) whether the trial court denied not only
petitioner's motion for preliminary hearing on its affirmative defenses but its motion to
dismiss as well; (2) if the answer is in the affirmative, whether or not the trial court
gravely abused its discretion in denying said motions; and (3) whether the trial court
gravely abused its discretion in quashing the subpoena ad testificandum issued against
Atty. Ancheta.
Anent the first issue, we find that what was denied in the order dated October 27,
2000 was not only the motion for preliminary hearing but the motion to dismiss as well.
A reading of the dispositive portion of said order shows that the trial court neither
qualified its denial nor held in abeyance the ruling on petitioner's motion to dismiss thus
—
IN VIEW OF THE FOREGOING, the aforecited Motion To Quash
Subpoena Ad Testificandum is granted; and the aforecited Motion For
Preliminary Hearing On Defendant's Affirmative Defenses With Motion To dismiss
The Instant Complaint Based On Said Affirmative Defenses is denied. 10
(Emphasis supplied)
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 In issuing the assailed order, the trial court ruled on the merits of petitioner's
Motion to Dismiss vis-à-vis respondents' Comment and Opposition which clearly
traversed the affirmative defenses raised by petitioner, to wit:
After carefully going over the pleadings, this Court finds, on the first
motion that the arguments raised in the said motion and the reply filed in
connection thereto appear to be meritorious; and on the second motion, that the
arguments raised in the comments and opposition and the rejoinder filed by the
plaintiffs likewise appear to be meritorious. 11

Moreover, it is presumed that all matters within an issue raised in a case were
passed upon by the court. In the absence of evidence to the contrary, the presumption
is that the court a quo discharged its task properly. 12
I n Municipality of Biñan Laguna v. Court of Appeals , 13 decided under the old
Rules of Civil Procedure, it was held that a preliminary hearing permitted under Rule 16,
Section 5, is not mandatory even when the same is prayed for. It rests largely on the
sound discretion of the trial court, thus —

SEC. 5. Pleading grounds as affirmative defenses. — Any of the

grounds for dismissal provided for in this Rule, except improper venue, may be
pleaded as an affirmative defense, and a preliminary hearing may be had thereon
as if a motion to dismiss had been filed. (Emphasis supplied)

The use of the word "may" in the aforequoted provision shows that such a hearing is not
a matter of right demandable from the trial court; it is not mandatory but discretionary.
"May" is an auxiliary verb indicating liberty, opportunity, permission and possibility. 14
Such interpretation is specifically stated under the 1997 Rules of Civil Procedure. Rule
16, Section 6, now provides that a grant of a preliminary hearing rests on the sound
discretion of the court, to wit —

SEC. 6. Pleading grounds as affirmative defenses. — If no motion to

dismiss has been filed, any of the grounds for dismissal provided for in this Rule
may be pleaded as an affirmative defense in the answer and, in the discretion of
the court, a preliminary hearing may be had thereon as if a motion to dismiss had
been filed. (Emphasis supplied)

In the case at bar, the Court of Appeals did not err in finding that no abuse of
discretion could be ascribed to the trial court's denial of petitioner's motion for
preliminary hearing on its affirmative defenses with motion to dismiss. The issue of
whether or not a trademark infringement exists, is a question of fact that could best be
determined by the trial court.
Under the old Trademark Law 15 where the goods for which the identical marks
are used are unrelated, there can be no likelihood of confusion and there is therefore no
infringement in the use by the junior user of the registered mark on the entirely different
goods. 16 This ruling, however, has been to some extent, modified by Section 123.1(f)
of the Intellectual Property Code (Republic Act No. 8293), which took effect on January
1, 1998. The said section reads:

Sec. 123. Registrability. — 123.1. A mark cannot be registered if it:

xxx xxx xxx

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 (f) Is identical with, or confusingly similar to, or constitutes a translation
of a mark considered well-known in accordance with the preceding paragraph,
which is registered in the Philippines with respect to goods or services which are
not similar to those with respect to which registration is applied for: Provided,
That use of the mark in relation to those goods or services would indicate a
connection between those goods or services, and the owner of the registered
mark: Provided, further, That the interest of the owner of the registered mark are
likely to be damaged by such use; (Emphasis supplied)

A junior user of a well-known mark on goods or services which are not similar to
the goods or services, and are therefore unrelated, to those specified in the certificate
of registration of the well-known mark is precluded from using the same on the entirely
unrelated goods or services, subject to the following requisites, to wit:
1. The mark is well-known internationally and in the Philippines. Under
Rule 102 of the Rules and Regulations on Trademarks; Service Marks, Trade
Names and Marked or Stamped Containers, 17 in determining whether a mark is
well known, the following criteria or any combination thereof may be taken into
account:

(a) the duration, extent and geographical area of any use of the
mark, in particular, the duration, extent and geographical area of any
promotion of the mark, including advertising or publicity and presentation,
at fairs or exhibitions, of the goods and/or services to which the mark
applies;
(b) the market share in the Philippines and in other countries, of
the goods and/or services to which the mark applies;
(c) the degree of the inherent or acquired distinction of the
mark;
(d) the quality-image or reputation acquired by the mark;
(e) the extent to which the mark has been registered in the
world;
(f) the exclusivity of the registration attained by the mark in the
world;
(g) the extent to which the mark has been used in the world;

(h) the exclusivity of use attained by the mark in the world;

(i) the commercial value attributed to the mark in the world;
(j) the record of successful protection of the rights in the mark;

(k) the outcome of litigations dealing with the issue of whether

the mark is a well-known mark; and

(l) the presence of absence of identical or similar marks validly

registered for or used on identical or similar goods or services and owned
by persons other than the person claiming that his mark is a well-known
mark.
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 2. The use of the well-known mark on the entirely unrelated goods or
services would indicate a connection between such unrelated goods or services
and those goods or services specified in the certificate of registration in the well
known mark. This requirement refers to the likelihood of confusion of origin or
business or some business connection or relationship between the registrant and
the user of the mark.

3. The interests of the owner of the well-known mark are likely to be

damaged. For instance, if the registrant will be precluded from expanding its
business to those unrelated good, or services, or if the interests of the registrant
of the well-known mark will be damaged because of the inferior quality of the
good or services of the user. 18

Section 123.1(f) is clearly in point because the Music Lounge of petitioner is

entirely unrelated to respondents' business involving watches, clocks, bracelets, etc.
However, the Court cannot yet resolve the merits of the present controversy considering
that the requisites for the application of Section 123.1(f), which constitute the kernel
issue at bar, clearly require determination facts of which need to be resolved at the trial
court. The existence or absence of these requisites should be addressed in a full blown
hearing and not on a mere preliminary hearing. The respondent must be given ample
opportunity to prove its claim, and the petitioner to debunk the same.
The same is true with respect to the issue of whether Atty. Alonzo Ancheta was
properly authorized to sign the verification and certification against forum shopping in
behalf of respondents. This could be properly resolved during the trial together with the
substantive issues raised by petitioner.
Considering that the trial court correctly denied petitioner's motion for preliminary
hearing on its affirmative defenses with motion to dismiss, there exists no reason to
compel Atty. Ancheta to testify. Hence, no abuse of discretion was committed by the
trial court in quashing the subpoena ad testificandum issued against Atty. Ancheta.
Grave abuse of discretion implies such capricious and whimsical exercise of
judgment as equivalent to lack of jurisdiction, or, in other words, where the power is
exercised in an arbitrary or despotic manner by reason of passion or personal hostility,
and it must be so patent and gross as to amount to an evasion of positive duty or to a
virtual refusal to perform the duty enjoined or to act at all in contemplation of law. None
of these was committed by the trial court; hence, the Court of Appeals correctly
dismissed the petition.
WHEREFORE, in view of all the foregoing, the petition for review on certiorari
filed by petitioner is DENIED. The November 28, 2002 Decision and the February 13,
2003 Resolution of the Court of Appeals in CA-G.R. SP No. 64660 which dismissed the
petition for certiorari filed by petitioner are AFFIRMED. DAEaTS

SO ORDERED.
Davide, Jr., C .J ., Panganiban, Carpio and Azcuna, JJ ., concur.

Footnotes

1. Rollo, p. 51, penned by Associate Justice Romeo A. Brawner and concurred in by

Associate Justices Bienvenido L. Reyes and Danilo B. Pine.

2. Rollo, p. 61.
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 3. Docketed as Civil Case No. Q-98-36172, Rollo, p. 62.

4. Answer, Rollo, pp. 138–139; See also pp. 134–137.

5. Rollo, p. 147.

6. Petition, Rollo, p. 10.

7. Rollo, p. 170.

8. Rollo, p. 214.
9. Petition, pp. 17–19.

10. Op. cit., note 8.

11. Id.

12. Spouses Vicky Tan Toh v. Solid Bank Corporation, G.R. No. 154183, 7 August 2003.
13. G.R. No. 94733, 17 February 1993, 219 SCRA 69.

14. Municipality of Binan Laguna, supra, pp. 75–76.

15. Republic Act No. 166.

16. Esso Standard Eastern, Inc. v. Court of Appeals, 201 Phil. 803 (1982); Hickok,
Manufacturing Co., Inc. v. Court of Appeals, 201 Phil. 853 (1982); Faberge, Inc. v.
Intermediate Appellate Court, G.R. No. 71189, 4 November 1992, 215 SCRA 316.
17. Amended by Office Order No. 17 dated 1 December 1998.
18. Ruben E. Agpalo, The Law on Trademark Infringement and Unfair Competition, 2000
Edition, pp. 168–170.

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