L.C. Big Mak Burger, Inc. vs. McDonald's Corporation

A finding of indirect contempt requires willful disobedience of a lawful court order; good faith reliance on a final and executory judgment of another tribunal that validates the challenged conduct negates the element of willfulness, even if the conduct is later claimed to infringe the enjoined rights. The use of a corporate name instead of the proscribed mark, undertaken in accordance with a final SEC ruling recognizing the right to that corporate name, does not constitute contempt of the injunction.

McDonald’s Corporation, owner of the “Big Mac” trademark, filed Civil Case No. 90-1507 for trademark infringement and unfair competition against L.C. Big Mak Burger, Inc. The Regional Trial Court of Makati, Branch 137, issued a preliminary injunction on August 16, 1990, ordering Big Mak to refrain from using the name “Big Mak” or any colorable imitation likely to cause confusion with McDonald’s marks within the National Capital Judicial Region. After trial, the RTC rendered a Decision on September 5, 1994, making the injunction permanent and awarding damages to McDonald’s. The Court of Appeals initially reversed, but the Supreme Court in G.R. No. 143993 on August 18, 2004, reversed the CA and reinstated the RTC Decision, which became final and executory. A writ of execution was issued on November 14, 2005.

• Nature of the Contempt Proceeding: McDonald’s Corporation filed a petition for indirect contempt against L.C. Big Mak Burger, Inc. and its president Francis Dy, alleging violation of a permanent injunction that had been affirmed by the Supreme Court in G.R. No. 143993. The injunction ordered Big Mak to refrain from using the name “Big Mak” or any colorable imitation thereof likely to cause confusion with McDonald’s “Big Mac” mark within the National Capital Judicial Region.

• The Alleged Defiance: McDonald’s claimed that despite service of the writ of execution on November 17, 2005, Big Mak continued to use the words “Big Mak” in its restaurant stalls and products in and outside Metro Manila and refused to fully pay the monetary awards.

• Big Mak’s Compliance and Evidence: Big Mak denied the allegations. It averred that it had tendered full payment to the sheriff but that McDonald’s refused to accept direct payment. With respect to the mark, Big Mak asserted that it had stopped using “Big Mak” and instead used its corporate name “L.C. Big Mak Burger, Inc.” and changed its stalls and products to “Super Mak.” Photographs taken in 2009 showed stalls and vans bearing “Super Mak” and/or the corporate name. In his judicial affidavit, Francis Dy stated that from the time the injunction was served, the company desisted from using “Big Mak” standing alone and changed stall names to “Super Mak,” and that by early 2009, the stalls and vans reflected only “Super Mak” and the corporate name.

• The SEC Decision: A separate case, SEC-AC No. 426, had been filed by McDonald’s seeking the cancellation of Big Mak’s corporate name. The Securities and Exchange Commission dismissed the complaint in a Decision dated January 3, 1994, holding that Big Mak’s use of “Big Mak Burger” had priority, that the corporate name was not identical or confusingly similar to “Big Mac,” and that there was no ground to cancel the name. This SEC Decision became final and executory and was never reversed or modified by the infringement decision.

• RTC Contempt Court’s Ruling: Judge Winlove M. Dumayas of the RTC Makati, Branch 59, dismissed the contempt petition and awarded damages to Big Mak and Francis Dy — ₱500,000 for business reputation damage, ₱500,000 moral damages to Dy, ₱100,000 exemplary damages, and ₱100,000 attorney’s fees — finding that Big Mak had complied in good faith and that no willful defiance occurred.

• CA Reversal: The Court of Appeals found Big Mak guilty of indirect contempt. It interpreted Francis Dy’s judicial affidavit as an admission that changes were made only in 2009, after the contempt petition was filed. It further held that the display of the corporate name “L.C. Big Mak Burger, Inc.,” which contained the words “Big Mak,” was a continuation of infringement and thus a defiance of the injunction. The CA also opined that the SEC Decision was binding only until the Supreme Court’s 2004 Decision, implying the latter modified or overturned it.

• Good Faith and Absence of Willful Disobedience: Petitioner argued that it complied with the injunction by ceasing to use the “Big Mak” mark and adopting “Super Mak” and its corporate name. No admission of belated compliance existed; the judicial affidavit merely identified when the photographs were taken, not when the changes were implemented.
• Reliance on Final SEC Decision: Petitioner maintained that its use of the corporate name “L.C. Big Mak Burger, Inc.” was justified by the final and executory SEC Decision in SEC-AC No. 426, which recognized its right to use the name and held it not confusingly similar to “Big Mac.” Reliance on this valid judgment negated any contemptuous intent.
• Injunction Limited to the “Big Mak” Mark: Petitioner contended that the injunction only prohibited the use of the word mark “Big Mak,” not the use of its duly registered corporate name, which was lawfully retained under the SEC ruling.

• Continuing Use of Proscribed Mark: Respondent maintained that petitioner continued to use the words “Big Mak” in its business in defiance of the writ of execution and final judgment.
• Corporate Name as Infringement and Defiance: Respondent argued that because the proscribed words “Big Mak” appear in petitioner’s corporate name, the display of that name on stalls and products constituted continued infringement and amounted to disobedience of the court order.
• Refusal to Pay Judgment Debt: Respondent claimed that petitioner failed to fully pay the damages awarded, further indicating contempt of the final judgment.

• Indirect Contempt: Whether L.C. Big Mak Burger, Inc. is guilty of indirect contempt for allegedly violating the permanent injunction by continuing to use the words “Big Mak” in its business and by refusing to fully pay the judgment debts.

• Indirect Contempt: No indirect contempt was committed. The evidence demonstrated that petitioner desisted from using the “Big Mak” mark and instead used “Super Mak” and its corporate name. The CA’s finding of an admission of belated compliance was a misinterpretation of the judicial affidavit; the photographs taken in 2009 did not prove that the marketing changes were implemented only at that time. The use of the corporate name “L.C. Big Mak Burger, Inc.” instead of the mark “Big Mak” could not, by itself, constitute contempt. The injunction proscribed the use of the mark “Big Mak,” and petitioner’s adoption of its corporate name was a good faith effort to comply, consistent with the final SEC Decision that the corporate name was not confusingly similar to “Big Mac.” Contempt requires willful disobedience; the gravamen of the offense is the intent to defy the court. Petitioner’s reliance on a lawful and binding SEC judgment to justify its conduct demonstrated good faith and negated willfulness. The contempt petition was therefore properly dismissed, and the damages awarded by the Contempt Court were left undisturbed as no challenge to them was raised.

• Nature and Elements of Contempt of Court — Contempt of court is a willful disregard or disobedience of a public authority. The gravamen of the offense is the intent to defy the court. To constitute contempt, the act must be done willfully and for an illegitimate or improper purpose. Condemnation for contempt should not be made lightly; the power to punish contempt must be exercised on the preservative, not the vindictive, principle.
• Good Faith as a Defense to Indirect Contempt — A person should not be condemned for contempt where he contends for what he believes to be right and in good faith, however erroneous his conclusion as to his rights. Good faith, or the lack of it, of the alleged contemnor must be considered. Reliance on a final and executory decision of a competent tribunal that validates the challenged conduct is a sufficient showing of good faith and negates the willfulness element.
• Separate and Distinct Character of SEC Corporate Name Cases — A complaint for change of corporate name before the SEC is a separate and distinct proceeding from an infringement and unfair competition case before a trial court. A final and executory SEC decision cannot be reversed or modified by a judgment in the infringement case.

• “Contempt of court has been defined as a willful disregard or disobedience of a public authority. x x x Indeed, as can be gleaned from the above-cited jurisprudential definition of contempt, the intent goes to the gravamen of the offense. Thus, the good faith, or lack of it, of the alleged contemnor should be considered.” — This passage underscores that the core of indirect contempt is willful intent, making good faith an essential consideration.
• “A person should not be condemned for contempt where he contends for what he believes to be right and in good faith however erroneous may be his conclusion as to his rights. To constitute contempt, the act must be done willfully and for an illegitimate or improper purpose.” — This is the controlling statement on good faith negating contempt.
• “Considering that condemnation for contempt should not be made lightly, and that the power to punish contempt should be exercised on the preservative and not on the vindictive principle, the Court finds no difficulty in reaching the conclusion that there was no willful disregard or defiance of its order/decision.” — The Supreme Court invoked this principle in absolving petitioner of contempt.

• Castillejos Consumers Association, Inc. v. Dominguez, et al., 757 Phil. 149 (2015) — Followed for the definition that contempt is a willful disregard or disobedience of a public authority and that intent goes to the gravamen of the offense.
• Saint Louis University, Inc., et al. v. Olairez, et al., 730 Phil. 444 (2014) — Followed for the rule that good faith of the alleged contemnor should be considered and that a person should not be punished for contempt when acting in good faith.
• The Executive Secretary and Lomibao v. Gordon, et al., 359 Phil. 266 (1998) — Followed for the principle that the power to punish contempt should be exercised on the preservative, not vindictive, principle.

• Section 3(b), (c), and (d), Rule 71 of the Rules of Court — Enumerates the acts constituting indirect contempt, including disobedience of a lawful writ, process, order, or judgment, and improper conduct that impedes or degrades the administration of justice. The provision was applied as the charging legal basis but the Court found that its essential element of willful disobedience was not present.

Maria Lourdes P.A. Sereno (Chief Justice, Chairperson), Teresita J. Leonardo-De Castro, Mariano C. Del Castillo, and Francis H. Jardeleza concurred. No separate concurring opinions were issued.

N/A — The decision was unanimous.