Z.E. LOTHO, INC., PLAINTIFF AND APPELLANT, VS. ICE AND COLD STORAGE INDUSTRIES OF THE PHILIPPINES, INC., ET AL., DEFENDANTS AND APPELLEES.

This action was commenced on March 11, 1957, in the Court of First
instance of Laguna by the plaintiff corporation charging the defendants
with unfair competition and demanding from them the payment of damages.
The court a quo denied the plaintiff’s claim on the grounds of laches
and consent; hence this appeal, which was directed to this Court
because the amount involved is more than P200,000.00.

Briefly, the facts are as follows; Z.E. Lotho, Inc. was
incorporated on June 9, 1947, with a capital stock of P100,000,00, for
the purpose of operating an ice plant and selling the manufactured ice
at wholesale or retail. It secured a certificate of public convenience
to serve an area that included the towns of San Pedro, Biñan, Sta.
Rosa, Cabuyao and Calamba, all in the province of Laguna.

From 1947 until sometime in 1951, the corporation operated a 10-ton
ice-producing unit. From June 9 to December 31, 1947, the plaintiff
obtained a gross revenue of P13,590.05, but against the corresponding
operating expenses, it incurred a loss of P251.01. For the entire year
1948, the company suffered another loss of P4,789.42. In 1949, however,
the plaintiff was able to make a profit of P1,907,33, but in 1950, “it
again incurred a loss of P2,873.68. It suffered the heaviest loss
amounting to P17,080.24 in 1951, and in that year, the corporation
first discontinued operating its ice plant.

Because of the stoppage, plaintiff’s certificate of public
convenience was cancelled, but on February 14, 1955, it was revived
upon the company’s petition. When it resumed operation on or before
February 28, 1955, only an old 5-ton ice producing unit was used in
place of the 10 ton unit which was by then already sold to the spouses
Emilio Gomez and Crisanta Sta, Maria Gomez in order to meet pressing
obligations of the company. Since then until June of 1955, when it
altogether ceased to engage in business, whenever there was a breakdown
in its machinery, the plaintiff would buy from the Farola Ice Plant of
the Ice and Cold Storage Industries of the Philippine, Inc., for
resale to its customers.

On January 21, 1958, the plaintiff’s certificate of public
convenience was definitely cancelled by the Public Service Commission.

Upon the other hand, defendant Ice and Cold Storage Industries of
the Philippines, Inc., is a corporation likewise engaged in the
manufacture and sale of ice. Comprised within its franchised territory
are the City of Manila, Pasay City, Quezon City and some towns of
Cavite and Bulacan. The other defendants are all ice dealers in
different municipalities of Laguna which are covered by the plaintiff’s
franchise. Up to December, 1947, these defendants were regular
customers of the plaintiff. Beginning the following year, however, they
started to buy the greater bulk of the ice that they resold from the
defendant ice company. Z.E. Lotho, Inc. made efforts to get back the
patronage of the ice dealers as early, it appears, as 1948, but it was
unsuccessful, apparently because it was more profitable in many ways to
buy from the defendant company.

Claiming that the sales made to the dealers by said defendant
company constituted or amounted to indirect sales within the
plaintiff’s authorized territory, Z.E Lotho, sometime in June, 1955,
made representations to discuss the matter with the defendants. A
conference was held, and a tentative agreement was reached between Z.E. Lotho and the ice dealers. However, the draft of the agreement was
never signed, each party blaming the other for the non-consummation.

Upon the foregoing facts, this litigation ensued. The trial court,
as already said, dismissed the plaintiff’s action. Resorting to this
Court, the appellant urges that—

“The lower court erred in holding that,
notwithstanding that defendant-appellees have committed unlawful acts
constituting unfair competition, plaintiff-appellant is barred from
recovering damages as a consequence thereof because of laches and
consent on its part, even though those supposed defenses are neither
pleaded nor their essential elements proven.”

The appellant’s charge is not substantiated by the records. That the
affirmative defenses of laches and consent as barring plaintiff’s claim
have been substantially pleaded is evident from each of defendants’
respective answers to the complaint, to wit:

“4. That plaintiff has never exercised the diligence
of a good father of a family by trying to minimize or eliminate the
alleged damages resulting from the alleged acts of the herein
defendant, and plaintiff has never notified or ordered defendants to stop the alledge selling of ice, until the filing of the complaint.” (Answer of defendant Ice and Gold Storage Industries of the Philippines, Inc.) (Italics supplied)

“3.
That the said plaintiff has never asked or prohibited the herein
defendant to stop selling ice until the complaint in the present case
was filed.” (Answer of defendants-spouses Jose Espeleta and Justine de
los Reyes; to the same effect are the separate answers of defendants
Giriaco Beato, Demetrio Carpena, Felix Carpena, Felix Bautista, Isabel
Almoro and Feliciano Olivares, see Rec. on Appeal, pp. 14-55).

Not only is inaction within a reasonable time to enforce a right the
basic premise that underlies a valid defense of laches, but such
inaction often evinces implied consent or acquiescence to the violation
of the right. Consonant with the mandate that the rules of procedure
should be liberally construed (Sec 2, Rule 1, Rules of Court), we hold
that defendants affirmative allegations previously quoted sufficiently
comply with the requirements of Section 5, Rule 9 of the Rules of
Court; i.e., that affirmative defenses should be “specifically
pleaded.” At any rate, the introduction of evidence tending to prove
laches without any objection on the part of the plaintiff would have
cured whatever formal defect there was in the answers of the defendants
regarding that defense.

This brings us to the question whether or not the equitable defense
of laches should apply in this case. In the leading case of Go Chi Gun,
et al., vs. Co Cho, et al., 96 Phil., 622, this Court, citing 19 Am.
Jur. pp. 343-344, enumerated the essential elements of that defense as
follows:

“(1) conduct on the part of the defendant, or of one
under whom he claims, giving rise to the situation of which complaint
is made and for which the complaint seeks a. remedy; (2) delay in
asserting the complainant’s rights, the complainant having had
knowledge or notice of the defendant’s conduct and having been afforded
an opportunity to institute a suit; (3) lack of knowledge or notice on
the part of the defendant that the complainant would assert the right
on which he bases his suit; and (4) injury or prejudice to the
defendant in the event relief is accorded to the complainant, or the
suit is not held to be barred.”

The first element is naturally conceded to exist by the plaintiff
when it claimed that there was an invasion by the defendants of its
rights under the certificate of public convenience. The attendance of
the second element is, on the other hand, clear from the evidence on
record, which shows that Zoilo E. Lotho, the general manager and
treasurer of the appellant corporation, knew since 1948 that defendant
Ice and Cold Storage Industries was selling ice to its co-defendants,
and that indeed he tried to win back the ice dealers’ patronage. From
1948 to March 11, 1957, when the complaint was filed in the court
below, a period of more than nine years had elapsed, and taking into
account the nature of this action, the delay is unreasonable (see 52
Am. Jut1. 633) . The situation did not change because defendants had
allegedly, continued to violate plaintiff’s right. Plaintiff’s action,
it should be noted, is not merely for the protection of a legal right
or to prevent further violation of such right, to which laches would
have little, if any, application, but to obtain relief for the past
violation.

While there is some merit in the assertion that the period of laches
has at times been held to be comparable to the period prescribed by the
statute of limitations, strictly, said equitable defense may apply
independently of that statutory period, so that it has been
successfully interposed even if a shorter time had elapsed (Abraham vs.
Ordway, 39 L. Ed. 1036, 158 U.S. 416, 15 S.Ct. 894; Whitney vs. Fox, 41
L. Ed. 1145, 166 U.S. 637, 17 S.Ct. 713; see also 19 Am. Jur. 346).
Furthermore, the statutory period of, limitation in this case is not
ten years, as erroneously pointed out by the plaintiff, but four years.

“ART. 1146. The following actions must be instituted within four years.

(1) Upon an injury to the rights of the plaintiff; * * * (Civil Code)

The provision just quoted was based on Section 43 of the Code of Civil Procedure that reads:

“Other Civil Actions; How Limited.—action other than
for the recovery of real property can only be brought within the
following periods after the right of action accrues:

* * *
3. Within four years: An action for an injury to or trespass upon real
estate. An action for the recovery of personal property. An action for
the recovery of damages for taking, retaining, or injuring personal
property. An action for injury to the person other than injuries
resulting from assault, battery, or false imprisonment. An action for
an injury to the rights of the plaintiff not rising on contract and not
hereinafter enumerated. * * * ” (Italics Supplied)

The third element which requires lack of knowledge or notice on the
part of the defendants that the plaintiff would assert its right is
likewise evident. The plaintiff was full aware that the defendant
company was selling ice to its co-defendants as early as 1948, yet it
made no genuine efforts for stop that practice, although it tried to
court or win back the ice-dealers patronage. It was only about seven
years thereafter or sometime in June, 1955, that the plaintiff
informally charged the defendant with having conducted sales within the
former’s franchised territory. As observed by the court below, the
evidence showed that plaintiff was not real opposed to the sales being
made by time defendant company with its territory, so much so that in
the conference of July 1, 1955, the parties reached an “unconsummated”
agreement where among other things, it was made clear that the ice
dealers could continue buying any quantity of ice from the Ice and Cold
Storage Industries of the Philippines; Inc. (Exh. R-1″) Also indicating acquiescence by the plaintiff to the questioned sales is
the fact that the plaintiff itself used to buy ice from the defendant
company which it re-sold to its customers. There was even a time when
the plaintiff asked that it be given a special quota of 40 blocks of
ice a day (Exhibit “18”).

The last of the elements of laches is injury or prejudice to the
defendant In the event relief is accorded to the plaintiff. Stated in
another way, the doctrine of stale demands would apply only where by
reason of the lapse of time, “it would be inequitable to allow a party
to enforce his legal rights.” (19 Am. Jur. 352).

Such inequity is apparent in the case at bar. It is admitted that
some of the material records of the plaintiff that itemize or support
its statement of the gross damage were lost because of the long delay
is bringing this suit, and, therefore, could not be produced when the
defendants asked to have recours to said records. Plaintiff thus made
it more difficult for defendant to controvert the correctness and
veracity of the damages, which justifies a presumption against the
truth of the plaintiff’s stale claim (See 30 C.J.S. 542-543). Had the
defendants been properly forewarned of the bringing of this action or
had this litigation been brought to court earlier, they could have
guards against Incurring liability for damages or at least minimized
the same, so that any relief accorded now to the plaintiff would result
in defendants being held answerable for damages that they could have
otherwise avoided. It would be unjust enable plaintiff to reap benefit
from having slept on its rights.

In view, of the foregoing considerations, it becomes unnecessary for us to dwell on the other points raised in this appeal.

Wherefore, the decision appealed from is affirmed, with costs against the appellant.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Barrera, Paredes, Dizon, and De Leon JJ., concur.