G.R. No.

182042 July 27, 2011

THUNDER SECURITY AND INVESTIGATION AGENCY/LOURDES M.

LASALA, Petitioner,
vs.
NATIONAL FOOD AUTHORITY (REGION I) and NFA REGIONAL BIDS AND AWARDS
COMMITTEE (REGION I), Respondents.

DECISION

VILLARAMA, JR., J.:

Before this Court is a petition1 for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure, as amended, seeking to reverse the Decision2 dated July 18, 2007 of the
Court of Appeals (CA) in CA-G.R. SP No. 93642, which set aside the Orders3 dated
August 27, 2003 and December 1, 2005 of the Regional Trial Court (RTC) of San
Fernando City, La Union, Branch 66 in Civil Case No. 6846.

The facts are as follows:

Sometime in September 2002, petitioner Thunder Security and Investigation Agency,

owned and operated by petitioner Lourdes M. Lasala as sole proprietor, entered into a
Contract for Security Services4 with respondent National Food Authority (NFA), Region I.
The contract provided that Thunder Security will provide 132 security guards to safeguard
the NFA’s personnel, offices, facilities and properties in Region I for a period of one year
from September 15, 2002 to September 15, 2003.

Subsequently, Republic Act (R.A.) No. 91845 was enacted on January 10, 2003, and took
effect on January 26, 2003. Said law expressly repealed, among others, Executive Order
(E.O.) No. 40, Series of 20016 which governed the bidding procedure of service contracts
in the Government.

Since petitioner’s contract with the NFA was about to expire on September 15, 2003, the
NFA caused the publication of an Invitation to Apply for Eligibility and to Bid on May 11
and 18, 2003, intended for all private security agencies.7 Petitioner paid the bidding fee of
₱ 1,000.00 on May 21, 2003 to signify its intention to participate in the bidding process.
However, on June 9, 2003, the NFA, through Assistant Regional Director Victoriano
Molina, chairman of respondent NFA-Regional Bids and Awards Committee (NFA-RBAC),
notified petitioner to submit the required documents not later than June 19, 2003 in order
to qualify for the bidding.8 On June 26, 2003, the NFA-RBAC informed petitioner that its
application to bid had been rejected due to its failure to submit the required
documents.9 Aggrieved, petitioner sent a letter of protest to the NFA on July 10, 2003,
contending that until the Implementing Rules and Regulations (IRR) of R.A. No. 9184 can
be promulgated, no bidding should take place.10Notwithstanding, respondents rejected
petitioner’s application. Respondents defended their position, citing an instruction coming
from then NFA Administrator Arthur C. Yap which directed that in the absence of the said
IRR and due to the exigency of the service, respondents’ projects would be temporarily
guided by the provisions of E.O. No. 40, among others, provided the same are consistent
with R.A. No. 9184.11

Unfazed, petitioner filed before the RTC a Petition12 for Prohibition and Preliminary
Injunction, with a prayer for the issuance of a Temporary Restraining Order (TRO) plus
Damages, seeking, among others, to enjoin respondents from awarding the contract to
another security agency. On August 8, 2003, the RTC issued a TRO against
respondents.13 Correlatively, in its Order14 dated August 27, 2003, the RTC granted the
writ of preliminary injunction in favor of petitioner and directed respondents to desist from
terminating petitioner’s services until further orders from the RTC. The RTC held that the
composition and the orders of the NFA-RBAC were void because the IRR of R.A. No.
9184 has not yet been promulgated. The RTC also found that no observers from the
private sector were present in the bidding process as required by law. The RTC ordered:

WHEREFORE, premises considered[,] let [a] Writ of Preliminary Injunction [be issued]
against respondents National Food Authority Region I and the Regional Bid and Awards
Committee (RBAC) enjoining and restraining said respondents and all persons acting in
their behalf from awarding the contract for security services in NFA Region I and from
terminating the services of petitioner until further orders from the Court, upon payment of
an Injunction Bond in the amount of Php50,000.00 in the name of the respondents to
answer for any and all damages which the respondents may suffer in the event that the
Court should finally decide that petitioner is not entitled to the issuance thereof.

Let the Pre-trial Conference of this case be set on September 22, 2003 at 2:00 o’clock in
the afternoon.

SO ORDERED.15

Respondents filed a Motion for Reconsideration16 on September 23, 2003, contending that
per Minutes of the Meeting17 for public bidding held on July 16, 2003, three independent
observers were actually present, namely, Floriano S. Gallano, Jenny Lilan and Antonita S.
Hagad. On October 8, 2003, IRR Part A18 (IRR-A) of R.A. No. 9184 also took effect.
Nonetheless, the RTC denied respondents’ motion for reconsideration in its Order19 dated
December 1, 2005. Thus, respondents sought recourse from the CA by way of certiorari
under Rule 65 of the 1997 Rules of Civil Procedure, as amended, charging the RTC of
grave abuse of discretion in the issuance of the said orders.20

On July 18, 2007, the CA granted the petition. It held that the RTC gravely abused its
discretion when it issued the writ of preliminary injunction against respondents despite the
utter lack of basis and justification for its issuance. The CA highlighted that while IRR-A of
R.A. No. 9184 took effect on October 8, 2003,21 and thus could not have been applied by
the RTC in its August 27, 2003 Order, its failure to consider the said IRR-A in resolving
respondents’ motion for reconsideration amounted to grave abuse of discretion. The CA
added that contrary to the trial court’s ruling, there were three observers present during
the bidding process, as shown by the Minutes of the Meeting for public bidding held on
July 16, 2003. The CA further opined that petitioner did not appear to possess a clear
legal right to enjoin the awarding of the contract considering that petitioner’s right to
participate in the bidding was itself dubious as petitioner failed to submit the necessary
documents required by respondents. However, the CA clarified that its decision was
merely focused on the issue of the impropriety of the issuance of the writ of preliminary
injunction and not on the issues of the propriety of the award of the contract and damages.
Thus, the CA held that the latter issues should still be heard by the RTC.22 The dispositive
portion of the CA decision reads:

WHEREFORE, in view of the foregoing, the instant PETITION is hereby GRANTED. The
Orders issued by Branch 66 of the Regional Trial Court of San Fernando City, La Union
dated August 27, 2003 and December 1, 2005 in Civil Case No. 6846 are hereby SET
ASIDE.
SO ORDERED.23

Petitioner filed a Motion for Reconsideration24 but the CA denied the same in its
Resolution25 dated March 5, 2008.

Hence, this petition which raised the following issues:

1. Whether the Court of Appeals committed a reversible error when it held that the
respondents did not err in applying E.O. 40 in the conduct of the bidding[;]

2. Whether the Court of Appeals committed a reversible error when it held that there was
no irregularity attending the questioned bidding[; and]

3. Whether the Court of Appeals committed a reversible error when it reversed the Orders
of [the RTC] granting injunctive relief to herein petitioner[.]26

Petitioner emphasizes that R.A No. 9184, which expressly repealed E.O. No. 40, was
already in force at the time the bidding was conducted in this case on July 16, 2003;
hence, it was error for the NFA and the NFA-RBAC to conduct the public bidding in
accordance with E.O. No. 40. Petitioner also abandons its initial stance regarding the
need for implementing rules and regulations, and now argues that even without its IRR,
R.A. No. 9184 can be understood and enforced. Petitioner adds that there is no provision
of law or jurisprudence which requires that there must first be an IRR before a law takes
effect, and adds that NFA Administrator Arthur C. Yap and his subordinates cannot
suspend the operation of R.A. No. 9184 and order that bidding be conducted in
accordance with E.O. No. 40 which was already repealed. Petitioner also insists that there
was an irregularity in the bidding process as the observers presented by respondents
were allegedly not independent and cannot be relied upon to observe the process
diligently. Petitioner further insists that the presence or absence of observers in the
bidding process is a question of fact which the CA cannot tackle in a petition for certiorari
under Rule 65. As such, the CA should have remanded the case to the RTC for the
determination of the question of fact.27

On the other hand, respondents through the Office of the Government Corporate Counsel
(OGCC), counter that petitioner failed to present any evidence before the RTC and the CA
to substantiate its claim that the NFA-RBAC was not constituted in accordance with R.A.
No. 9184. Having alleged a violation of law, it was incumbent upon petitioner to prove by
sufficient evidence that there was indeed such violation. The OGCC points out that unlike
petitioner, respondents were able to prove sufficiently that there were actually three
observers present during the bidding process, which fact the RTC failed to consider.
Moreover, the OGCC argues that respondents’ reliance on E.O. No. 40, pending the
promulgation of the IRR of R.A. No. 9184, was allowed by Section 77 28 of IRR-A. There
was likewise no violation of any clear and unmistakable right of petitioner as to warrant the
issuance of the writ of preliminary injunction. The OGCC points out that the rejection of
petitioner’s application was actually petitioner’s own fault because petitioner failed to
submit the necessary documents despite several notices. Finally, the OGCC stresses that
the trial court judge issued the writ of preliminary injunction in violation of the law and with
grave abuse of discretion because it effectively and indefinitely renewed and extended the
contract between the parties contrary to jurisprudence that no court can compel a party to
agree to a contract through the instrumentality of a writ of preliminary injunction.29

Essentially, the sole issue for our resolution is whether the CA erred in setting aside the
RTC orders which granted injunctive relief to petitioner.
The petition is bereft of merit.

Section 3, Rule 58 of the 1997 Rules of Civil Procedure, as amended, provides the
grounds for the issuance of a preliminary injunction:

SEC. 3. Grounds for issuance of preliminary injunction. — A preliminary injunction may be

granted when it is established:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such
relief consists in restraining the commission or continuance of the act or acts complained
of, or in requiring the performance of an act or acts, either for a limited period or
perpetually;

(b) That the commission, continuance or nonperformance of the act or acts complained of
during the litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or
is procuring or suffering to be done, some act or acts probably in violation of the rights of
the applicant respecting the subject of the action or proceeding, and tending to render the
judgment ineffectual.

Based on the foregoing provision, we held in Philippine Ports Authority v. Cipres

Stevedoring & Arrastre, Inc.,30 to wit:

A preliminary injunction is an order granted at any stage of an action prior to judgment of

final order, requiring a party, court, agency, or person to refrain from a particular act or
acts. It is a preservative remedy to ensure the protection of a party’s substantive rights or
interests pending the final judgment in the principal action. A plea for an injunctive writ lies
upon the existence of a claimed emergency or extraordinary situation which should be
avoided for otherwise, the outcome of a litigation would be useless as far as the party
applying for the writ is concerned.

At times referred to as the "Strong Arm of Equity," we have consistently ruled that there is
no power the exercise of which is more delicate and which calls for greater circumspection
than the issuance of an injunction. It should only be extended in cases of great injury
where courts of law cannot afford an adequate or commensurate remedy in damages; "in
cases of extreme urgency; where the right is very clear; where considerations of relative
inconvenience bear strongly in complainant’s favor; where there is a willful and unlawful
invasion of plaintiff’s right against his protest and remonstrance, the injury being a
continuing one, and where the effect of the mandatory injunction is rather to reestablish
and maintain a preexisting continuing relation between the parties, recently and arbitrarily
interrupted by the defendant, than to establish a new relation."

For the writ to issue, two requisites must be present, namely, the existence of the right to
be protected, and that the facts against which the injunction is to be directed are violative
of said right. It is necessary that one must show an unquestionable right over the
1avvphi 1

premises.31

Thus, the following requisites must be proved before a writ of preliminary injunction, be it
mandatory or prohibitory, will issue:
(1) The applicant must have a clear and unmistakable right to be protected, that is a right
in esse;

(2) There is a material and substantial invasion of such right;

(3) There is an urgent need for the writ to prevent irreparable injury to the applicant; and

(4) No other ordinary, speedy, and adequate remedy exists to prevent the infliction of
irreparable injury.32

In this case, it is apparent that when the RTC issued its December 1, 2005 Order,
petitioner has no more legal rights under the service contract which already expired on
September 15, 2003. Therefore, it has not met the first vital requisite that it must have
material and substantial rights that have to be protected by the courts.33 It bears stressing
that an injunction is not a remedy to protect or enforce contingent, abstract, or future rights;
it will not issue to protect a right not in esse and which may never arise, or to restrain an
act which does not give rise to a cause of action. There must exist an actual right.34 Verily,
petitioner cannot lay claim to an actual, clear and positive right based on an expired
service contract.

Moreover, well-entrenched in this jurisdiction that no court can compel a party to agree to
a contract through the instrumentality of a writ of preliminary injunction.35 A contract can
be renewed, revived or extended only by mutual consent of the parties.36 By issuing the
assailed orders most particularly its December 1, 2005 Order, the RTC in effect extended
the life of the parties’ expired contract in clear contravention of our earlier
pronouncements.

In sum, we find that the CA committed no reversible error in rendering the assailed
decision which would warrant the modification, much less, the reversal thereof.

WHEREFORE, the instant petition for review on certiorari is DENIED. The Decision dated
July 18, 2007 of the Court of Appeals in CA-G.R. SP No. 93642 is AFFIRMED.

With costs against the petitioner.

SO ORDERED.

G.R. No. 175284 September 19, 2012

BP PHILIPPINES, INC. (FORMERLY BURMAH CASTROL PHILIPPINES,

INC.), Petitioner,
vs.
CLARK TRADING CORPORATION, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

This Petition for Review on Certiorari under Rule 46 of the Rules of Court assails the
Court of Appeals Decision dated August ? 2006 and Resolution dated October 30, 2006
1 2

in CA G.R. ------- entitled

Burmah Castrol Philippines, Inc. v. Clark Trading Corporation, which affirmed the
Decision dated December 15, 2002 of the Regional Trial Court (RTC), Branch 57,
3

Angeles City in Civil Case No. 9301.

BP Philippines, Inc. (petitioner), a corporation "engaged in the development, manufacture,

importation, distribution, marketing, and wholesale of: (i) the products of the BURMAH
CASTROL GROUP, including, x x x the CASTROL range of lubricants and associated
products x x x," filed a Complaint for "injunction with prayer for preliminary injunction and
4 5

temporary restraining order (TRO) and damages" in the RTC against respondent Clark
Trading Corporation, owner of Parkson Duty Free, which, in turn, is a duty free retailer
operating inside the Clark Special Economic Zone (CSEZ). Parkson Duty Free sells,
among others, imported duty-free Castrol products not sourced from petitioner.

Petitioner alleged that sometime in 1994 it had entered into a Marketing and Technical
Assistance Licensing Agreement and a Marketing and Distribution Agreement
6 7

(agreements) with Castrol Limited, U.K., a corporation organized under the laws of
England, and the owner and manufacturer of Castrol products. Essentially, under the
terms of the agreements, Castrol Limited, U.K. granted petitioner the title "exclusive
8

wholesaler importer and exclusive distributor" of Castrol products in the territory of the
Philippines. Under the July 22, 1998 Variation "territory" was further clarified to include
9

duty-free areas. 10

Petitioner claimed that respondent, by selling and distributing Castrol Products not 11

sourced from petitioner in the Philippines, violated petitioner’s exclusive rights under the
agreements. Despite a cease and desist letter dated September 14, 1998 sent by
12

petitioner, respondent continued to distribute and sell Castrol products in its duty-free
shop. Petitioner, citing Yu v. Court of Appeals as basis for its claim, contended that the
13

unauthorized distribution and sale of Castrol products by respondent "will cause grave
and irreparable damage to its goodwill and reputation."

To support the application for TRO, petitioner presented the testimony of a certain Farley 14

Cuizon, one of the people who conducted a test-buy on October 30, 1998 at Parkson Duty
Free. Cuizon testified that he had purchased one box containing twelve (12) bottles with
15

red caps of Castrol GTX motor oil, and that these red caps signified that the Castrol motor
oil did not come from petitioner, since the bottles of Castrol motor oil petitioner sold had
white caps. Moreover, Cuizon further testified that the bottles of Castrol motor oil bought
from Parkson Duty Free had on them printed labels stating that these "may not be resold
outside North America." However, on cross-examination, he testified that no patent
16

violation existed since the red caps on the Castrol GTX products were not significant.

On March 4, 1999, the RTC issued an Order directing the issuance of a TRO for a period
of twenty (20) days enjoining respondent "from selling and distributing Castrol products
until further orders x x x."
17

On April 15, 1999, the RTC denied petitioner’s prayer for the issuance of a writ of
preliminary injunction, there being no sufficient justification for the relief.
18

Respondent, in its answer, stated that petitioner had no cause of action. Respondent
19

alleged that it was a stranger to the agreements, it being neither a party nor a signatory
thereto. Based on the theory that only parties to a contract were bound by it, respondent
claimed that it could not be held liable for violations of the terms of the agreements. While
respondent admitted that it distributed and sold Castrol products, it also posited that it only
conducted its business within the confines of the CSEZ in accordance with Executive
Order Nos. 140, 250 and 250-A. Since petitioner was not authorized to operate,
20 21 22

distribute and sell within the CSEZ, respondent did not violate the agreements because its
efficacy only covers an area where petitioner is allowed by law to distribute.

After trial on the merits, the RTC dismissed the complaint. It ruled that the factual
circumstances of the Yu case were different from the present case since respondent was
operating a duty-free shop inside the CSEZ. It noted that "the Castrol products sold by
[respondent] therefore [was] legal provided that they only [sold] the same in their store
inside Clark and to customers allowed to make said purchase and for their consumption." 23

With regard to the propriety of the issuance of a preliminary injunction, the RTC ruled:

[Petitioner] failed to show xxx [any] act by [respondent] [that constitutes] an injurious
invasion of its rights stemming from a contract it signed with another party coupled by the
limited scope of the transaction of [respondent] and its customers.

Hence, [petitioner] cannot be entitled to an injunction in the instant case. It has not shown
that it has a right which must be protected by this court, and it failed to show also that
defendant is guilty of acts which [violate] its rights."

xxxx

WHEREFORE, premises considered, the complaint filed by [petitioner] is hereby ordered

DISMISSED. 24

On appeal, the Court of Appeals affirmed the ruling of the RTC. Petitioner was not able to
establish the existence of a clear legal right to be protected and the acts which would
constitute the alleged violation of said right. The circumstances under which the Yu case
was decided upon were different from that of the present case. The Court of Appeals
pointed out the different circumstances in the following manner:

Firstly, in Yu, the High Court did not make a final determination of the rights and
obligations of the parties in connection with the exclusive sales agency agreement of wall
covering products between Philip Yu and the House of Mayfair in England. Said case
reached the High Court in connection with the incident on the preliminary injunction and
the main suit for injunction was still pending with the Regional Trial Court of Manila. The
High Court categorically stated that their "observations" do not in the least convey the
message that they "have placed the cart ahead of the horse, so to speak." This is the
reason why in the dispositive portion of said case, the High Court remanded the case to
the court of origin.

In the instant case, the trial court already rendered its assailed Decision which found that
[petitioner] has not shown that it has a right which must be protected and that [respondent]
is not guilty of acts which violate [petitioner’s] right. Thus, We fail to see how the High
Court’s "observations" in the Yu case should be cited as a controlling precedent by
[petitioner].

Secondly, in Yu, it appears that Philip Yu has an exclusive sales agency agreement with
the House of Mayfair in England since 1987 to promote and procure orders for Mayfair
wall covering products from customers in the Philippines. Despite [the] said exclusive
sales agency agreement, Yu’s dealer, Unisia Merchandising Co., Inc., engaged in a
sinister scheme of importing the same goods, in concert with the FNF Trading in West
Germany, and misleading the House of Mayfair into believing that the wallpaper products
ordered via said trading German firm were intended for shipment to Nigeria, although they
were actually shipped to and sold in the Philippines.

In the case at bar, [respondent], who is a registered locator doing business at the Parkson
Duty Free Shop within the [CSEZ] administered by the Clark Development Corporation,
was not a dealer of [petitioner] nor was there any business dealing or transaction at all
between [petitioner] and [respondent]. In fact, it was established in evidence, through the
testimony of Adrian Phillimore, [petitioner]’s very own witness, that respondent was
already selling imported Castrol GTX products even prior to the execution of the Variation
to Marketing and Distribution Agreement dated 23 July 1998 between [petitioner] and
Castrol Limited, a corporation established under the laws of England.

Further, [petitioner] failed to show that [respondent’s] duty free importation of said Castrol
GTX products which were sold at its Parkson Duty Free Shop was a sinister scheme
employed by [respondent] in order to by-pass [petitioner].

Thirdly, in Yu, the House of Mayfair of England, in its correspondence to FNF Trading of
West Germany, even took the cudgels for Philip Yu in seeking compensation for the
latter’s loss as a consequence of the scheme of the dealer Unisia Merchandising Co., Inc.,
in concert with FNF Trading.

In the case at bar, [petitioner] did not allege in its Complaint nor prove who the supplier of
[respondent] was with respect to said Castrol GTX products sold in Parkson Duty Free
Shop. There is no showing that [respondent] sought Castrol Limited of England in order to
procure Castrol GTX products for retailing inside the duty free shop of [respondent] within
the Clark Special Economic Zone, with the intention of violating the purported exclusive
marketing and distributorship agreement between [petitioner] and Castrol Limited of
England. Neither do We find any showing that Castrol Limited of England took up the
cudgels for [petitioner], by corresponding with [respondent], in connection with the latter’s
retailing of Castrol GTX products with red caps in its duty free shop at the Clark Special
Economic Zone.

Fourthly, in Yu, the House of Mayfair in England was duped into believing that the goods
ordered through FNF Trading of West Germany were to be shipped to Nigeria only, but
the goods were actually sent to and sold in the Philippines. Considering this circumstance,
the Supreme Court stated that "(a) ploy of this character is akin to the scenario of a third
person who induces a party to renege on or violate his undertaking under a contract,
thereby entitling the other contracting party to relief therefrom (Article 1314, New Civil
Code)."

In the instance case, there is no evidence that any party was duped and that [respondent],
who is not a privy to the marketing and distribution agreement between [petitioner] and
Castrol Limited of England, employed any sinister scheme or ploy at all. We do not find
any showing of a scenario whereby [respondent] induced any party to renege or violate its
undertaking under said agreement, thereby entitling [petitioner] to injunctive relief and
damages. Thus, [petitioner’s] insistence that [respondent’s] obligation to [petitioner] does
not arise from contract, but from law, which protects parties to a contract from the wrongful
interference of strangers, does not have any factual or legal basis.
xxxx

Considering the foregoing findings, [petitioner] is not entitled to a permanent injunction

and damages. [Petitioner] failed to establish the existence of a clear legal right to be
protected and the acts of [respondent] which are violative of said right. In the absence of
any actual, existing, clear legal right to be protected, injunction does not lie and
consequently, there is no ground for the award of damages as claimed by [petitioner].

In any event, We take note, at this juncture, that [respondent] is a registered locator
operating the Parkson Duty Free Shop within the confines of the Clark Special Economic
Zone. In said duty free operation, goods sold within the duty free shops are imported duty
free and also resold as such.

Section 1 of Executive Order No. 250, as amended, provides:

SECTION 1. Allowable Areas for Duty Free Shop Operation. - The moratorium on the
establishment of duty free stores/outlets imposed by E.O. No. 140 is hereby lifted.
Accordingly, duty free stores/outlets, whether operated by the government and/or private
entities, may be established within the country’s international ports of entry subject to the
terms and conditions set forth in E.O. No. 46, as amended, and in the secured and
fenced-in areas of special economic zones/freeports pursuant to the provisions of the
Bases Conversion and Development Act of 1992 (RA 7227), establishing the Subic
Special Economic Zone/Freeport Zone, Clark Special Economic Zone, John Hay Special
Economic Zone, Poro Point Special Economic and Freeport Zone; RA 7922 (Establishing
the Sta. Ana, Cagayan Special Economic Zone and Freeport); RA 7903 (Creating the
Zamboanga City Special Economic Zone and Freeport).

xxxx

WHEREFORE, premises considered, the appeal is DENIED for lack of merit. The
Decision dated 15 December 2002 of the Regional Trial Court of Angeles City, Branch 57
in Civil Case No. 9301 is AFFIRMED.

Costs against [petitioner].

25

Petitioner moved for reconsideration but the same was denied for lack of merit. 26

Hence, this petition.

Petitioner reiterates that it is entitled to have its proprietary rights under the agreements
protected by an injunction. It argues that the fact that respondent was operating inside the
CSEZ was inconsequential since the agreements specifically covered the whole
Philippines, including duty-free zones pursuant to the agreements. Moreover, petitioner
claims that the Court of Appeals erred in affirming the RTC ruling that the Yu case does
not apply. Thus, respondent’s continued unauthorized, illegal and illegitimate sale of
Castrol GTX motor oil has caused petitioner to suffer damages to its goodwill and
business reputation and resulted to losses in business opportunities.

Respondent, for its part, argues that the case should be dismissed for lack of merit. It
contends that it is not a party to the agreements and as such, under Article 1311 of the
27

Civil Code, it cannot be bound to the contract. It also argues that the Yu case is
inapplicable here since, unlike in that case, unfair competition as defined under Article 28 28

of the Civil Code is not present in the case now before us.

The facts of this case and the allegations of the parties raise the question of whether
petitioner is entitled to injunction against third-persons on the basis of its marketing and
distribution agreements.

The petition is without merit.

We agree with the Court of Appeals that the Yu case is inapplicable to the present case.
To reiterate and as pointed out by the Court of Appeals, aside from the Yu case being
issued during the pendency of the main action for injunction, the Court made the following
observation:

Another circumstance which respondent court overlooked was petitioner’s suggestion,

which was not disputed by herein private respondent in its comment, that the House of
Mayfair in England was duped into believing that the goods ordered through the FNF
Trading were to be shipped to Nigeria only, but the goods were actually sent to and sold in
the Philippines. A ploy of this character is akin to the scenario of a third person who
induces a party to renege on or violate his undertaking under a contract, thereby
entitling the other contracting party to relief therefrom (Article 1314, New Civil
Code). The breach caused by private respondent was even aggravated by the
consequent diversion of trade from the business of petitioner to that of private respondent
caused by the latter’s species of unfair competition as demonstrated no less by the sales
effected inspite of this Court’s restraining order. This brings Us to the irreparable mischief
which respondent court misappreciated when it refused to grant the relief simply because
of the observation that petitioner can be fully compensated for the damage. x x x. 29

(Emphasis supplied.)

This badge of "irreparable mischief" as observed by the Court caused the Yu case to be
remanded for the issuance of a preliminary injunction.

In contrast, the present case deals with the main action for injunction. In Bacolod City
Water District v. Labayen, we have discussed the nature of an action for injunction, to wit:
30

Injunction is a judicial writ, process or proceeding whereby a party is ordered to do or

refrain from doing a certain act. It may be the main action or merely a provisional remedy
for and as an incident in the main action.

The main action for injunction is distinct from the provisional or ancillary remedy of
preliminary injunction which cannot exist except only as part or an incident of an
independent action or proceeding. As a matter of course, in an action for injunction, the
1âwphi1

auxiliary remedy of preliminary injunction, whether prohibitory or mandatory, may issue.

Under the law, the main action for injunction seeks a judgment embodying a final
injunction which is distinct from, and should not be confused with, the provisional remedy
of preliminary injunction, the sole object of which is to preserve the status quo until the
merits can be heard. A preliminary injunction is granted at any stage of an action or
proceeding prior to the judgment or final order. It persists until it is dissolved or until the
termination of the action without the court issuing a final injunction. (Emphasis supplied,
citations omitted.)
In the present case, neither the RTC nor the Court of Appeals found any nefarious
scheme by respondent to induce either party to circumvent, renege on or violate its
undertaking under the marketing and distribution agreements. We note that no allegation
was made on the authenticity of the Castrol GTX products sold by respondent. Thus,
there is nothing in this case that shows a ploy of the character described in the Yu case,
so this is clearly distinguishable from that case.

As we have already stated, the writ of injunction would issue:

Upon the satisfaction of two requisites, namely: (1) the existence of a right to be protected;
and (2) acts which are violative of said right. In the absence of a clear legal right, the
issuance of the injunctive relief constitutes grave abuse of discretion. Injunction is not
designed to protect contingent or future rights. Where the complainant’s right is doubtful or
disputed, injunction is not proper. The possibility of irreparable damage without proof of
actual existing right is not a ground for an injunction.
31

Respondent not being able to prove and establish the existence of a clear and actual right
that ought to be protected, injunction cannot issue as a matter of course. Consequently,
the Court does not find any ground for the award of damages.

WHEREFORE, the petition is DENIED. The Court of Appeal Decision in CA-G.R. CV No. ?
is hereby AFFIRMED.

Costs against petitioner.

SO ORDERED.

G.R. No. 190795 July 6, 2011

NATIONAL ASSOCIATION OF ELECTRICIY CONSUMERS FOR REFORMS, INC.

(NASECORE), represented by PETRONILO ILAGAN; FEDERATION OF VILLAGE
ASSOCIATIONS (FOVA), represented by SIEFRIEDO VELOSO; and FEDERATION
OF LAS PIÑAS VILLAGE (FOLVA), represented by BONIFACIO DAZO,Petitioners,
vs.
ENERGY REGULATORY COMMISSION (ERC) and MANILA ELECTRIC COMPANY,
INC. (MERALCO),Respondents.

DECISION

SERENO, J.:

The Energy Regulatory Commission (ERC), created under the Electric Power Industry
Reform Act of 2001(EPIRA),1used to apply the Return on Rate Base (RORB) method to
determine the proper amount a distribution utility (DU) may charge for the services it
provides. The RORB scheme had been the method for computing allowable electricity
charges in the Philippines for decades, before the onset of the EPIRA. Section 43(f) of the
EPIRA allows the ERC to shift from the RORB methodology to alternative forms of
internationally accepted rate-setting methodology, subject to multiple conditions.2 The
ERC, through a series of resolutions, adopted the Performance-Based Regulation (PBR)
method to set the allowable rates DUs may charge their customers.3 Meralco, a DU,
applied for an increase of its distribution rate under the PBR scheme docketed as ERC
Case No. 2009-057 RC (MAP2010 case) on 7 August 2009. Petitioners NASECORE,
FOLVA, FOVA, and Engineer Robert F. Mallillin (Mallillin) all filed their own Petitions for
Intervention to oppose the application of Meralco.4

At the initial hearing, on 6 October 2009, the following entered their appearances: (1)
Meralco, (2) Mallillin, and (3) FOVA. Petitioners NASECORE and FOLVA failed to appear
despite due notice.5

Meralco presented its first witness on 13 November 2009. At the date of hearing, FOLVA
failed to appear despite due notice.6 Likewise, on 19 November 2009, the continuation of
Meralco’s presentation of its witness, petitioners NASECORE, FOVA, and FOLVA all
failed to appear despite due notice.7 NASECORE had sent a letter requesting that it be
excused from the said hearing, but reserved its right to cross-examine the witness
presented by Meralco. The latter objected to this request by virtue of the ERC’s Rules of
Practice and Procedure. ERC ruled that the absence of NASECORE and FOVA was
deemed a waiver of their right to cross-examine Meralco’s first witness.8

At the 26 November 2009 hearing, NASECORE and FOLVA again failed to attend the
hearing despite due notice. Upon motion by Meralco, ERC declared that NASECORE had
waived its right to cross-examine the second witness of Meralco for failure to attend the
said hearing. ERC then gave Meralco five (5) days from said date of hearing within which
to file its Formal Offer of Evidence. FOVA and all the other Intervenors were, likewise,
given ten (10) days from receipt thereof to file their comments thereon and fifteen (15)
days from said date of hearing to file their position papers or Memoranda.9

On 1 December 2009, Meralco filed its Formal Offer of Evidence with compliance. On 7
December 2009, it was directed by ERC to submit additional documents to facilitate the
evaluation of its application.

Petitioner NASECORE claims that it was only on 8 December 2009, that it received
Meralco’s Formal Offer of Evidence, together with a copy of the 7 December 2009 ERC
Order. Thus, it believes that it has until 18 December 2009 to file its comment thereon.

On 10 December 2009, Petitioner NASECORE filed with ERC a Manifestation with Motion
dated 9 December 2009 requesting that the ERC direct applicant Meralco to furnish
intervenor NASECORE all the items in ERC’s directive/Order dated 7 December 2009; to
furnish Intervenor NASECORE a copy of the Records of the Proceedings of the hearings
held on 19 and 26 November 2009; and to grant the same intervenor fifteen (15) days,
from receipt of applicant’s compliance with the ERC’s Order dated 7 December 2009,
within which to file its comment to applicant’s Formal Offer of Evidence.

On 14 December 2009,10 Meralco’s application in the MAP2010 case was approved by ERC.
Petitioner NASECORE protests this claiming approval as premature, that there were still
four days before the expiration of the period given to it to file its opposition to the formal
offer of evidence of Meralco, and before petitioner NASECORE received its copy of the
documents Meralco was required to additionally submit in the 7 December 2009 ERC
Order.

A day after the aforementioned Decision, or on 15 December 2009, petitioner

NASECORE allegedly received the additional documents Meralco submitted in
compliance with the ERC’s 7 December 2009 Order.
Malillin filed his Motion for Reconsideration (MR) before the ERC.11 Instead of filing their
own motions for reconsideration, petitioners came directly to this Court via a Petition for
Certiorari under Rule 65 of the Rules of Court with an Urgent Prayer for the Issuance of a
Temporary Restraining Order (TRO) or Status Quo Order.

Allegations in the Instant Petition; Meralco’s and ERC’s Comments

Petitioners’ main assertion is that the ERC Decision approving the MAP 2010 application of
Meralco is null and void for having been issued in violation of their right to due process of
law.12 They further ask this Court to stay the execution of the aforementioned Decision for
being void, to wit:

As already shown earlier, the assailed ERC Decision is a patent nullity due to lack of due
process of law. Thus, being a void decision, it can not (sic) be the source of any right on
the part of MERALCO to collect additional charges from their customers. Invariably, the
4.3 million customers of MERALCO has (sic) no obligation whatsoever to pay additional
distribution charges to MERALCO. To implement such void ERC decision, is plainly
oppressive, confiscatory, and unjust.13

On 26 January 2010, Meralco filed its Comment to the instant Petition. Meralco contends
that the said Petition should be denied due course or dismissed for the following reasons:

1. Petitioners have availed of an improper remedy;14

2. Petitioners have failed to observe the proper hierarchy of courts;15

3. Petitioners were amply afforded the right to participate in the proceedings and have
thus been afforded sufficient opportunity to be heard;16 and

4. Meralco has already voluntarily suspended the implementation of the approved

MAP2010 rates rendering the issues raised in this Petition moot.17

Meralco furthermore opposes petitioners’ prayer for the issuance of a TRO or Status quo
order. It argues that petitioners failed to present an "urgent and paramount necessity" for
the issuance of the writ considering that Meralco already voluntarily suspended the
implementation of the assailed Decision pending resolution of Mallillin’s MR. In fact, on 1
February 2010, ERC issued an Order suspending the implementation of the 14 December
2009 Decision pending the resolution of Mallillin’s MR.

On 27 August 2010, ERC filed its Comment. The ERC argued that a Petition for Certiorari
under Rule 65 is not the proper remedy in the case at bar; that there was no denial of
petitioners’ right to procedural due process; and that its 10 March 2010 order has
rendered the instant petition moot. In this Order, the ERC granted the MR of Mallillin and
directed the implementation of the therein reflected revised distribution rates.

New Allegations in the Reply and Meralco’s Comment Thereon

On 8 April 2010, petitioners filed their Reply to Meralco’s Comment. In their Reply,
petitioners, for the first time, put forward the following arguments:

(1) Meralco, from 2003-2008, has been earning more than the 12% rate of recovery
considered by law as just and reasonable.
Petitioners newly argue that the ERC erred in approving Meralco’s application for
increasing its charges in spite of the validation by the Commission on Audit (COA),
through a report, of a computation showing Meralco’s income as exceeding the 12%
mandated by law. Petitioners conclude thus:

In view of the COA Audit Report (x x x), the position of the herein petitioners were
validated, i.e., that Meralco’s rate increase of P0.0865/KWh granted in 2003 was not only
unnecessary but also unreasonable, hence MERALCO should not only be ordered to roll
back its rate but also to refund its excess revenues to consumers.

(2) Questionable rate-setting methodology adopted by ERC.

According to petitioners, this Court ordered the ERC to consider the 2003 increase it
granted to Meralco as provisional until it has taken action on the COA Audit Report but
that ERC disregarded this order because of its adamant position that the PBR rate fixing
methodology is the "be-all-and-end-all" of its rate fixing function while sacrificing the
interests of millions of consumers.18

They argue that it is not the validity of the rate setting methodology employed but the
reasonableness of the rates to be applied that ought to be the controlling factor in
determining the rates that a public utility should be allowed to implement.19

Thus, the ERC should not limit itself with the use of the PBR method if it would result in
unreasonable rates. Rather, the ERC should have the authority to employ any method so
long as the result was reasonable to both consumer and investor. In effect, petitioners are
asking this court to adopt the end result doctrine, which was pronounced by the U.S.
Supreme Court in National Power Commission v. Hope Natural Gas Co.20 and cited in the
concurring opinion of former Chief Justice Fred Ruiz Castro in Republic v. Medina.21

Petitioners contend that the use of the PBR method results in disadvantage to the public,
viz:

In fine, MERALCO succeeded in wangling from the ERC through an internationally

accepted rate-setting methodology (i.e, Performance Based Rate [PBR]) a rate that will
not only guarantee that its operations shall remain viable but a rate that will give it
astronomical profits at the expense of the consuming public whom it is obligated to serve.

A table showing that the common stockholders of Meralco, for the last 21 years, had
earned 424% on their actual investment, per year, was also presented by petitioners.
Petitioners conclude that these numbers negate any argument that Meralco needs a rate
increase, irrespective of any under rate methodology applied.22

The Issue of the Validity of the PBR was not Squarely Raised in this Petition; the Sole
Issue is the Denial of Due Process

We have ruled that "issues not previously ventilated cannot be raised for the first time on
appeal, much less when first proposed in the reply to the comment on the petition for
review."23 To allow petitioners to blindside Meralco with such newly raised issues violates
the latter’s due process rights. Having been raised for the first time, this Court cannot rule
on the issues regarding the unreasonableness of Meralco’s rates and the validity of the
choice of the PBR method. If petitioners wanted to include these issues for resolution, the
proper procedure was for them to ask this Court to allow them to amend their Petition for
the inclusion of the aforementioned issues. Thus, we rule that the sole issue for resolution
in this case is whether or not petitioners’ right to due process of law was violated when the
ERC issued its Order before the expiration of the period granted to petitioners to file their
comment.

There Has Been No Denial of Due Process, at most only an Irregularity in the Precipitate
Issuance of the Assailed Decision, which Irregularity ERC has Sought to Remedy

In Cooperative Devt. Authority v. Dolefil Agrarian Reform Beneficiaries Coop., Inc. et

al.,24 it was held that the appellate court violated the therein petitioners’ right to be heard
when it rendered judgment against them without allowing them to file their comment or
opposition.

In the case at bar, petitioners were required to file their comment on the formal offer of
evidence of Meralco. However, the ERC rendered its Decision prior to the lapse of the
period granted to petitioners. According to petitioners, ERC’s failure to accord them a
reasonable opportunity to present their oppositions or comments on the application of
Meralco clearly denied them due process of law. The ERC committed grave abuse of
discretion when it deprived them of their opportunity to be heard.

This prompted Petitioners to file the present Petition on 20 January 2010.

This Court is of the Opinion that considering the facts in this case, including all the events
that occurred both prior to and subsequent to the issuance of the 14 December 2010
Decision, the ERC did not deprive petitioners of their right to be heard.

Petitioners claim that that they were not given a chance to submit their evidence or
memorandum in support of their position that Meralco had been charging rates that were
beyond the 12% reasonable rate of return established in jurisprudence.25 The records
show, however, that they had been given notice to attend all the hearings conducted by
the ERC, but that they voluntarily failed to appear in or attend those hearings.

Furthermore, after the issuance of the assailed Order, Mallillin filed an MR before
petitioners filed their Petition in this Court. On 25 January 2010, the ERC issued an Order
directing Petitioners NASECORE, FOLVA, and FOVA to file their respective comments on
Mallillin’s MR. Petitioners were given a period of ten days from receipt of the order, to file
their comments. The ERC also scheduled the hearing on the said MR on 5 February
2010.

On 26 January 2010, Meralco filed a Manifestation and Motion wherein it expressed its
decision to voluntarily suspend the implementation of the 14 December 2009 Decision
pending the ERC’s resolution of Mallillin’s MR.

Instead of filing their comments, petitioners NASECORE and FOVA, through separate
letters respectively dated 28 January 2010 and 31 January 2010, sought to excuse
themselves from participating in the proceedings before the ERC on the ground that they
have already filed the present Petition.

On 1 February 2010, the ERC issued an Order suspending the implementation of the
herein questioned 14 December 2010 Decision pending the resolution of the MR.
During the 5 February 2010 hearing, only Meralco appeared. Neither petitioners nor
Mallillin participated in the proceedings.

On 10 March 2010, ERC issued an Order granting the MR with modification, the
dispositive portion of which reads:

WHEREFORE, the foregoing premises considered, the "Motion for Reconsideration" filed
by Engr. Robert F. Mallillin is hereby GRANTED WITH MODIFICATION. Accordingly,
MERALCO is hereby directed to implement the revised distribution rates, excluding all
rate distortions, as shown in the foregoing table. Consequently, the Order dated February
1, 2010 issued by the Commission granting the deferment of the implementation of the
Decision dated December 14, 2009 pending final resolution of Engr. Mallillin’s motions is
hereby LIFTED.

SO ORDERED.26

Where opportunity to be heard either through oral arguments or through pleadings is

granted, there is no denial of due process. It must not be overlooked that prior to the
issuance of the assailed Decision, petitioners were given several opportunities to attend
the hearings and to present all their pleadings and evidence in the MAP 2010 case.
Petitioners voluntarily failed to appear in most of those hearings.

Although it is true that the ERC erred in prematurely issuing its Decision, its subsequent
act of ordering petitioners to file their comments on Mallillin’s MR cured this defect. We
have held that any defect in the observance of due process requirements is cured by the
filing of a MR.27 Thus, denial of due process cannot be invoked by a party who has had the
opportunity to be heard on his MR.28 Even though petitioners never filed a MR, the fact
that they were still given notice of Mallillin’s filing of a MR and the opportunity to file their
comments thereto makes immaterial ERC’s failure to admit their comment in the
MAP2010 case. After all, petitioners’ allegations in their unfiled comment could have still,
easily and just as effectively, been raised in the MAP2010 case by incorporating the
arguments in the comment to be filed in the MR case. It must be remembered that the
standard of due process impressed upon administrative tribunals allows a certain degree
of latitude as long as fairness is not ignored.29

The opportunity granted by the ERC of, technically, allowing petitioners to finally be able
to file their comment in the case, resolves the procedural irregularity previously inflicted
upon petitioners.

We find that there has been no denial of due process and that any irregularity in the
premature issuance of the assailed Decision has been remedied by the ERC through its
Order which gave petitioners the right to participate in the hearing of the MR filed by
Mallillin.

Petitioners have Chosen the Wrong Remedy and the Wrong Forum; the Real Motive for
Bringing Petition was to Obtain an indefinite TRO, this the Court cannot Countenance 1awphil

Section 1, Rule 23 of the ERC’S Rules of Procedure expressly provides for the remedy of
filing a motion for reconsideration, viz:

A party adversely affected by a final order, resolution, or decision of the Commission

rendered in an adjudicative proceeding may, within fifteen (15) days from receipt of a copy
thereof, file a motion for reconsideration. In its motion, the movant may also request for
reopening of the proceeding for the purpose of taking additional evidence in accordance
with Section 17 of Rule 18. No more than one motion for reconsideration by each party
shall be entertained.

Rule 65 of the Rules of Civil Procedure provides that a petition for certiorari may be filed
when "there is no appeal, nor any plain, speedy, and adequate remedy in the ordinary
course of law". The "plain" and "adequate remedy" referred to in Rule 65 is a motion for
reconsideration of the assailed decision.30 Thus, it is a well-settled rule that the filing of a
motion for reconsideration is a condition sine qua non before the filing of a special civil
action for certiorari.31 The purpose of this rule is to give the lower court the opportunity to
correct itself.32 However, this requirement is not an ironclad rule. The prior filing of a
motion for reconsideration may be dispensed with if petitioners are able to show a
concrete, compelling, and valid reason for doing so.33 The Court may brush aside the
procedural barrier and take cognizance of the petition if it raises an issue of paramount
importance and constitutional significance.34 Thus:

True, we had, on certain occasions, entertained direct recourse to this Court as an

exception to the rule on hierarchy of courts. In those exceptional cases, however, we
recognized an exception because it was dictated by public welfare and the advancement
of public policy, or demanded by the broader interest of justice, or the orders complained
of were found to be patent nullities, or the appeal was considered as clearly an
inappropriate remedy.35

Petitioners claim that they did not file any motion for reconsideration with the ERC "in
order to prevent the imminent miscarriage of justice, that the issue involves the principles
of social justice, that the Decision sought to be set aside is a patent nullity and that the
need for relief therefore is extremely urgent"36; because they believe that the same would
be a futile exercise considering that the ERC had blatantly disregarded the Supreme
Court directive to consider the last increase of Meralco as provisional until ERC has taken
action on the COA Audit Report;37 and because "an appeal would be slow, inadequate,
and insufficient."38

They also claim that the direct resort to the Supreme Court resorted to by them is in order
"to timely prevent a grave injustice to the 4.3 million customers of Meralco who stand to
suffer by reason of a patently void decision by ERC which would result in additional
monthly billing of at least half a billion pesos";39 because "time is of the essence"; and
because "transcendental constitutional issues" are involved in this case.40

Petitioners further argue that their decision to go directly to this Court is justified "because
of the number of consumers affected by the said Decision; because the amount involved
in the controversy is so huge (P605.25 million [plus 12% VAT] additional billing per month);
because it is violative of the provisions of EPIRA; because it is contrary to the
constitutional provisions on social justice, and because it is in utter disregard of the COA
Audit Report".41

We do not uphold petitioners’ arguments on this matter.

In Cervantes v. CA,42 this Court ruled:

It must be emphasized that a writ of certiorari is a prerogative writ, never demandable as a

matter of right, never issued except in the exercise of judicial discretion. Hence, he who
seeks a writ of certiorari must apply for it only in the manner and strictly in accordance with
the provisions of the law and the Rules. Petitioner may not arrogate to himself the
determination of whether a motion for reconsideration is necessary or not. To dispense
with the requirement of filing a motion for reconsideration, petitioner must show a concrete,
compelling, and valid reason for doing so, which petitioner failed to do. Thus, the Court of
Appeals correctly dismissed the petition.

The general statements used by Petitioner to excuse their direct recourse to this Court are
not the "concrete, compelling, and valid reasons" required by jurisprudence to justify their
failure to comply with the mandated procedural requirements. In addition to this, the
"urgency" of the resolution of matters raised by petitioners is negated, by the fact that
rates approved by the ERC, in the exercise of its rate-fixing powers, are in a sense,
inherently only provisional.

Furthermore, this Court finds that the real motive behind the filing of the present Petition is
to obtain an indefinite TRO and this, the Court cannot countenance. Section 9, Rule 58 of
the Rules of Court provides the rules for permanent injunctions, to wit:

Sec. 9. When final injunction granted.

If after the trial of the action it appears that the applicant is entitled to have the act or acts
complained of permanently enjoined, the court shall grant a final injunction perpetually
restraining the party or person enjoined from the commission or continuance of the act or
acts or confirming the preliminary mandatory injunction.

Petitioners assert that this Court should issue a TRO because of the huge amount that
would unduly burden the consumers with the continued application of the MAP2010 rates.
According to petitioners, "if not stayed, the present financial hardships of 4.3 million
MERALCO customers due to the global financial meltdown and the recent calamities in
the country will surely further worsen." Petitioners also claim that there is an extreme
urgency to secure a TRO, considering that the assailed Decision is immediately
executory.

The purpose of a TRO is to prevent a threatened wrong and to protect the property or
rights involved from further injury, until the issues can be determined after a hearing on
the merits.43 Under Section 5, Rule 58 of the 1997 Rules of Civil Procedure, a TRO may
be issued only if it appears from the facts shown by affidavits or by a verified application
that great or irreparable injury would be incurred by an applicant before the writ of
preliminary injunction could be heard.

If such irreparable injury would result from the non-issuance of the requested writ or if the
"extreme urgency" referred to by petitioners indeed exists, then they should have been
more vigilant in protecting their rights. As they have all been duly notified of the
proceedings in the ERC case, they should have appeared before the ERC and
participated in the trials.

We find that petitioners erred in thinking that the non-issuance of the TRO they requested
would put consumers in danger of suffering an "irreparable injury". But this asserted injury
can be repaired, because, had petitioners participated in the proceedings before the ERC
and the latter had found merit in their appeal, the undue increase in electric bills shall be
refunded to the consumers. 1avvp hi1
All the other issues raised by petitioners in connection with the MAP2010 case are factual in
nature and should be raised before the ERC not before this Court. Allegations and issues
in connection with the rate increases under ERC Case No. 2008-018- RC and ERC Case
No. 2008-004-RC, including the question of whether Meralco improperly exceeded the
12% maximum rate of return provided by law, are more properly to be disposed of in
another pending case, G.R. No. 191150.44

Before finally disposing of this case, we deem it proper to warn the ERC that it cannot give
a deadline to parties before it that it will not respect. Even though the ERC, as an
administrative agency, is not bound by the rigidity of certain procedural requirements, it is
still bound by law and practice to observe the fundamental and essential requirements of
due process in justiciable cases presented before it.

WHEREFORE, the instant petition is hereby DISMISSED.

SO ORDERED.

G.R. No. 159101 July 27, 2011

SPS. GONZALO T. DELA ROSA & CRISTETA DELA ROSA, Petitioners,

vs.
HEIRS OF JUAN VALDEZ and SPOUSES POTENCIANO MALVAR AND LOURDES
MALVAR, Respondents.

DECISION

LEONARDO-DE CASTRO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court with Prayer
for Temporary Restraining Order and/or a Writ of Preliminary Injunction assailing the
Decision1 dated June 10, 2003 and Resolution2 dated July 24, 2003 of the Court of
Appeals in CA-G.R. SP No. 76081. The Court of Appeals found that Judge Felix S.
Caballes of the Regional Trial Court (RTC), Branch 71 of Antipolo City, did not commit
grave abuse of discretion in issuing the Orders dated December 16, 20023 and February
28, 20034 in Civil Case No. 00-6015, which granted the issuance of a writ of preliminary
mandatory injunction, placing spouses Juan5 and Apolinaria Valdez (spouses Valdez) and
spouses Potenciano and Lourdes Malvar (spouses Malvar) in possession of Lot 4,
Psd-76374, located in Barrio Sta. Cruz, Antipolo City, Rizal, with an area of 103 hectares
(subject property).

The instant Petition traces its roots to a Complaint for Quieting of Title and Declaration of
Nullity of Transfer Certificates of Title6 involving the subject property, filed before the RTC
by Manila Construction Development Corporation of the Philippines (MCDC), against
Gonzalo and Cristeta dela Rosa (spouses Dela Rosa) and Juan, Jose, Pedro and Maria,
all surnamed De la Cruz, docketed as Civil Case No. 00-6015. Complaints-in-intervention
were filed in the said case by (1) North East Property Ventures, Inc. (NEPVI),7 and (2)
spouses Valdez and spouses Malvar.8 The spouses Malvar were the grantees/assignees
under a Deed of Absolute Transfer/Conveyance9 over the subject property executed by
the spouses Dela Rosa on September 6, 2001.
The RTC took note of the following facts in its Order dated December 16, 2002:

In its complaint, plaintiff MCDC in substance states that: thru its President, Honor P.
Moslares, the subject property consisting an area of 103 hectares was acquired by virtue
of the Deed of Absolute Sale executed on January 16, 1996. It is further stated that Juan
Valdez and Apolinaria Valdez were awarded with Sales Patent after compliance with
corresponding requirements. Plaintiff MCDC and its predecessor-in-interest Juan Valdez
have been in continuous, adverse and open possession of the property in the concept of
owners.

However, plaintiff MCDC has been unlawfully deprived of the possession and enjoyment
of the property because of the continuing acts of dispossession committed and
perpetuated by the defendants spouses Gonzales and Cristeta dela Rosa as well as the
other defendants and other occupants who have no property right at all. As a result
plaintiff [MCDC] has suffered and continues to suffer grave and irreparable damages and
injuries; thus, the writ of preliminary injunction is urgently necessary to prevent further acts
of dispossession of plaintiff MCDC.

While in the Complaint-in-intervention of Intervenor North East Property Ventures, Inc. it is

substantially alleged that: It claims to be the co-owner to the extent of one half or fifty
percent (50%) of the subject parcel of land according to a Deed of Absolute
Conveyance/Transfer for valuable services to be rendered; and for the amounts to be
advanced by intervenor corporation needed to update the real estate taxes; and to clear
the title of Juan Valdez from overlapping titles from the adverse claim of the interlopers;
and the removal of the defendants and other occupants from the disputed property.
Intervenor North East Property Ventures, Inc. sought for the relief to be placed in
possession of the property by the process of the writ of mandatory injunction.

Whereas, in the subsequent complaint-in-intervention, intervenors Valdez spouses state

that they are the absolute owners of the subject parcel of land being the vendees/grantees
of Sales Patent No. 38713 dated September 5, 1983 which was preceded by Sales
Application dated July 21, 1968 and Order of Sales Patent No. (IV-1) 13442 issued on
August 31, 1983, and paid under official receipt No. 6010195. On the other hand,
intervenors Malvar spouses allege that they are the grantees/assignees under the Deed
of Absolute Transfer/Conveyance executed on September 6, 2001 by the intervenors
spouses Valdez.

Indubitably, the pleadings reveal admitted and uncontroverted facts, to wit:

1. The subject matter of this case is a parcel of land located at Barrio Sta. Cruz, Antipolo
City consisting of one hundred three (103) hectares, more or less;

2. Defendants dela Rosa spouses and Intervenors Valdez spouses have been in
possession of the said parcel of land in question;

3. Several portions of the disputed property have been occupied by the other unknown
defendants and numerous occupants;

4. Certification dated April 11, 2002 certified that Transfer Certificate of Title No. 541423-A
was not recorded in the Registry of Deeds, Marikina City;
5. Certification dated April 12, 2002 certified that Transfer Certificate of Title No. 541423-A
was not recorded in the Registry of Deeds, Antipolo City.

To dovetail the uncontroverted or admitted facts and the evidence presented, this Court
has found that:

On the side of plaintiff MCDC:

1. MCDC’s right or claim on the disputed parcel of land is based on Sales Patent No.
38713 issued in the name of plaintiff-intervenor Juan Valdez;

2. The price or consideration stipulated in the Deed of Absolute Sale dated January 16,
1996 covering the realty was not paid; thus, the sale is simulated according to the
handwritten letter dated April 5, 2002 of plaintiff MCDC and according to the Joint Venture
Agreement;

3. The terms and conditions of the Joint Venture Agreement were not complied with as
shown by the very allegations in paragraphs 12, 14 and 15 by the plaintiff [MCDC] in its
complaint against defendant Dela Rosa spouses.

On the part of defendants Dela Rosa spouses:

1. Defendants Dela Rosa have been in the physical possession of the substantial portions
of the questioned property;

2. They base their claim of possession and ownership: Firstly, on the Titulo de Propriedad
No. 4136 that was previously nullified in the Intestate Estate of Don Mariano San Pedro y
Esteban vs. Court of Appeals reported in Volume 265 Supreme Court Reports Annotated
page 733; Secondly, Transfer Certificate of Title No. 451423-A in the name of defendant
Cristeta dela Rosa shows on its face the following:

a. June 16, 1934 was certified the date of original registration; while, the dates of survey of
the subject land were on July 14-25, 1969 and the approval was on June 30, 1971;

b. The technical description of the disputed property Lot 4 of the plaintiff [MCDC] in the
Sales Patent No. 38713 was copied and manipulated in TCT No. 451423-A to be as Lots
4-A and 4-B;

3. TCT No. 451423-A was not recorded in the Registry of Deeds of Marikina according to
the certification dated April 11, 2002 and was not recorded in the Registry of Deeds of
Antipolo City per certification dated April 12, 2002.

On the side of plaintiff-intervenor North East Property Ventures, Inc.:

1. Deed of Absolute Transfer/Conveyance executed on 3rd September 1999 by the

plaintiffs-intervenors Juan Valdez and Apolinaria Valdez;

2. Special Power of Attorney dated also 3rd September 1999;

3. Complaint-in-Intervention failed to attach any document showing accomplishment of

any of the terms and conditions of the transfer/conveyance.
On the part of plaintiff-intervenor spouses Juan Valdez and Apolinaria Valdez and
plaintiff-intervenor spouses Potenciano Malvar and Lourdes Malvar:

1. Sales Application No. (IV-1) 1344-2 dated July 21, 1968 filed by plaintiff-intervenor Juan
Valdez;

2. Official Receipt No. 6030195 dated April 26, 1983, payor Juan Valdez covering Lot 4;

3. Order: Issuance of Patent dated August 31, 1983 signed and issued on 05 September
1983;

4. Sales Patent No. 38713 issued on September 05, 1983;

5. Transmittal Letter dated December 3, 1993 of Sales Patent No. 38713 to the Registry of
Deeds, Marikina, Rizal, for registration and issuance of certificate of title;

6. 1st Indorsement dated August 1, 1994 issued by the Land Registration Authority;

7. December 5, 1990 Official communication by Land Management Bureau signed by

Director Abelardo Palad, Jr. relating to 1st Indorment of Land Registration Authority (LRA)
clarifying the existence of Sales Patent No. 38713 issued in the name of Juan Valdez for
Lot 4, Psd-76374;

8. August 15, 1994 Reply of Artemio B. Cana, Acting Register of Deeds, Marikina City to
the 1st Indorsement dated August 1, 1994 of the Land Registration Authority;

9. Letter of Official Inquiry dated November 21, 1994 by the Hon. Estanislao U. Valdez on
the request for assistance of Intervenor Juan Valdez on Sales Patent No. 37813;

10. Letter dated August 1, 1994 of Juan Valdez to the Register of Deeds, Marikina City,
requesting for registration of Sales Patent No. 37813;

11. Plan Psd-76374 of Lot 4 covered by Sales Patent No. 37813;

12. Deed of Absolute Transfer/Conveyance dated 06 September 2001 executed by

Intervenors Juan Valdez and Apolinaria Valdez in favor of Intervenor Potenciano Malvar
family corporation, Noel Rubber Development Corporation;

13. Deeds of Absolute Sale dated 06 September 2001 selling 150,000 or 15 hectares of
Lot 4 covered by Sales Patent.

Noticeably, plaintiff MCDC; Intervenor North East Property Ventures, Inc. and Intervenor
Valdez spouses and Malvar spouses under separate applications have commonly prayed
for the relief of mandatory injunction; although plaintiff MCDC initially sought for the relief
of preventive injunction; however, all the prayers for reliefs of mandatory injunction have
conjoined against defendants dela Rosa spouses and the other occupants of Lot 4, the
land in controversy.10 (Citations omitted.)

The RTC had to determine: (1) whether or not it should issue a writ of preliminary
mandatory injunction in Civil Case No. 00-6015, directing that a party or parties be placed
in possession of the subject property; and (2) in whose favor should such writ be issued.
In its Order dated December 16, 2002, the RTC granted the joint prayer for the issuance
of a writ of preliminary mandatory injunction of the spouses Valdez and spouses Malvar,
decreeing thus:

WHEREFORE, premises considered, this Court orders the issuance of the Writ of
Preliminary Mandatory Injunction to place Intervenor Spouses Juan Valdez and Apolinaria
Valdez and the Intervenor Spouses Potenciano Malvar and Lourdes Malvar in the
possession of the subject parcel of land Lot 4 covered by Sales Patent No. 38713 dated
September 5, 1983 in the name of Juan Valdez upon posting the bond in the amount of
₱1,000,000.00 subject to the approval of the Court which shall answer for damages that
defendant may suffer if it is found that said intervenors are not entitled thereto.11

The spouses Dela Rosa filed a Motion for Reconsideration of the aforementioned Order,
but it was denied by the RTC in another Order12 dated February 28, 2003. According to
the RTC, the issues and evidence presented by the spouses Dela Rosa in their Motion for
Reconsideration merely re-hashed those already thoroughly discussed in the Order dated
December 16, 2002, thus, there was no valid reason to alter, modify, or reverse said
order.

Aggrieved, the spouses Dela Rosa filed a Petition for Certiorari before the Court of
Appeals, which was docketed as CA-G.R. SP No. 76081. The spouses Dela Rosa prayed
that the Orders dated December 16, 2002 and February 28, 2003 be annulled for having
been issued by RTC Judge Caballes with grave abuse of discretion and that the
enforcement of the same orders be enjoined.

On June 10, 2003, the Court of Appeals rendered its Decision dismissing the spouses
Dela Rosa’s Petition for Certiorari and, thus, upholding the RTC Orders dated December
16, 2002 and February 28, 2003. The appellate court agreed with the RTC that there are
ample justifications for the issuance of the writ of preliminary mandatory injunction in favor
of the spouses Valdez and spouses Malvar. The dispositive portion of the Court of
Appeals judgment states that "WHEREFORE, the petition is DISMISSED. Respondent
judge is DIRECTED to try the case on the merits with reasonable dispatch."13

On July 1, 2003, the spouses Dela Rosa filed a Motion for Reconsideration of the
foregoing Decision, however, it was denied for lack of merit by the Court of Appeals in its
Resolution dated July 24, 2003.

The spouses Dela Rosa now comes before this Court via the instant Petition for Review
with prayer for the issuance of a temporary restraining order (TRO) and/or writ of
preliminary injunction.

In a Resolution14 dated October 8, 2003, the Court issued a TRO enjoining the Court of
Appeals, the RTC, and the spouses Valdez and spouses Malvar, and their agents,
representatives, and anyone acting on their behalf, from implementing and enforcing the
Decision dated June 10, 2003 and Resolution dated July 24, 2003 of the Court of Appeals
in CA-G.R. SP No. 76081. The Court also required the spouses Dela Rosa to post a bond
in the amount of ₱500,000.00 in cash or surety to answer for all damages which the
spouses Valdez and spouses Malvar might sustain by reason of the TRO if the Court
should finally decide that the spouses Dela Rosa were not entitled thereto.

The spouses Valdez and spouses Malvar filed several motions to lift the TRO, but these
were all denied by the Court,15 hence, the TRO remained effective and binding.
The spouses Dela Rosa made the following assignment of errors in the Petition at bar:

The Honorable Court of Appeals committed a grave and reversible error in affirming the
order of the regional trial court, branch 71, Antipolo city ordering the issuance of a writ of a
preliminary mandatory injunction in favor of the private respondents spouses Valdez and
spouses Malvar in order to take away from the petitioners the possession of the land in
question and to place the private respondents in possession thereof.

II

The Honorable Court of Appeals erred in appreciating the exhibits relied upon by the
respondent judge in issuing the writ of preliminary mandatory injunction which are fake,
falsified, spurious, and non-existent.

III

The Honorable Court of Appeals committed a grave and reversible error in sustaining the
issuance of a writ of preliminary mandatory injunction which apparently and glaringly
amounted to a prejudgment of the case notwithstanding the fact that no trial on the merits
has as yet been started.

IV

The Honorable Court of Appeals also seriously erred when it deliberately ignored the
arguments raised in the motion for reconsideration despite its own admission that it
cannot pass upon the factual findings of the respondent judge.16

Essentially, the Court must resolve herein the issue of whether or not the Court of Appeals
erred in dismissing the spouses Dela Rosa’s Petition for Certiorari which, in turn, is
dependent on the question of whether or not the RTC committed grave abuse of
discretion, amounting to lack or excess of jurisdiction, in issuing a writ of preliminary
mandatory injunction, which placed the spouses Valdez and spouses Malvar in
possession of the subject property during the pendency of Civil Case No. 00-6015. For
this reason, the Court shall address and concern itself only with the assailed writ, but not
with the merits of the case pending before the RTC. A preliminary injunction is merely a
provisional remedy, adjunct to the main case and subject to the latter's outcome. It is not a
cause of action in itself.17

A preliminary injunction is an order granted at any stage of an action or proceeding prior to

the judgment or final order. It may be: (1) a prohibitory injunction, which commands a
party to refrain from doing a particular act; or (2) a mandatory injunction, which commands
the performance of some positive act to correct a wrong in the past.18

Section 3, Rule 58 of the Revised Rules of Court, enumerates the grounds for the
issuance of a writ of preliminary injunction, whether prohibitive or mandatory:

SEC. 3. Grounds for issuance of preliminary injunction. — A preliminary injunction may be

granted when it is established:
(a) That the applicant is entitled to the relief demanded, and the whole or part of such
relief consists in restraining the commission or continuance of the act or acts complained
of, or in requiring the performance of an act or acts, either for a limited period or
perpetually;

(b) That the commission, continuance or non-performance of the act or acts complained of
during the litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or
is procuring or suffering to be done, some act or acts probably in violation of the rights of
the applicant respecting the subject of the action or proceeding, and tending to render the
judgment ineffectual.

A preliminary mandatory injunction is more cautiously regarded than a mere prohibitive

injunction since, more than its function of preserving the status quo between the parties, it
also commands the performance of an act. Accordingly, the issuance of a writ of
preliminary mandatory injunction is justified only in a clear case, free from doubt or dispute.
When the complainant's right is doubtful or disputed, he does not have a clear legal right
and, therefore, the issuance of a writ of preliminary mandatory injunction is improper.
While it is not required that the right claimed by applicant, as basis for seeking injunctive
relief, be conclusively established, it is still necessary to show, at least tentatively, that the
right exists and is not vitiated by any substantial challenge or contradiction.19

Sine dubio, the grant or denial of a writ of preliminary injunction in a pending case, rests
on the sound discretion of the court taking cognizance of the case since the assessment
and evaluation of evidence towards that end involve findings of facts left to the said court
for its conclusive determination. Hence, the exercise of judicial discretion by a court in
injunctive matters must not be interfered with except when there is grave abuse of
discretion. Grave abuse of discretion in the issuance of writs of preliminary injunction
implies a capricious and whimsical exercise of judgment that is equivalent to lack of
jurisdiction, or where the power is exercised in an arbitrary or despotic manner by reason
of passion, prejudice or personal aversion amounting 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.20

In the instant Petition, the Court finds that the RTC did not commit grave abuse of
discretion in issuing the writ of preliminary mandatory injunction in favor of the spouses
Valdez and spouses Malvar. Consequently, the Court of Appeals did not commit any
reversible error in dismissing the spouses Dela Rosa’s Petition for Certiorari.

A scrutiny of the RTC Orders dated December 16, 2002 and February 28, 2003 easily
reveals that these were based on substantial evidence and pertinent jurisprudence.

In its Order dated December 16, 2002, the RTC thoroughly discussed its factual and legal
bases for granting the challenged writ in favor of the spouses Valdez and spouses Malvar:

This Court honestly believes, after in-depth evaluation of the material and relevant
averments in the pleadings, annexes thereto, and documents formally offered and
admitted, and the established and unconverted facts, that the joint application for
mandatory injunction of the Intervenors Valdez spouses and Malvar spouses is
meritorious.
Firstly, because neither the plaintiff MCDC nor the intervenor North East Property
Ventures, Inc. has shown by credible facts to underwrite the clear legal right to be entitled
to the relief of injunction since their proprietary right or rights of dominion under their
respective muniments of title were subject to conditions which were not complied with
correspondingly.

Notably, the Joint Venture Agreement (Annex I, Complaint-in-Intervention of Intervenor

Valdez) has qualified the Deed of Absolute Sale (Exhibit "B") since both deeds involved
the same parties covering the same disputed parcel of land; hence, both deeds are to be
interpreted jointly and to be harmonized (Philippine National Construction Corporation vs.
Mars Construction Enterprises, Inc., 323 SCRA 624).

Secondly, consequentially because the parties primarily and ultimately affected by the
continuing and manifold acts of dispossession are the intervenors, the spouses Juan
Valdez and Apolinaria Valdez and the Malvar spouses, who evidently by the facts and
circumstances borne out by the pleadings and by the evidence, have already shown to
have established clear legal rights to be entitled to the relief of writ of mandatory injunction
under the salutary ruling that enunciates:

"x x x In Visayan Realty, Inc. vs. Meer[,] we ruled that the approval of a sales application
merely authorized the applicant to take possession of the land so that he could comply
with the requirements prescribed by law before a final patent could be issued in his favor.
Meanwhile, the government still remained the owner thereof, as in fact the application
could still be cancelled and the land awarded to another applicant should it be shown that
the legal requirements had not been complied with. What divests the government of title to
the land is the issuance of the sales patent and its subsequent registration with the
Register of Deeds. x x x" (Development Bank of the Philippines vs. Court of Appeals, 253
SCRA 414, 419-420) Underlining supplied.

Other considerations why the relief of preliminary mandatory injunction precludes the
preventive injunction are: the acts of dispossession have become manifold and have
perpetuated with impunity by the defendants and those whose occupancies were derived
from them and the degree of violations of the rights of the plaintiffs-intervenors Valdez and
Malvar has reached the extremes on one hand; and the other the undisputed fact that the
supposed title of ownership of defendant dela Rosas, has been certified to be
non-existent (Annexes B and C, Reply to Opposition to Motion to Conduct Hearing etc.)
by the concerned Registry of Deeds while the Titulo de Propriedad No. 4136 where
defendants dela Rosa’s right to occupy was fatuously derived was nullified in the case of
the Intestate Estate of Don Mariano San Pedro y Esteban vs. Court of Appeals, 265
SCRA 733.

The situations as established relative to the preliminary mandatory injunction in this case
is clearly within the ambit of the exceptional or extreme urgency cases of: "x x x WHERE
the right to the possession, during the pendency of the main case, of the property involved
is very clear; WHERE considerations of relative inconvenience bear strongly in favor of
the complainant seeking the possession pendente lite; WHERE there was willful and
unlawful invasion of plaintiff’s rights, over his protest and remonstrance, the injury being a
continuing one; WHERE the effect of the preliminary mandatory injunction is to
re-establish and maintain a pre-existing and continuing relationship between the parties,
recently and arbitrarily interrupted by the defendant, rather than to establish a new
relationship during the pendency of the principal case x x x" authoritatively mentioned in
G.R. No. 104782 prom. March 30, 1993, entitled Nelly Raspado vs. Court of Appeals, 220
SCRA 650, 653.
Measured by the parameters of judicial discretion specified in the immediate proceeding
paragraph, the grant of preliminary writ of mandatory injunction to place in possession of
the property in question intervenors Valdez Spouses including Intervenors Malvar
Spouses would be justified and consistent with the ruling that:

"In effect, petitioner’s occupation of the land in question, after the denial of its application
for Miscellaneous Sales Patent, became subsequently illegal. Petitioner’s members have,
as a consequence, become squatters whose continuous possession of the land may now
be considered to be in bad faith. This is unfortunate because squatters acquire no legal
right over the land they are occupying.

Although as a general rule, a court should not by means of a preliminary injunction,

transfer property in litigation from the possession of one party to another, this rule admits
of some exceptions. For example, when there is a clear finding of ownership and
possession of the land or unless the subject property is covered by a torrens title pointing
to one of the parties as the undisputed owner. In the case at bench, the land subject of the
suit is covered by a torrens title under the name of NHA." (Cagayan de Oro City Landless
Residents Asso. Inc. vs. Court of Appeals, 254 SCRA 220, 232-233).

This aforecited ruling is squarely applicable in this case because, as previously shown,
the intervenors Valdez and Malvar have established a clear and legal right of ownership
and possession and the alleged TCT No. 451423-A of the defendants spouses dela Rosa
is non-existent.

Nevertheless, the existence in the land records of the Bureau of Lands now the Land
Management Bureau of the Sales Patent (Exhibit "F") the recording in the Map of the
Cadastral module of the Lungsod Silangan of the subject property in the name of Juan
Valdez are sufficient actual "caveat emptor" to defendants dela Rosa and their privies,
[assignees] or [transferees]. Thus, actual notice of the Sales Patent No. 38713 (Exhibit "F")
has a binding [effect] on defendants dela Rosa and those whose rights were derived from
them.21

Instead of summarily dismissing the spouses Dela Rosa’s Motion for Reconsideration of
the Order dated December 16, 2002, the RTC still extensively addressed in its Order
dated February 28, 2003 each of the issues raised by the spouses Dela Rosa in their
motion, to wit:

With respect to the issue of absence of clear legal right on the part of the intervenors
Valdez spouses and Malvar spouses, the Court believes that the pieces of documentary
evidence detailed in the order sought to be reconsidered are overwhelming. While the
thrust of defendant spouses’ motion on the falsity or non-existence of the Sales Patent No.
37813 (Exhibit "F") is predicated on the letter dated October 2, 1994 of Abelardo Palad, Jr.,
Director of Lands Management Bureau, however, the Court believes that the same bears
no evidentiary value or credence, simply because it is unsigned and without any
certification or authentication. Besides, the letter merely certifies that "the alleged Sales
Patent No. 38713 x x x does not appear to have been recorded or entered in the Sales
Patent Registry Book."

This Court perforce gave credence and probative value to the December 5, 1990 Official
Communication (Exhibit "H") of Land Management Bureau, signed by Director Abelardo
Palad, Jr. stating in no uncertain terms that:
"x x x In connection therewith, please be informed that a perusal to our official records
show that Sales Patent No. 37813 was issued by this Office in the name of Juan Valdez
for Lot 4, Psd-76374, situated in Sta. Cruz, Antipolo, Rizal, covering an area of 1,033,760
square meters on September 5, 1983."

relative to the 1st Indorsement (Exhibit "G") of the Land Registration Authority (LRA)
clarifying the existence of Sales Patent No. 38713 (Exhibit "F") issued in the name of
Intervenor Juan Valdez for Lot 4, Psd-763774.

What is predominantly telling is the fact of payment under Official Receipt No. 6030195
(Exhibit "E") dated April 26, 1983 received by the then Bureau of Lands as due
consideration by Intervenor Valdez for the purchase of the subject parcel of land.

As regards the issue of non-violation of Intervenors’ rights by defendants dela Rosas on

the ground that a clear legal right has not been established, it would be too repetitious for
the Court to re-state what had been thoroughly and previously discussed in the assailed
order like the other re-hashed issues raised in the instant motion. The falsity of
defendants’ claim as to the non-existence of Sales Patent No. 38713 under the name of
Intervenor Juan Valdez has also been shown and explained by documents on record and
therefore should need no further elucidation.

Nevertheless, to clear the minds of any air of doubt, the transmittal of the Letter (Annex Q,
Complaint-in-Intervention) dated December 3, 1993 of the Sales Patent No. 38713
(Exhibit "F") issued to Intervenor Valdez to the Registry of Deeds precisely states that:

"We are forwarding to you the above-noted patent for registration and issuance of the
corresponding certificate of title.

Please notify the patentee as soon as the owner’s duplicate certificate of title is ready for
release."

as well as the August 15, 1994 Letter Reply (Exhibit "I") of Artemio Cana, Acting Registry
of Deeds stating that:

"In compliance and to comment your first Indorsement of August 1, 1994 relative to the
Sales Patent No. 38713 issued by the Bureau of Lands on September 5, 1983 in the
name of Juan O. Valdez, which patent is sought to be registered, I have the honor, very
respectfully, to inform your good office that Original Certification of title issued pursuant to
Sales, Free and Homestead Patents, by procedural standards followed in this office, are
personally delivered by DENR, PENRO Officials to this office, afterwhich, registration is
effected upon representation of its owners." (Underlining for emphasis.)

And the letter dated August 1, 1994 (Exhibit "K") are indicia of efforts to have the Sales
Patent No. 38713 (Exhibit "F") registered and those efforts, having been entered in the
day book of Registry of Deeds of Marikina, as well as in the Land Registration Authority, is
a constructive notice of the registration of sales patent to bind the defendants, their
representatives, attorneys and privies as they have been bound by actual notice when
defendants dela Rosa spouses claimed as theirs and caused to have Lot 4, PSD-76374
technically described under Sales Patent No. 38713 (Exhibit "F") to be subdivided into Lot
4-A, Lot 4-B and Lot 4-C to be supplanted as the property described in defendants’
Transfer Certificate of Title No. 451423-A. Defendants’ certificate of title therefore is the
proverbial "skeleton hidden in the closet".
On the other hand, defendants-spouses dela Rosas’ assertions against the certifications
on the non-existence of their TCT No. 451423-A by the Registry of Deeds of Marikina City
and the Registry of Deeds of Antipolo City, by citing LRC Case No. ’94-1492 pending also
before this Court only logically highlights or underscores the falsity of their Transfer
Certificate of Title No. 451423-A. Defendants’ dilemma is aggravated or compounded by
the revelation in the technical description of their Transfer Certificate of Title No. 451423-A
that Lot 4, Psd-76374 of Intervenors’ Sales Patent No. 38713 (Exhibit "F") as pointed out
in the preceding paragraph, was supplanted therein. Likewise, the date of survey July
14-25, 1969 of the subject property Lot 4-Psd-76374 and the date of approval June 30,
1971 was also copied from Intervenors’ Sales Patent No. 38713.

With reference to the issue as to the non-existence of extreme urgencies or necessity of

the writ of preliminary mandatory injunction; this Court has culled from the records that
long before or in 1993 the filing of an ejectment case (Civil Case No. 2107, Branch II, MTC,
Antipolo City) defendants dela Rosa had already intruded into the portions of the land in
controvery (Decision dated April 22, 1993, Annex "D" of the complaint of MCDC).

The indiscriminate disposition by defendants either by lease or sale of right has caused
and continued to cause grave and irreparable material damages and moral injuries to the
Intervenors. And because of the questionable and conflicting documents, the Deed of
Absolute Sale executed on July 28, 1976 in their favor covering the notorious Titulo de
Propriedad No. 4136 that was nullified in the Intestate Estate of Don Mariano San Pedro y
Esteban vs. Court of Appeals, 265 SCRA 733 and because of the doubtful TCT No.
451423-A allegedly issued on 10 July 1974, the defendants were able to sell rights to
occupy other portions of the subject property, while other syndicated groups were
emboldened to sell also rights of occupancy, thus conflicts of rights have become
inevitable resulting to the breakdown of peace and order in the communities.

Again it must be stressed that as a general rule a parcel of land in dispute cannot be taken
from one party and given to another by an injunctive writ. But that is not absolute or
without exception. The exception to the general rule is when there is a clear finding of
ownership of the land in litigation, as in this case. And the Court honestly believes that the
grant of the questioned writ to the herein intervenors falls within the exceptional cases
(Nely Raspado vs. Court of Appeals, 220 SCRA 650, 653; Cagayan de Oro Landless
Residents Asso., Inc. vs. Court of Appeals, 254 SCRA 232) for reasons previously
discussed. Further the grant of the writ of preliminary mandatory injunction is
merely pendente lite, and the intervenors have already filed a bond as required by the
Court, in the amount of ONE MILLION PESOS (₱1,000,000.00) for defendants’ protection,
if it is found that intervenors are not entitled thereto.22

Evidently, there are ample justifications for the grant by the RTC of a writ that places the
subject property in the possession of the spouses Valdez and spouses Malvar for the
duration of the trial of Civil Case No. 00-6015. Sales Patent No. 38713, covering the
subject property, had already been issued to Juan Valdez which makes him, at the very
least, the equitable owner of the said property. There is already a request for the
registration of Sales Patent No. 38713 pending before the Registry of Deeds of Marikina
City. The spouses Valdez acknowledge the transfer of the subject property to the spouses
Malvar. In contrast, the title of the spouses Dela Rosa to the subject property is nebulous.
The spouses Dela Rosa’s title is based on TCT No. 451423-A in Cristeta dela Rosa’s
name, which is not registered with the Registry of Deeds of Marikina City or Antipolo City.
TCT No. 451423-A is also traced back to Titulo de Propriedad No. 4136, which, in the
Intestate Estate of the late Don Mariano San Pedro y Esteban v. Court of Appeals,23 was
already declared null and void, and from which no rights could be derived.
There is no reason for the Court to deviate from the foregoing findings of the RTC, as
affirmed by the Court of Appeals. It is worth stressing that the assessment and evaluation
1avvphi1

of evidence in the issuance of the writ of preliminary injunction involves findings of facts
ordinarily left to the trial court for its conclusive determination. The Court has time and
again ruled that conclusions and findings of fact of the trial court are entitled to great
weight and should not be disturbed on appeal, unless strong and cogent reasons dictate
otherwise. This is because the trial court is in a better position to examine the real
evidence, as well as to observe the demeanor of the witnesses while testifying in the
case.24

There is likewise no merit in the spouses Dela Rosa’s contention that the RTC Orders
dated December 16, 2002 and February 28, 2003 amounted to a prejudgment of the case,
there being no trial on the merits of Civil Case No. 00-6015 as yet. In Levi Strauss (Phils.)
Inc. v. Vogue Traders Clothing Company,25 the Court already explicated that:

Indeed, a writ of preliminary injunction is generally based solely on initial and incomplete
evidence adduced by the applicant (herein petitioner). The evidence submitted during the
hearing of the incident is not conclusive, for only a "sampling" is needed to give the trial
court an idea of the justification for its issuance pending the decision of the case on the
merits. As such, the findings of fact and opinion of a court when issuing the writ of
preliminary injunction are interlocutory in nature. Moreover, the sole object of a
preliminary injunction is to preserve the status quo until the merits of the case can be
heard. Since Section 4 of Rule 58 of the Rules of Civil Procedure gives the trial courts
sufficient discretion to evaluate the conflicting claims in an application for a provisional writ
which often involves a factual determination, the appellate courts generally will not
interfere in the absence of manifest abuse of such discretion. A writ of preliminary
injunction would become a prejudgment of a case only when it grants the main prayer in
the complaint or responsive pleading, so much so that there is nothing left for the trial
court to try except merely incidental matters. x x x.26

The RTC Orders dated December 16, 2002 and February 28, 2003 have settled nothing
more than the question of which party/parties is/are entitled to possession of the subject
property while Civil Case No. 00-6015 is still being heard. The findings of fact and opinion
of the RTC, based on the evidence that had so far been submitted by the parties, are
merely interlocutory in nature. Even with its issuance of said Orders, the RTC is not
precluded from proceeding with Civil Case No. 00-6015 to receive additional evidence
and hear further arguments that will help said trial court to determine with finality the
rightful owner/s and possessor/s of the subject property.

WHEREFORE, the Petition is DENIED. The Decision dated June 10, 2003 and Resolution
dated July 24, 2003 of the Court of Appeals in CA-G.R. SP No. 76081 are AFFIRMED.
Furthermore, the TRO issued by the Court in its Resolution dated October 8, 2003 is lifted
and the surety bond posted by the spouses Dela Rosa is CANCELLED. The RTC, Branch
71 of Antipolo City is ordered to proceed with the hearing of Civil Case No. 00-6015 with
dispatch.

Costs against the spouses Dela Rosa.

SO ORDERED.

G.R. No. 88705 June 11, 1992

JOY MART CONSOLIDATED CORPORATION, petitioners,

vs.

HON. COURT OF APPEALS, PHOENIX OMEGA DEVELOPMENT AND

MANAGEMENT CORPORATION and LIGHT RAIL TRANSIT
AUTHORITY, respondents.

GRIÑO-AQUINO, J.:

Does a trial court possess jurisdiction to dissolve a writ of preliminary injunction which is
pending review on certiorariin the Court of Appeals?

In 1978-79, the government planned the Light Rail Transit (LRT) system to service the
transportation requirements of the commuting public from Baclaran to Balintawak
Monument and vice versa. The property of Joy Mart at Carriedo Street, Sta. Cruz, Manila,
where the Isetann Department Store is located, and three (3) other adjoining parcels of
land (with a total area of 1,611 sq. m., on which stands the Presidente Hotel leased by Joy
Mart) was among the properties that would be needed for the LRT system and were being
considered for expropriation should negotiations for their acquisition fail. As a gesture of
cooperation with the government, Joy Mart consented to sell the property and give up its
leasehold rights over the adjacent properties, provided, it would be given the first option to
redevelop the entire area denominated as the consolidated block of the LRT Carriedo
station encompassing Joy Mart's properties.

On September 8, 1982, while negotiations for the purchase of the properties were ongoing
between Joy Mart and the Special Committee on Land and Property Acquisition of the
Light Rail Transit Authority (LRTA), the latter entered into a contract with the Philippine
General Hospital Foundation Inc. which had been granted the right, authority, and license
to develop the areas adjacent to the LRT stations and to manage and operate the
concessions to be established in Caloocan, Manila, and Pasay, with the right to sublease,
assign, and transfer any of its rights and interests therein.

On February 22, 1983, Joy Mart conveyed its property and waived its leasehold rights on
the adjacent lots in favor of the government, through the LRTA, under a Deed of Absolute
Sale. The Deed provided, among other things, that "upon recommendation of the special
panel created by the LRTA Committee on Land and Property Acquisition. LRTA agreed
that Joy Mart, the owner of Isetann and lessee of the Presidente Hotel, should be given
the first option in the redevelopment of the consolidated block, notwithstanding their
compensation for the property."

As partial compliance with the aforestated first option, the PGH Foundation subleased to
Joy Mart the LRT Carriedo station covering the consolidated block for the purpose of
constructing a multi-storey building of first class materials.

Subsequently, Joy Mart submitted to LRTA its plans for the construction of the building
occupying the consolidated block. However, LRTA informed Joy Mart that the proposed
building should occupy only an area of 1,141.20 square meters as the rest of the areas
within the consolidated block would be used by the LRT station and as set-back area or
open space for the benefit of the commuting public.
When Joy Mart reminded LRTA of the contract provisions over the consolidated block, the
former was assured that, in the event any area in the consolidated block was to be
released for redevelopment, the first option of Joy Mart would be respected and
implemented.

On August 30, 1984, an Addendum to the Sublease Agreement was executed between
Joy Mart and the PGH Foundation increasing the area to be used and occupied by Joy
Mart. Aside from the increase of monthly rental and provision for an escalation clause, Joy
Mart was made to pay "goodwill" in the sum of P3.0 Million.

Pursuant to its understanding with, and the assurances of, LRTA, Joy Mart constructed an
eight-storey building with ten levels fully airconditioned in the subject area. Joy Mart had
to borrow P50.0 Million for this project. The feasibility study on the viability of this project
was conditioned upon Joy Mart serving the business requirements in the LRT Carriedo
station and maintaining its first option to redevelop and occupy any available area therein.

On November 28, 1986, LRTA entered into Commercial Stalls Concession Contract with
the Phoenix Omega Development and Management Corporation ("Phoenix" for brevity)
awarding to it all the areas and commercial spaces within the three LRT terminals and the
fifteen (15) on-line stations.

In the third quarter of 1987, Joy Mart learned of the contract between LRTA and Phoenix
when construction activities commenced within the consolidated block of the LRT
Carriedo station.

Joy Mart made representations with the LRTA and reiterated its first option to redevelop
the subject area, but to no avail.

Joy Mart filed a complaint for specific performance of contract and damages for breach of
contract with injunction against the LRTA and Phoenix on August 21, 1987. The case
entitled "Joy Mart vs. LRTA and Phoenix," was docketed as Civil Case No. 87-41731 in
the Regional Trial Court of Manila. Branch XXXII. Joy Mart asked that LRTA be ordered to
award to it, either by sale, or lease, the redevelopment of the area known as the
consolidated block of the LRT Carriedo station which is part of the area subject of the
Deed of Absolute Sale dated February 22, 1983, executed by Joy Mart in favor of the
Government or LRTA. Joy Mart also asked the court to issue a writ of preliminary
injunction and/or restraining order "commanding the respondents (LRTA and Phoenix)
individually and collectively, their officers and employees, to cease and desist from the
construction being had in the property adjacent to the leased premises."

On September 25, 1987, the trial court, presided by Judge (now Court of Appeals Justice)
Artemon D. Luna, after hearing the parties and considering their respective
memorandums in amplification of oral arguments, issued a writ of preliminary injunction
"commanding the defendant Phoenix to cease and desist from continuing with the
construction going on adjacent to the property on lease to the plaintiff by LRTA, until
further orders from this court, upon posting by the plaintiff of a P10,000.00 bond approved
by the court, which may answer for any damages that the defendants may sustain by
reason of the issuance of this writ" (p. 41. Rollo).

Phoenix sought relief in the Court of Appeals by filing a Petition for Certiorari and
Prohibition (CA-G.R. SP No. 12998) praying the appellate court: (1) to require the trial
court to immediately lift the writ of injunction and/or to refrain from further carrying out or
implementing it; and (2) after due hearing: (a) reverse and set aside the order granting the
writ of preliminary injunction; (b) dissolve the writ of injunction dated September 23, 1987;
and (c) prohibit the trial judge from taking cognizance of the case and to remand it to
Branch IX of the Regional Trial Court of Manila which had first taken cognizance of the
case. The petition was docketed as CA-G.R. SP No. 12998 and raffled to the Sixteenth
Division of the Court of Appeals which gave due course to the petition but did not issue a
restraining order against the trial court.

Meanwhile, in the trial court, the LRTA and Phoenix filed separate answers to Joy Mart's
complaint in Civil Case No. 87-41731. The pre-trial of the case was set on November 13,
1987. As Phoenix and Joy Mart were, exploring avenues for an amicable settlement, the
pre-trial conference was re-set on December 11, 1987, January 14, 1988, and lastly on
March 2, 1988 when it was declared terminated.

On May 30, 1988, while their certiorari petition to review the writ of preliminary injunction
issued by Judge Luna (CA-G.R. SP No. 12998) was still pending in the Court of Appeals,
the LRTA and Phoenix filed in the trial court a joint petition to dissolve the said Writ of
Preliminary Injunction, offering to post a counterbond for that purpose. They alleged that
the writ of preliminary injunction was causing tremendous losses to LRTA and Phoenix
because they have been unable to use the commercial stalls in the consolidated block
while Joy Mart could be compensated for any loss it may suffer if the injunction were lifted;
"that at a rate of P1,000.00 monthly rental per square meter, the 28 stalls would earn
P305,800.00 a month (tsn, idem), that since September 21, 1987 when the injunction was
issued up to the present, Phoenix should have earned P2,752.200.00 and suffered as
much in damages which it will continue to suffer if the injunction is not lifted" (p. 80. Rollo).
They pleaded that they "are as much entitled to the protection of their rights as plaintiff,
that if fair play gives the plaintiff a right to prolong the litigation, fairness also demands that
defendants be relieved of the thousands of pesos in damages that they suffer for every
day of delay in this case occasioned by the imposition of the injunction" (p. 69. Rollo).

Joy Mart opposed the petition to dissolve the injunction. The petition was heard on June
17, 1988 with the parties orally arguing their respective sides of the question.

On July 6, 1988, the trial court dissolved the writ of preliminary injunction on the ground
that its continuance would cause great damage to the respondents, while the petitioner's
claim for damages, which was yet to be proven, can be fully compensated. Joy Mart filed
a motion for reconsideration. LRTA and Phoenix opposed it. The trial court denied Joy
Mart's Motion for Reconsideration on August 9, 1988, stating thus:

The petition for dissolution is based on pertinent portion of Section 6, Rule 58 of the Rules
of Court, that the continuance of the injunction would cause great and irreparable damage
to defendants while plaintiff can be fully compensated for whatever damages that it may
suffer. The evidence adduced during the hearing of the petition for dissolution of the writ
showed that the continuance of the writ would cause great damages to defendants and
plaintiff's claim for damages, if any and which it has yet to prove, can be fully
compensated.

The order of dissolution expressed in no uncertain terms that this Court may not be
ascribed as having pre-empted the authority and jurisdiction of the Court of Appeals over
the certiorari proceedings. The authority of this Court to dissolve the writ is inferable in
Section 6, Rule 58, Rules of Court that it may dissolve the writ if it appears during the
hearing that although plaintiff is entitled to the injunction, its continuance would cause
great damage to the defendants while the plaintiff can be fully compensated for such
damages as it may suffer (Cf. Tiaoqui and Imperial vs. Horilleno, 63 Phil. 116, 120). (pp.
70-71, Rollo.)

On August 17, 1988, the Sixteenth Division of the Court of Appeals upon being apprised
by Phoenix of the trial court's action, dismissed Phoenix's petition for certiorari (CA-G.R.
SP No. 12998) for having become moot and academic.

On September 14, 1989, Joy Mart sought relief in the Court of Appeals from Judge Luna's
order lifting the writ of preliminary injunction. In its petition for certiorari with preliminary
injunction and restraining order (CA-G.R. SP No. 15618, assigned to the Ninth Division of
the Court of Appeals), Joy Mart prayed that:

. . . a temporary restraining order be forthwith issued commanding the Honorable

respondent Court to refrain from further proceeding in the matter sought to be
reviewed . . . ; (c) the application for a writ of preliminary injunction be granted restraining
respondent Phoenix from continuing its subleasing and construction activities adjacent to
the premises leased to petitioner by respondent LRTA until the main case is finally
decided; and (d) a judgment be rendered declaring the order of 6 July 1988, as well as the
order of 9 August 1988, of the Honorable respondent Court to be null and void, and
upholding the order of 21 September 1987 to be valid and binding. (pp. 39-40, Rollo.)

The Court of Appeals, Ninth Division, gave due course to the petition and required the
respondents to answer within ten (10) days from notice. The Court temporarily restrained
the respondents "from implementing the questioned orders of 6 July 1988 and 9 August
1988, and for private respondent Phoenix to refrain from engaging in subleasing and
construction activities in the questioned premises, and from implementing the sublease
contracts if already signed, or the occupancy of the commercial stalls if already
constructed, until further orders from this court" (pp. 17-18, Rollo). It set the hearing of the
application for a writ of preliminary injunction on September 29, 1988.

Despite the temporary restraining order which it received on September 19, 1988,
Phoenix continued its construction activities and allowed its tenants to occupy the finished
stalls. Whereupon Joy Mart filed a motion praying the Court of Appeals to declare Phoenix
in contempt of court.

After hearing the application for a writ of preliminary injunction, the opposition and
answers of the LRTA and Phoenix, and the memoranda of the parties, the Court of
Appeals, Ninth Division, on February 28, 1989, dismissed Joy Mart's petition.

Hence, this petition for review in which Joy Mart alleges that the Court of Appeals erred:

1. in not finding that the trial court lost jurisdiction to act on the motion to dissolve the writ
of preliminary injunction, after the said writ had been elevated to the Court of Appeals,
Sixteenth Division, for review;

2. in not finding that Phoenix is guilty of forum-shopping; and

3. in not finding Phoenix guilty of contempt, of court, and in not issuing a writ of preliminary
mandatory injunction.
These assignments of error are reducible to the lone issue of whether the trial court
continued to have control of the writ of preliminary injunction even after the same had
been raised to the Court of Appeals for review.

The answer is no. After the LRTA and Phoenix had elevated the writ of preliminary
injunction even after the same had been raised to the Court of Appeals for review.

The answer is no. After the LRTA and Phoenix had elevated the writ of preliminary
injunction to the Court of Appeals for determination of the propriety of its issuance
(CA-G.R. SP No. 12998), the trial court (notwithstanding the absence of a temporary
restraining order from the appellate court) could not interfere with or preempt the action or
decision of the Court of Appeals on the writ of preliminary injunction whose annulment
was sought therein by Phoenix and the LRTA.

In petitioning the trial court to lift the writ of preliminary injunction which they themselves
had brought up to the Court of Appeals for review, Phoenix and the LRTA engaged in
forum-shopping. After the question of whether the writ of preliminary injunction should be
annulled or continued had been elevated to the Court of Appeals for determination, the
trial court lost jurisdiction or authority to act on the same matter. By seeking from the trial
court an order lifting the writ of preliminary injunction, Phoenix and LRTA sought to divest
the Court of Appeals of its jurisdiction to review the writ. They improperly tried to moot
their own petition in the Court of Appeals — a clear case of trifling with the proceedings in
the appellate court or of disrespect for said court.

In Prudential Bank vs. Castro, 142 SCRA 223, 231 where the trial judge issued an order
changing or correcting his previous order which had been elevated to the Supreme Court
for review, the judge's actuation was deemed to be "disrespectful of this Court."

(e) Respondent Judge, in his Order of March 13, 1985, gave course to the appeal of
Complainant Bank although he had already ruled that the latter had lost the right of appeal.
That Order of March 13, 1985 was issued after Complainant Bank had instituted G.R. No.
69907 on February 19, 1985, asking that Respondent Judge be ordered to allow its
appeal from the summary judgment. The order of March 13, 1985 was clearly intended to
render G.R. No. 69907 moot and academic. Said Order was disrespectful of this Court. If
at all, Respondent Judge should have come to this Court in said G.R. No. 69907, to ask
for leave to allow the appeal of Complainant Bank with admission that he had realized that
his previous denial of the appeal was erroneous.

The actuation of Judge Luna in Civil Case No. 87-41731 can be categorized as such. It is
not excused by the fact that Phoenix and LRTA were presenting evidence of losses and
damages in support of their motion to lift the writ of preliminary injunction, for that could as
easily have been done by them in the Court of Appeals which possesses "the power to try
cases and conduct hearing, receive evidence and perform any and all acts necessary to
resolve factual issues raised in cases falling within its original and appellate jurisdiction,
including the power to grant and conduct new trials or further proceedings" (Sec. 9, par.
[3], 2nd par.. B.P. Blg. 129).

The trial judge played into the hands of Phoenix and the LRTA, and acted with grave
abuse of discretion amounting to excess of jurisdiction in granting their motion to dissolve
the writ of injunction. Judicial courtesy behooved the trial court to keep its hands off the
writ of preliminary injunction and defer to the better judgment of the Court of Appeals the
determination of whether the writ should be continued or discontinued.
The non-issuance of a temporary restraining order by the Court of Appeals upon receipt of
the petition in CA-G.R. SP No. 12998 simply meant that the trial court could proceed to
hear and decide the main complaint of Joy Mart for specific performance of contract and
damages against the LRTA and Phoenix. It did not give the lower court a license to
interfere with the appellate court's disposition of the writ of preliminary injunction.

By simply "noting" that the trial court's order lifting the writ of preliminary injunction
had mooted the case before it, the Court of Appeals displayed regrettable indifference
toward the lower court's interference with the exercise of the appellate court's jurisdiction
to decide and dispose of the petition for certiorari pending before it. Instead of being
jealous of its jurisdiction, the Appellate Court was simply glad to be rid of the case.

The Court of Appeals' reasoning that the trial court did not overlap or encroach upon its
(the Court of Appeals') jurisdiction because the trial court "was actually delving into a new
matter — the propriety of the continuance of the writ of preliminary injunction in view of
developments and circumstances occurring after the issuance of the injunction" (pp.
51-52, Rollo), is unconvincing, for the issue of the impropriety of issuing the writ of
preliminary injunction was inseparable from the issue of whether the writ should be
maintained or not. By lifting the writ of injunction before the Court of Appeals could rule on
whether or not it was properly issued, the trial court in effect preempted the Court of
Appeals' jurisdiction and flouted its authority.

The private respondents' application to the trial court for the dissolution of the writ of
preliminary injunction that was pending review in the Court of Appeals was a form of forum
shopping which this Court views with extreme disapproval. The lower court's proceeding
being void for lack of jurisdiction, the writ of preliminary injunction should be reinstated,
and the petition to annul the writ (CA-G.R. SP No. 12998) should be dismissed on the
ground of forum shopping as provided in Rule No. 17 of the Interim Rules and Guidelines,
Rules of Court.

17. Petitions for writs of certiorari, etc. — No petition for certiorari, mandamus,
prohibition, habeas corpus or quo warranto may be filed in the Intermediate Appellate
Court if another similar petition has been filed or is still pending in the Supreme Court. Nor
may such petition be filed in the Supreme Court if a similar petition has been filed or is still
pending in the Intermediate Appellate Court, unless it be to review the action taken by the
Intermediate Appellate Court on the petition filed with it. A violation of this rule shall
constitute contempt of court and shall be a cause for the summary dismissal of both
petitions, without prejudice to the taking of appropriate action against the counsel or party
concerned.

The dismissal of Phoenix and LRTA's petition in G.R. No. SP 12998 by the Court of
Appeals (Sixteenth Division) was correct, but it should be for violation of Rule 17 of the
Interim Rules and Guidelines (forum-shopping), not because the petition had become
moot and academic.

The dismissal of Joy Mart's petition for certiorari in. CA-G.R. SP No. 15618 by the Court of
Appeals (Ninth Division) is annulled and set aside for grave abuse of discretion.

WHEREFORE, the petition for review is GRANTED. The Court of Appeals' decision dated
February 28, 1989 in CA G.R. SP No. 115618, dismissing Joy Mart's petition
for certiorari and upholding the dissolution by the Regional Trial Court of Manila, Branch
32, of the preliminary writ of injunction in Civil Case No. 87-41731, is hereby annulled and
set aside and the preliminary writ of injunction issued by the trial court on September 23,
1987 in Civil Case No. 87-41731 is reinstated. However, if in the meantime the
construction and occupancy of the private respondents' commercial stalls sought to be
stopped by the injunction have been completed, the rentals received by the private
respondents after the finality of this decision shall be deposited by them, or the lessees, in
the Regional Trial Court to await the final judgment in Civil Case No. 87-41731. Costs
against the private respondents.

The Court of Appeals, Ninth Division, is ordered to hear and decide Joy Mart's petition to
declare Phoenix in contempt of court for having allegedly defied and disobeyed the
Court's temporary restraining order of September 15, 1988 in CA-G.R. SP No. 115618.

SO ORDERED.

G.R. No. 91478 February 7, 1991

ROSITA PEÑA petitioner,

vs.
THE COURT OF APPEALS, SPOUSES RISING T. YAP and CATALINA YAP,
PAMPANGA BUS CO., INC., JESUS DOMINGO, JOAQUIN BRIONES, SALVADOR
BERNARDEZ, MARCELINO ENRIQUEZ and EDGARDO A. ZABAT, respondents.

Cesar L. Villanueva for petitioner.

Martin N. Roque for private respondents.

GANCAYCO, J.:

The validity of the redemption of a foreclosed real property is the center of this
controversy.

The facts as found by the respondent court are not disputed.

A reading of the records shows that [Pampanga Bus Co.] PAMBUSCO, original owners of
the lots in question under TCT Nos. 4314, 4315 and 4316, mortgaged the same to the
Development Bank of the Philippines (DBP) on January 3, 1962 in consideration of the
amount of P935,000.00. This mortgage was foreclosed. In the foreclosure sale under Act
No. 3135 held on October 25, 1974, the said properties were awarded to Rosita Peña as
highest bidder. A certificate of sale was issued in her favor by the Senior Deputy Sheriff of
Pampanga, Edgardo A. Zabat, upon payment of the sum of P128,000.00 to the Office of
the Provincial Sheriff (Exh. 23). The certificate of sale was registered on October 29, 1974
(Exh. G).

On November 19, 1974, the board of directors of PAMBUSCO, through three (3) out of its
five (5) directors, resolved to assign its right of redemption over the aforesaid lots and
authorized one of its members, Atty. Joaquin Briones "to execute and sign a Deed of
Assignment for and in behalf of PAMBUSCO in favor of any interested party . . ." (Exh. 24).
Consequently, on March 18, 1975, Briones executed a Deed of Assignment of
PAMBUSCO's redemption right over the subject lots in favor of Marcelino Enriquez (Exh.
25). The latter then redeemed the said properties and a certificate of redemption dated
August 15, 1975 was issued in his favor by Sheriff Zabat upon payment of the sum of one
hundred forty thousand, four hundred seventy four pesos P140,474.00) to the Office of
the Provincial Sheriff of Pampanga (Exh. 26).

A day after the aforesaid certificate was issued, Enriquez executed a deed of absolute
sale of the subject properties in favor of plaintiffs-appellants, the spouses Rising T. Yap
and Catalina Lugue, for the sum of P140,000.00 (Exh. F).

On August 18, 1975, a levy on attachment in favor of Capitol Allied Trading was entered
as an additional encumbrance on TCT Nos. 4314, 4315 and 4316 and a Notice of a
pending consulta was also annotated on the same titles concerning the Allied Trading
case entitled Dante Gutierrez, et al. vs. PAMBUSCO (Civil Case No. 4310) in which the
registrability of the aforesaid lots in the name of the spouses Yap was sought to be
resolved (Exh. 20-F). The certificate of sale issued by the Sheriff in favor of defendant
Peña, the resolution of the PAMBUSCO's board of directors assigning its redemption
rights to any interested party, the deed of assignment PAMBUSCO executed in favor of
Marcelino B. Enriquez, the certificate of redemption issued by the Sheriff in favor of
Enriquez as well as the deed of absolute sale of the subject lots executed by Enriquez in
favor of the plaintiffs-appellants were all annotated on the same certificates of title likewise
on August 18, 1975. Also, on the same date, the Office of the Provincial Sheriff of San
Fernando, Pampanga informed defendant-appellee by registered mail "that the properties
under TCT Nos. 4314, 4315 and 4316 . . . . were all redeemed by Mr. Marcelino B.
Enriquez on August 15,1975 . . . ;" and that she may now get her money at the Sheriffs
Office (Exh. J and J-1).

On September 8, 1975, Peña wrote the Sheriff notifying him that the redemption was not
valid as it was made under a void deed of assignment. She then requested the recall of
the said redemption and a restraint on any registration or transaction regarding the lots in
question (Exh. 27).

On Sept. 10, 1975, the CFI Branch III, Pampanga in the aforementioned Civil Case No.
4310, entitled Dante Gutierrez, et al. vs. PAMBUSCO, et al., ordered the Register of
Deeds of Pampanga . . . to desist from registering or noting in his registry of property . . .
any of the following documents under contract, until further orders:

(a) Deed of Assignment dated March 18, 1975 executed by the defendant Pampanga Bus
Company in virtue of a resolution of its Board of Directors in favor of defendant Marcelino
Enriquez;

(b) A Certificate of Redemption issued by defendant Deputy Sheriff Edgardo Zabat in

favor of defendant Marcelino Enriquez dated August 15, 1975;

(c) Deed of Sale dated August 16, 1975 executed by defendant Marcelino Enriquez in
favor of defendant Rising Yap. (Original Record, p. 244)

On November 17, 1975, the Land Registration Commission opined under LRC Resolution
No. 1029 that "the levy on attachment in favor of Capitol Allied Trading (represented by
Dante Gutierrez) should be carried over on the new title that would be issued in the name
of Rising Yap in the event that he is able to present the owner's duplicates of the
certificates of title herein involved" (Exh. G).
Meanwhile, defendant Peña, through counsel, wrote the Sheriff asking for the execution of
a deed of final sale in her favor on the ground that "the one (1) year period of redemption
has long elapsed without any valid redemption having been exercised;" hence she "will
now refuse to receive the redemption money . . . (Exh. 28).

On Dec. 30, 1977, plaintiff Yap wrote defendant Peña asking payment of back rentals in
the amount of P42,750.00 "for the use and occupancy of the land and house located at
Sta. Lucia, San Fernando, Pampanga," and informing her of an increase in monthly rental
to P2,000; otherwise, to vacate the premises or face an eviction cum collection suit (Exh.
D).

In the meantime, the subject lots, formerly under TCT Nos. 4314, 4315 and 4316 were
registered on June 16, 1978 in the name of the spouses Yap under TCT Nos. 148983-R,
148984-R and 148985-R, with an annotation of a levy on attachment in favor of Capitol
Allied Trading. The LRC Resolution No. 1029 allowing the conditioned registration of the
subject lots in the name of the spouses Yap was also annotated on TCT No. 4315 on June
16, 1978 and the notice of a pending consulta noted thereon on August 18, 1975 was
cancelled on the same date.

No Trial on the merits was held concerning Civil Case No. 4310. In an order dated
February 17, 1983, the case was dismissed without prejudice.

Despite the foregoing, defendant-appellee Peña remained in possession of the lots in

question hence, the spouses Yap were prompted to file the instant case. 1

The antecedents of the present petition are as follows:

Plaintiffs-appellants, the spouses Rising T. Yap and Catalina Lugue, are the registered
owners of the lots in question under Transfer Certificate of Title (TCT) Nos. 148983-R,
148984-R, 148985-R. In the complaint filed on December 15, 1978, appellants sought to
recover possession over the subject lands from defendants Rosita Peña and Washington
Distillery on the ground that being registered owners, they have to enforce their right to
possession against defendants who have been allegedly in unlawful possession thereof
since October 1974 "when the previous owners assigned (their) right to collect rentals . . .
in favor of plaintiffs" (Record, p. 5). The amount claimed as damages is pegged on the
total amount of unpaid rentals from October 1974 (as taken from the allegations in the
complaint) up to December 1978 at a monthly rate of P1,500.00 'and the further sum of
P2,000.00 a month from January 1979 until the defendants finally vacate the . . . premises
in question with interest at the legal rate (Record, p. 61).

In their answer, defendants Rosita Peña and Washington Distillery denied the material
allegations of the complaint and by way of an affirmative and special defense asserted
that Peña is now the legitimate owner of the subject lands for having purchased the same
in a foreclosure proceeding instituted by the DBP . . . against PAMBUSCO . . . and no
valid redemption having been effected within the period provided by law. It was contended
that plaintiffs could not have acquired ownership over the subject properties under a deed
of absolute sale executed in their favor by one Marcelino B. Enriquez who likewise could
not have become [the] owner of the properties in question by redeeming the same on
August 18, 1975 (Exh. 26) under an alleged[ly] void deed of assignment executed in his
favor on March 18, 1975 by the original owners of the land in question, the PAMBUSCO.
The defense was that since the deed of assignment executed by PAMBUSCO in favor of
Enriquez was void ab initio for being an ultra vires act of its board of directors and, for
being without any valuable consideration, it could not have had any legal effect; hence, all
the acts which flowed from it and all the rights and obligations which derived from the
aforesaid void deed are likewise void and without any legal effect.

Further, it was alleged in the same Answer that plaintiffs are buyers in bad faith because
they have caused the titles of the subject properties with the Register of Deeds to be
issued in their names despite an order from the then CFI, Br. III, Pampanga in Civil Case
No. 4310, entitled Dante Gutierrez, et al. vs. Pampanga Bus Company, Inc., et al., to
desist from registering or noting in his registry of property . . . any of the above-mentioned
documents under contest, until further orders. (Record, p. 11).

For its part, defendant Washington Distillery stated that it has never occupied the subject
lots hence they should not have been impleaded in the complaint.

The defendants, therefore, prayed that the complaint be dismissed; that the deed of
assignment executed in favor of Marcelino Enriquez, the certificate of redemption issued
by the Provincial Sheriff also in favor of Marcelino Enriquez, and the deed of sale of these
parcels of land executed by Marcelino Enriquez in favor of the plaintiffs herein be all
declared null and void; and further, that TCT Nos. 148983-R, 148984-R and 148985-R,
covering these parcels issued in the plaintiffs name be cancelled and, in lieu thereof,
corresponding certificates of title over these same parcels be issued in the name of
defendant Rosita Peña.

Thereafter, the defendants with prior leave of court filed a third-party complaint third-party
defendants PAMBUSCO, Jesus Domingo, Joaquin Briones, Salvador Bernardez (as
members of the Board of Directors of PAMBUSCO), Marcelino Enriquez, and Deputy
Sheriff Edgardo Zabat of Pampanga. All these third-party defendants, how ever, were
declared as in default for failure to file their answer, except Edgardo Zabat who did file his
answer but failed to appear at the pre-trial.

After trial, a decision was rendered by the court in favor of the defendants-appellees, to
wit:

WHEREFORE, and in view of all the foregoing, judgment is hereby rendered dismissing
the complaint filed by the plaintiffs against the defendants and declaring as null and void
the following:

(a) The resolution of the Board of Directors of PAMBUSCO approved on November 19,
1974 assigning the PAMBUSCO's right of redemption concerning the parcels involved
herein

(b) The deed of assignment dated March 18, 1975 executed in favor of Marcelino
Enriquez pursuant to the resolution referred to in the preceding paragraph;

(c) The certificate of redemption dated August 15, 1975 issued by Deputy Sheriff Edgardo
Zabat in favor of Marcelino Enriquez concerning these parcels;

(d) The deed of absolute sale dated August 15, 1975 executed by Marcelino Enriquez in
favor of the plaintiffs concerning the same parcels and

(e) TCT Nos. 148983-R, 148984-R and 148985-R of the Register of Deeds of Pampanga
in the name of the plaintiffs also covering these parcels.
Third-party defendant Edgardo Zabat, in his capacity as Deputy Sheriff of Pampanga is
directed to execute in favor of defendant Rosita Peña the corresponding certificate of final
sale involving the parcels bought by her in the auction sale of October 25, 1974 for which
a certificate of sale had been issued to her.

Finally, the third-party defendants herein except Deputy Sheriff Edgardo Zabat are hereby
ordered to pay the defendants/third party plaintiffs, jointly and severally, the amount of
P10,000.00 as attorney's fees plus costs. 2

Thus, an appeal from said judgment of the trial court was interposed by private
respondents to the Court of Appeals wherein in due course a decision was rendered on
June 20, 1989, the dispositive part of which reads as follows:

WHEREFORE, premises considered, the judgment of the trial court on appeal is

REVERSED. Defendant-appellee Peña is hereby ordered to vacate the lands in question
and pay the plaintiffs-appellants the accrued rentals from October, 1974 in the amount of
P1,500.00 per month up to December, 1978 and the amount of P2,000.00 per month
thereafter, until appellee finally vacate (sic) the premises with interest at the legal rate.

SO ORDERED. 3

A motion for reconsideration filed by the appellee was denied in a resolution dated
December 27, 1989.

Hence, this petition for review on certiorari of said decision and resolution of the appellate
court predicated on the following assigned errors:

First Assignment of Error

THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT THE TRIAL

COURT HAD NO JURISDICTION TO RULE ON THE VALIDITY OF THE QUESTIONED
RESOLUTION AND TRANSFERS.

Second Assignment of Error

THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER

HAS NO LEGAL STANDING TO ASSAIL THE VALIDITY OF THE QUESTIONED
RESOLUTION AND THE SERIES OF SUCCEEDING TRANSACTIONS LEADING TO
THE REGISTRATION OF THE SUBJECT PROPERTIES IN FAVOR OF THE
RESPONDENTS YAP.

Third Assignment of Error

THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT THE

RESOLUTION OF RESPONDENT PAMBUSCO, ADOPTED ON 19 NOVEMBER 1974,
ASSIGNING ITS RIGHT OF REDEMPTION IS NOT VOID OR AT THE VERY LEAST
LEGALLY DEFECTIVE.

Fourth Assignment of Error

THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT THE DEED OF
ASSIGNMENT, DATED 8 MARCH 1975, IN FAVOR OF RESPONDENT ENRIQUEZ IS
NOT VOID OR AT THE VERY LEAST VOIDABLE OR RESCISSIBLE.

Fifth Assignment of Error

THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT THE

QUESTIONED DEED OF ASSIGNMENT, DATED 8 MARCH 1975, WAS VOID AB
INITIO FOR FAILING TO COMPLY WITH THE FORMALITIES MANDATORILY
REQUIRED UNDER THE LAW FOR DONATIONS.

Sixth Assignment of Error

THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT

RESPONDENTS YAP ARE PURCHASERS IN GOOD FAITH AND IN FURTHER
HOLDING THAT IT WAS TOO LATE FOR PETITIONER TO INTERPOSE THE ISSUE
THAT RESPONDENTS YAP WERE PURCHASERS IN BAD FAITH.

Seventh Assignment of Error

THE RESPONDENT COURT OF APPEALS ERRED IN REVERSING THE DECISION

OF THE TRIAL COURT. 4

The petition is impressed with merit.

First, the preliminary issues.

The respondent court ruled that the trial court has no jurisdiction to annul the board
resolution as the matter falls within the jurisdiction of the Securities and Exchange
Commission (SEC) and that petitioner did not have the proper standing to have the same
declared null and void.

In Philex Mining Corporation vs. Reyes, 5

this Court held that it is the fact of relationship between the parties that determines the
proper and exclusive jurisdiction of the SEC to hear and decide intra-corporate disputes;
that unless the controversy has arisen between and among stockholders of the
corporation, or between the stockholders and the officers of the corporation, then the case
is not within the jurisdiction of the SEC. Where the issue involves a party who is neither a
stockholder or officer of the corporation, the same is not within the jurisdiction of the SEC.

In Union Glass & Container Corporation vs. Securities and Exchange Commission, this 6

Court defined the relationships which are covered within "intra-corporate disputes" under
Presidential Decree No. 902-A, as amended, as follows:

Otherwise stated, in order that the SEC can take cognizance of a case, the controversy
must pertain to any of the following relationships (a) between the corporation, partnership
or association and the public; (b) between the corporation, partnership or association and
its stockholders, partners, members, or officers; (c) between the corporation, partnership
or association and the state in so far as its franchise, permit or license to operate is
concerned; and (d) among the stockholders, partners or associates themselves.
In this case, neither petitioner nor respondents Yap spouses are stockholders or officers
of PAMBUSCO. Consequently, the issue of the validity of the series of transactions
resulting in the subject properties being registered in the names of respondents Yap may
be resolved only by the regular courts.

Respondent court held that petitioner being a stranger to the questioned resolution and
series of succeeding transactions has no legal standing to question their validity.

In Teves vs. People's Homesite and Housing Corporation, this Court held:
7

We note however, in reading the complaint that the plaintiff is seeking the declaration of
the nullity of the deed of sale, not as a party in the deed, or because she is obliged
principally or subsidiarily under the deed, but because she has an interest that is affected
by the deed. This Court has held that a person who is not a party obliged principally or
subsidiarily in a contract may exercise an action for nullity of the contract if he is
prejudiced in his rights with respect to one of the contracting parties, and can show the
detriment which would positively result to him from the contract in which he had no
intervention, Indeed, in the case now before Us, the complaint alleges facts which show
that plaintiff suffered detriment as a result of the deed of sale entered into by and between
defendant PHHC and defendant Melisenda L. Santos. We believe that the plaintiff should
be given a chance to present evidence to establish that she suffered detriment and that
she is entitled to relief. (Emphasis supplied.)

There can be no question in this case that the questioned resolution and series of
transactions resulting in the registration of the properties in the name of respondent Yap
spouses adversely affected the rights of petitioner to the said properties. Consequently,
petitioner has the legal standing to question the validity of said resolution and
transactions.

As to the question of validity of the board resolution of respondent PAMBUSCO adopted

on November 19, 1974, Section 4, Article III of the amended by-laws of respondent
PAMBUSCO, provides as follows:

Sec. 4. Notices of regular and special meetings of the Board of Directors shall be mailed
to each Director not less than five days before any such meeting, and notices of special
meeting shall state the purpose or purposes thereof Notices of regular meetings shall be
sent by the Secretary and notices of special meetings by the President or Directors
issuing the call. No failure or irregularity of notice of meeting shall invalidate any regular
meeting or proceeding thereat; Provided a quorum of the Board is present, nor of any
special meeting; Provided at least four Directors are present. (Emphasis supplied.) 8

The trial court in finding the resolution void held as follows:

On the other hand, this Court finds merit in the position taken by the defendants that the
questioned resolution should be declared invalid it having been approved in a meeting
attended by only 3 of the 5 members of the Board of Directors of PAMBUSCO which
attendance is short of the number required by the by-laws of the corporation.

xxx xxx xxx

In the meeting of November 19, 1974 when the questioned resolution was approved, the
three members of the Board of Directors of PAMBUSCO who were present were Jesus
Domingo, Joaquin Briones, and Salvador Bernardez The remaining 2 others, namely:
Judge Pio Marcos and Alfredo Mamuyac were both absent therefrom.

As it becomes clear that the resolution approved on November 19, 1974 is null and void it
having been approved by only 3 of the members of the Board of Directors who were the
only ones present at the said meeting, the deed of assignment subsequently executed in
favor of Marcelino Enriquez pursuant to this resolution also becomes null and void. . . . 9

However, the respondent court overturning said legal conclusions of the trial court made
the following disquisition:

It should be noted that the provision in Section 4, Article III of PAMBUSCO's amended
by-laws would apply only in case of a failure to notify the members of the board of
directors on the holding of a special meeting, . . . .

In the instant case, however, there was no proof whatsoever, either by way of
documentary or testimonial evidence, that there was such a failure or irregularity of notice
as to make the aforecited provision apply. There was not even such an allegation in the
Answer that should have necessitated a proof thereof. The fact alone that only three (3)
out of five (5) members of the board of directors attended the subject special meeting, was
not enough to declare the aforesaid proceeding void ab initio, much less the board
resolution borne out of it, when there was no proof of irregularity nor failure of notice and
when the defense made in the Answer did not touch upon the said failure of attendance.
Therefore, the judgment declaring the nullity of the subject board resolution must be set
aside for lack of proof.

Moreover, there is no categorical declaration in the by-laws that a failure to comply with
the attendance requirement in a special meeting should make all the acts of the board
therein null and void ab initio. A cursory reading of the subject provision, as aforequoted,
would show that its framers only intended to make voidable a board meeting held without
the necessary compliance with the attendance requirement in the by-laws. Just the use of
the word "invalidate" already denotes a legal imputation of validity to the questioned board
meeting absent its invalidation in the proceedings prescribed by the corporation's by-laws
and/or the general incorporation law. More significantly, it should be noted that even if the
subject special meeting is itself declared void, it does not follow that the acts of the board
therein are ipso facto void and without any legal effect. Without the declaration of nullity of
the subject board proceedings, its validity should be maintained and the acts borne out of
it should be presumed valid. Considering that the subject special board meeting has not
been declared void in a proper proceeding, nor even in the trial by the court below, there is
no reason why the acts of the board in the said special meeting should be treated as void
AB. initio. . . .
10

The Court disagrees.

The by-laws of a corporation are its own private laws which substantially have the same
effect as the laws of the corporation. They are in effect, written, into the charter. In this
sense they become part of the fundamental law of the corporation with which the
corporation and its directors and officers must comply. 11

Apparently, only three (3) out of five (5) members of the board of directors of respondent
PAMBUSCO convened on November 19, 1974 by virtue of a prior notice of a special
meeting. There was no quorum to validly transact business since, under Section 4 of the
amended by-laws hereinabove reproduced, at least four (4) members must be present to
constitute a quorum in a special meeting of the board of directors of respondent
PAMBUSCO.

Under Section 25 of the Corporation Code of the Philippines, the articles of incorporation
or by-laws of the corporation may fix a greater number than the majority of the number of
board members to constitute the quorum necessary for the valid transaction of business.
Any number less than the number provided in the articles or by-laws therein cannot
constitute a quorum and any act therein would not bind the corporation; all that the
attending directors could do is to adjourn.12

Moreover, the records show that respondent PAMBUSCO ceased to operate as of

November 15, 1949 as evidenced by a letter of the SEC to said corporation dated April 17,
1980. Being a dormant corporation for several years, it was highly irregular, if not
13

anomalous, for a group of three (3) individuals representing themselves to be the directors
of respondent PAMBUSCO to pass a resolution disposing of the only remaining asset of
the corporation in favor of a former corporate officer.

As a matter of fact, the three (3) alleged directors who attended the special meeting on
November 19, 1974 were not listed as directors of respondent PAMBUSCO in the latest
general information sheet of respondent PAMBUSCO filed with the SEC dated 18 March
1951. Similarly, the latest list of stockholders of respondent PAMBUSCO on file with the
14

SEC does not show that the said alleged directors were among the stockholders of
respondent PAMBUSCO. 15

Under Section 30 of the then applicable Corporation Law, only persons who own at least
one (1) share in their own right may qualify to be directors of a corporation. Further, under
Section 28 1/2 of the said law, the sale or disposition of an and/or substantially all
properties of the corporation requires, in addition to a proper board resolution, the
affirmative votes of the stockholders holding at least two-thirds (2/3) of the voting power in
the corporation in a meeting duly called for that purpose. No doubt, the questioned
resolution was not confirmed at a subsequent stockholders meeting duly called for the
purpose by the affirmative votes of the stockholders holding at least two-thirds (2/3) of the
voting power in the corporation. The same requirement is found in Section 40 of the
present Corporation Code.

It is also undisputed that at the time of the passage of the questioned resolution,
respondent PAMBUSCO was insolvent and its only remaining asset was its right of
redemption over the subject properties. Since the disposition of said redemption right of
respondent PAMBUSCO by virtue of the questioned resolution was not approved by the
required number of stockholders under the law, the said resolution, as well as the
subsequent assignment executed on March 8, 1975 assigning to respondent Enriquez the
said right of redemption, should be struck down as null and void.

Respondent court, in upholding the questioned deed of assignment, which appears to be

without any consideration at all, held that the consideration thereof is the liberality of the
respondent PAMBUSCO in favor of its former corporate officer, respondent Enriquez, for
services rendered. Assuming this to be so, then as correctly argued by petitioner, it is not
just an ordinary deed of assignment, but is in fact a donation. Under Article 725 of the Civil
Code, in order to be valid, such a donation must be made in a public document and the
acceptance must be made in the same or in a separate instrument. In the latter case, the
donor shall be notified of the acceptance in an authentic form and such step must be
noted in both instruments. 16
Non-compliance with this requirement renders the donation null and
void. Since undeniably the deed of assignment dated March 8, 1975 in question, shows
17 18

that there was no acceptance of the donation in the same and in a separate document,
the said deed of assignment is thus void ab initio and of no force and effect.

WHEREFORE, the petition is GRANTED. The questioned decision of the respondent

Court of Appeals dated June 20, 1989 and its resolution dated December 27, 1989 are
hereby REVERSED AND SET ASIDE and another judgment is hereby rendered
AFFIRMING in toto the decision of the trial court.

SO ORDERED.

A.M. No. 3180 June 29, 1988

RICARDO L. PARAS, complainant,

vs.
JUDGE REYNALDO ROURA, REGIONAL TRIAL COURT, BRANCH 55, MACABEBE,
PAMPANGA, ATTY. FRUMENCIO C. PULGAR and MR. DIOSDADO CARREON,
DEPUTY SHERIFF, REGIONAL TRIAL COURT, BRANCH 55, MACABEBE,
PAMPANGA, respondents.

Bautista, Picazo, Cruz, Buyco & Tan for petitioner.

RESOLUTION

FELICIANO, J.:

This is an administrative case against: (1) Judge Reynaldo Roura, Regional Trial Court, Branch 55, Macabebe, Pampanga; (2)
Atty. Frumencio C. Pulgar, Makati, Manila and (3) Mr. Diosdado Carreon, Deputy Sheriff, Regional Trial Court, Branch 55,
Macabebe, Pampanga — for disregarding and violating a Resolution of the Court of Appeals dated 3 March 1987 issued in
CA-G.R. No. 11443 entitled "Philippine Rabbit Bus Lines, Inc. vs. Hon. Reynaldo V. Roura, etc. et al." The complainant is Mr.
Ricardo L. Paras, who apparently filed this Complaint in his capacity as General Manager of Philippine Rabbit Bus Lines, Inc.
("Philippine Rabbit").

This administrative case arose from the following undisputed facts.

On 8 August 1986, respondent Judge Roura rendered a Decision finding Oscar G. Tiglao,
former driver of the Philippine Rabbit, guilty of the crime of damage to property with
multiple serious physical injuries through reckless imprudence. This Decision awarded
complainant Rosanna Del Rosario the following sums: P74,861.82 for actual damages:
P54,000.00 for lost income; and P150,000.00 for moral damages. The Decision became
final and executory and a Writ of Execution was issued against Oscar G. Tiglao.

Because the Writ of Execution was returned unsatisfied, respondent Judge issued an
Order dated 5 December 1986 directing issuance of a Subsidiary Writ of Execution
against the employer of Oscar G. Tiglao, that is, the Philippine Rabbit. Upon receipt of this
Order, Philippine Rabbit filed a Notice of Appeal which was denied by the respondent
Judge in an Order dated 14 January 1987. Meantime, on 6 December 1986, a Subsidiary
Writ of Execution was issued to respondent Deputy Sheriff Carreon. Two months later, on
6 February 1987, respondent Sheriff Carreon levied upon an Isuzu bus of Philippine
Rabbit, with body No. 239. Respondent Sheriff Carreon issued a Notice of Sale of
Philippine Rabbit Bus No. 239 and scheduled the public auction sale thereof on 6 March
1987.

Philippine Rabbit's Motion for Reconsideration of the 5 December 1986 Order of

respondent Judge was denied in another order dated 27 February 1987.

On 2 March 1987, Philippine Rabbit went on a Petition for certiorari and Prohibition, with
prayer for a preliminary mandatory injunction, before the Court of Appeals, seeking to
enjoin the implementation of the Subsidiary Writ of Execution issued on 6 December 1986.
Philippine Rabbit impleaded respondents Judge Roura, Deputy Sheriff Carreon, and
complainant Rosanna del Rosario "represented (therein) by Atty. Frumencio N. Pulgar."
On 3 March 1987, the Court of Appeals issued a Resolution, the relevant part of which
read as follows:

In the meantime, in order that the issues raised in this petition may not be considered
moot and academic. let a temporary restraining order be issued enjoining the herein
respondents or any person or persons acting for and on their behalf from implementing
the questioned Subsidiary Wr it of Execution dated December 6, 1986 and from
proceeding with the scheduled Sheriff Sale to be held on March 6,1987 at 9:30 A.M. until
further Order (sic) from this court.

SO ORDERED.

Pursuant to the above Resolution, a Temporary Restraining Order addressed to all three
(3) respondents herein was issued by the Court of Appeals on the same date.

By Letter dated 30 March 1987, respondent Pulgar, acting as counsel for Rosanna del
Rosario, reminded Deputy Sheriff Carreon that the Temporary Restraining Order, dated 3
March 1987, issued by the Court of Appeals had expired on 24 March 1987. Respondent
Pulgar cited B.P. 224 as well as Dionisio us. Court of First Instance, South Cotabato,
Branch II, 124 SCRA 222 (1983) and Ubarra vs. Tecson, 134 SCRA 4 (1985) and
requested the Deputy Sheriff to proceed with the sale of Philippine Rabbit Bus No. 239 on
10 April 1987. Acting on this request, respondent Deputy Sheriff Carreon issued a
Sheriff's Notice of Sale on 7 April 1987 setting the date of the public auction sale of Bus
Nos. 239 on 14 April 1987.

Philippine Rabbit reacted by filing, on 13 April 1987, with the Court of Appeals an Urgent
Motion seeking the extension of the lifetime of the Temporary Restraining Order on the
same date and by filing with the respondent Judge an "Urgent Ex-Parte Motion to Hold in
Abeyance the scheduled sale of PRBL Inc. property."

In his Order dated 14 April 1987, respondent Judge denied Philippine

Rabbit's Ex-Parte Motion for having become moot and academic, the auction sale of
Philippine Rabbit Bus No. 239 having taken place as scheduled and Rosanna del Rosario,
being the highest bidder, having already bought Bus No. 239 for the amount of
P250,000.00.

By Resolution dated 8 May 1987, the Court of Appeals, among other things, granted
Philippine Rabbit's application for a preliminary injunction, the effectivity of which was
conditioned upon Philippine Rabbit's filing a bond covering the award of damages by the
trial court. Upon subsequent motion of Philippine Rabbit, the Court of Appeals by still
another Resolution dated 30 June 1987, resolved to annul the 14 April 1987 auction sale
conducted by respondent Deputy Sheriff Carreon, as violative of its Resolutions dated 3
March 1987 and 8 May 1987. The Court of Appeals ordered respondent Judge to release
Bus No. 239 to Philippine Rabbit, the latter having posted the required bond.

In this administrative case, complainant contends that respondents Judge Roura, Deputy
Sheriff Carreon and Atty. Pulgar are administratively liable for implementing the
Subsidiary Writ of Execution notwithstanding the presence of the Temporary Restraining
Order of 3 March 1987 issued by the Court of Appeals restraining the respondents from
implementing that Subsidiary Writ of Execution "until further order (sic) from [the Court of
Appeals]. It appears to be complainant's theory that the phrase "until further order from
[the Court of Appeals)" had the effect of restraining respondents from implementing the
Subsidiary Writ indefinitely until the restraining order is lifted by the issuing court.

This administrative complaint has no legal basis.

Section 8 of the Interim Rules and Guidelines embodied in the en banc Resolution of the
Supreme Court dated 11 January 1983, which section in effect reproduces Section 5,
Rule 58 of the Rules of Court, as amended by B.P. Blg. 224 dated 16 April 1982, set out a
general rule concerning the duration of effectivity of restraining orders issued by "all
inferior courts" in the following terms:

Section 8. Preliminary injunction not granted without notice; issuance of restraining

order. — No preliminary injunction shall be granted without notice to the defendant. If it
shall appear from the facts shown by affidavits or by the verified complaint that a great or
irreparable injury would result to the applicant before the matter can be heard on notice,
the judge to whom the application for preliminary injunction was made, may issue a
restraining order to be effective only for a period of twenty-days from date of its
issuance. Within said twenty day period, the court must cause an order to be served on
the defendant, requiring him to show cause, at a specified time and place, why the
injunction should not be granted, and shall accordingly issue the corresponding order. In
the event that the application for preliminary injunction is denied, the restraining order is
deemed automatically vacated. (Emphasis supplied)

In Celso Defalobos v. Hon. Gregorio U. Aquilizan, etc., et al., this Court dealt with the
1

effect of lapse of the 20-day period upon restrainng orders. There, in ordering the release
on habeas corpus of petitioner who had been imprisoned for contempt of court for
disregarding a temporary restraining order issued by the respondent court, the Supreme
Court said:

At the outset, the extension by the respondent judge of the restraining order issued on
March 23, 1983 was already void for being violative of Batas Pambansa Blg. 224. It is
well-settled that the life span of a temporary restraining order automatically expires onthe
20th day by the sheer force of law and no judicial declaration to that effect is necessary
(See Ortigas & Co. Ltd. Partnesrship v. Hon. Vivencio M. Ruiz, et al., G.R. No. 33952,
March 9, 1987). Therefore, as correctly contended by the Solicitor-General, there was no
effective restraining order which the petitioner could have disobeyed. ....2

More recently, on 12 April 1988, in Delbros Hotel Corporation v. The Intermediate

Appellate Court, etc., et al., G.R. No. 72566, the Supreme Court in a ten (10) to four (4)
decision (with one abstention) held that the abovequoted Section 8 of the Interim Rules
and Guidelines is applicable to temporary restraining orders issued by the Court of
Appeals. The majority, speaking through Mr. Justice Fernan, said:
The applicability of the above-quoted provision to the then Intermediate Appellate Court,
now the Court of Appeals, can hardly be doubted. The Interim Rules and Guidelines were
promulgated to implement the Judiciary Reorganization Act of 1981 (B.P. Blg. 129) which
included the Intermediate Appellate Court among the Courts reorganized thereunder. This
is emphasized in the preamble of the Interim Rules which states that the same shall apply
to all inferior courts according to the Constitution." The term "inferior courts" as used
therein refers to all courts except the Supreme Court, the Sandiganbayan and the Court of
Tax Appeals. Thus, paragraphs 14 and 15 of the Interim Rules expressedly provide for
Procedure in the Intermediate Appellate Court."

Indeed, if paragraph 8 of the Interim Rules were not intended to apply to temporary
restraining orders issued by the respondent Court, there would have been absolutely no
reason for the inclusion of said paragraph in the Interim Rules. The limited life-span of
temporary restraining orders issued by the regional trial courts and municipal trial courts is
already provided for in B.P. Big. 224. It was precisely to include the Intermediate Appellate
Court within the same limitation as to the effectivity of its temporary restraining orders that
B.P. Blg. 224 was incorporated in the Interim Rules, with the significant change of the
word "judge" to "court" so as to make it clear and unequivocal that the temporary
restraining orders contemplated therein are those issued not only by trial judges but also
by justices of the appellate court.

Private respondents argue that it is impractical to apply paragraph 8 of the Interim Rules
to the respondent court because the latter's processes are enforceable throughout the
country and there could be instances when the twenty-day period of the effectivity of a
temporary restraining order would lapse before it is served on the parties concerned. This
allegation appears to be more illusory and imaginary than real. Private respondents have
not cited any single, actual instance when such eventuality had occured. Its possibility is
deemed remote and unlikely considering the present state of fast and efficient modes of
communication as well as the presumed eagerness of a party-litigant who has secured a
temporarily restraining order to have the same immediately served on the parties
conceirned with the least waste of time.

It follows, therefore, that respondent Judge Roura did not violate any legally effective act
or order of the Court of Appeals when he dismissed Philippine Rabbit's ex parte Motion to
Hold in Abeyance the scheduled sale of PRBL Inc. property. Similarly, the Temporary
Restraining Order of 3 March 1987 of the Court of Appeals had already lapsed when
Deputy Sheriff Carreon implemented anew on 14 April 1987 the Subsidiary Writ of
Execution and Atty. Pulgar's act of requesting in writing the Deputy Sheriff to proceed with
the Notice of Sale upon expiration of the twenty-day period, was strictly in accordance
with law. There was no legal impediment to the acts of Atty. Pulgar and Deputy Sheriff
Carreon. Finally, there is nothing in the record to suggest that the respondents acted
otherwise than in entire good faith.

ACCORDINGLY, Administrative Case No. 3180 is hereby DISMISSED for lack of merit.
Costs against complainant.

Fernan (Chairman), Bidin and Cortes, JJ., concur.

G.R. No. 142616 July 31, 2001

PHILIPPINE NATIONAL BANK, petitioner,

vs.
RITRATTO GROUP INC., RIATTO INTERNATIONAL, INC., and DADASAN GENERAL
MERCHANDISE,respondents.

KAPUNAN, J.:

In a petition for review on certiorari under Rule 45 of the Revised Rules of Court, petitioner
seeks to annul and set aside the Court of Appeals' decision in C.A. CV G.R. S.P. No.
55374 dated March 27, 2000, affirming the Order issuing a writ of preliminary injunction of
the Regional Trial Court of Makati, Branch 147 dated June 30, 1999, and its Order dated
October 4, 1999, which denied petitioner's motion to dismiss.

The antecedents of this case are as follows:

Petitioner Philippine National Bank is a domestic corporation organized and existing under
Philippine law. Meanwhile, respondents Ritratto Group, Inc., Riatto International, Inc. and
Dadasan General Merchandise are domestic corporations, likewise, organized and
existing under Philippine law.

On May 29, 1996, PNB International Finance Ltd. (PNB-IFL) a subsidiary company of
PNB, organized and doing business in Hong Kong, extended a letter of credit in favor of
the respondents in the amount of US$300,000.00 secured by real estate mortgages
constituted over four (4) parcels of land in Makati City. This credit facility was later
increased successively to US$1,140,000.00 in September 1996; to US$1,290,000.00 in
November 1996; to US$1,425,000.00 in February 1997; and decreased to
US$1,421,316.18 in April 1998. Respondents made repayments of the loan incurred by
remitting those amounts to their loan account with PNB-IFL in Hong Kong.

However, as of April 30, 1998, their outstanding obligations stood at US$1,497,274.70.

Pursuant to the terms of the real estate mortgages, PNB-IFL, through its attorney-in-fact
PNB, notified the respondents of the foreclosure of all the real estate mortgages and that
the properties subject thereof were to be sold at a public auction on May 27, 1999 at the
Makati City Hall.

On May 25, 1999, respondents filed a complaint for injunction with prayer for the issuance
of a writ of preliminary injunction and/or temporary restraining order before the Regional
Trial Court of Makati. The Executive Judge of the Regional Trial Court of Makati issued a
72-hour temporary restraining order. On May 28, 1999, the case was raffled to Branch
147 of the Regional Trial Court of Makati. The trial judge then set a hearing on June 8,
1999. At the hearing of the application for preliminary injunction, petitioner was given a
period of seven days to file its written opposition to the application. On June 15, 1999,
petitioner filed an opposition to the application for a writ of preliminary injunction to which
the respondents filed a reply. On June 25, 1999, petitioner filed a motion to dismiss on the
grounds of failure to state a cause of action and the absence of any privity between the
petitioner and respondents. On June 30, 1999, the trial court judge issued an Order for the
issuance of a writ of preliminary injunction, which writ was correspondingly issued on July
14, 1999. On October 4, 1999, the motion to dismiss was denied by the trial court judge
for lack of merit.

Petitioner, thereafter, in a petition for certiorari and prohibition assailed the issuance of the
writ of preliminary injunction before the Court of Appeals. In the impugned decision,1 the
appellate court dismissed the petition. Petitioner thus seeks recourse to this Court and
raises the following errors:
 1.

THE COURT OF APPEALS PALPABLY ERRED IN NOT DISMISSING THE

COMPLAINT A QUO, CONSIDERING THAT BY THE ALLEGATIONS OF THE
COMPLAINT, NO CAUSE OF ACTION EXISTS AGAINST PETITIONER, WHICH IS NOT
A REAL PARTY IN INTEREST BEING A MERE ATTORNEY-IN-FACT AUTHORIZED TO
ENFORCE AN ANCILLARY CONTRACT.

2.

THE COURT OF APPEALS PALPABLY ERRED IN ALLOWING THE TRIAL COURT TO

ISSUE IN EXCESS OR LACK OF JURISDICTION A WRIT OF PRELIMINARY
INJUNCTION OVER AND BEYOND WHAT WAS PRAYED FOR IN THE COMPLAINT A
QUO CONTRARY TO CHIEF OF STAFF, AFP VS. GUADIZ JR., 101 SCRA 827.2

Petitioner prays, inter alia, that the Court of Appeals' Decision dated March 27, 2000 and
the trial court's Orders dated June 30, 1999 and October 4, 1999 be set aside and the
dismissal of the complaint in the instant case.3

In their Comment, respondents argue that even assuming arguendo that petitioner and
PNB-IFL are two separate entities, petitioner is still the party-in-interest in the application
for preliminary injunction because it is tasked to commit acts of foreclosing respondents'
properties.4 Respondents maintain that the entire credit facility is void as it contains
stipulations in violation of the principle of mutuality of contracts.5 In addition, respondents
justified the act of the court a quo in applying the doctrine of "Piercing the Veil of
Corporate Identity" by stating that petitioner is merely an alter ego or a business conduit of
PNB-IFL.6

The petition is impressed with merit.

Respondents, in their complaint, anchor their prayer for injunction on alleged invalid
provisions of the contract:

GROUNDS

THE DETERMINATION OF THE INTEREST RATES BEING LEFT TO THE SOLE

DISCRETION OF THE DEFENDANT PNB CONTRAVENES THE PRINCIPAL OF
MUTUALITY OF CONTRACTS.

II

THERE BEING A STIPULATION IN THE LOAN AGREEMENT THAT THE RATE OF

INTEREST AGREED UPON MAY BE UNILATERALLY MODIFIED BY DEFENDANT,
THERE WAS NO STIPULATION THAT THE RATE OF INTEREST SHALL BE REDUCED
IN THE EVENT THAT THE APPLICABLE MAXIMUM RATE OF INTEREST IS REDUCED
BY LAW OR BY THE MONETARY BOARD.7

Based on the aforementioned grounds, respondents sought to enjoin and restrain PNB
from the foreclosure and eventual sale of the property in order to protect their rights to
said property by reason of void credit facilities as bases for the real estate mortgage over
the said property.8

The contract questioned is one entered into between respondent and PNB-IFL, not PNB.
In their complaint, respondents admit that petitioner is a mere attorney-in-fact for the
PNB-IFL with full power and authority to, inter alia, foreclose on the properties mortgaged
to secure their loan obligations with PNB-IFL. In other words, herein petitioner is an agent
with limited authority and specific duties under a special power of attorney incorporated in
the real estate mortgage. It is not privy to the loan contracts entered into by respondents
and PNB-IFL.

The issue of the validity of the loan contracts is a matter between PNB-IFL, the petitioner's
principal and the party to the loan contracts, and the respondents. Yet, despite the
recognition that petitioner is a mere agent, the respondents in their complaint prayed that
the petitioner PNB be ordered to re-compute the rescheduling of the interest to be paid by
them in accordance with the terms and conditions in the documents evidencing the credit
facilities, and crediting the amount previously paid to PNB by herein respondents.9

Clearly, petitioner not being a part to the contract has no power to re-compute the interest
rates set forth in the contract. Respondents, therefore, do not have any cause of action
against petitioner.

The trial court, however, in its Order dated October 4, 1994, ruled that since PNB-IFL, is a
wholly owned subsidiary of defendant Philippine National Bank, the suit against the
defendant PNB is a suit against PNB-IFL.10 In justifying its ruling, the trial court, citing the
case of Koppel Phil. Inc. vs. Yatco,11 reasoned that the corporate entity may be
disregarded where a corporation is the mere alter ego, or business conduit of a person or
where the corporation is so organized and controlled and its affairs are so conducted, as
to make it merely an instrumentality, agency, conduit or adjunct of another corporation.12

We disagree.

The general rule is that as a legal entity, a corporation has a personality distinct and
separate from its individual stockholders or members, and is not affected by the personal
rights, obligations and transactions of the latter.13 The mere fact that a corporation owns
all of the stocks of another corporation, taken alone is not sufficient to justify their being
treated as one entity. If used to perform legitimate functions, a subsidiary's separate
existence may be respected, and the liability of the parent corporation as well as the
subsidiary will be confined to those arising in their respective business. The courts may in
the exercise of judicial discretion step in to prevent the abuses of separate entity privilege
and pierce the veil of corporate entity.

We find, however, that the ruling in Koppel finds no application in the case at bar. In said
case, this Court disregarded the separate existence of the parent and the subsidiary on
the ground that the latter was formed merely for the purpose of evading the payment of
higher taxes. In the case at bar, respondents fail to show any cogent reason why the
separate entities of the PNB and PNB-IFL should be disregarded.

While there exists no definite test of general application in determining when a subsidiary
may be treated as a mere instrumentality of the parent corporation, some factors have
been identified that will justify the application of the treatment of the doctrine of the
piercing of the corporate veil. The case of Garrett vs. Southern Railway Co.14 is
enlightening. The case involved a suit against the Southern Railway Company. Plaintiff
was employed by Lenoir Car Works and alleged that he sustained injuries while working
for Lenoir. He, however, filed a suit against Southern Railway Company on the ground
that Southern had acquired the entire capital stock of Lenoir Car Works, hence, the latter
corporation was but a mere instrumentality of the former. The Tennessee Supreme Court
stated that as a general rule the stock ownership alone by one corporation of the stock of
another does not thereby render the dominant corporation liable for the torts of the
subsidiary unless the separate corporate existence of the subsidiary is a mere sham, or
unless the control of the subsidiary is such that it is but an instrumentality or adjunct of the
dominant corporation. Said Court then outlined the circumstances which may be useful in
the determination of whether the subsidiary is but a mere instrumentality of the
parent-corporation:

The Circumstance rendering the subsidiary an instrumentality. It is manifestly impossible

to catalogue the infinite variations of fact that can arise but there are certain common
circumstances which are important and which, if present in the proper combination, are
controlling.

These are as follows:

(a) The parent corporation owns all or most of the capital stock of the subsidiary.

(b) The parent and subsidiary corporations have common directors or officers.

(c) The parent corporation finances the subsidiary.

(d) The parent corporation subscribes to all the capital stock of the subsidiary or otherwise
causes its incorporation.

(e) The subsidiary has grossly inadequate capital.

(f) The parent corporation pays the salaries and other expenses or losses of the
subsidiary.

(g) The subsidiary has substantially no business except with the parent corporation or no
assets except those conveyed to or by the parent corporation.

(h) In the papers of the parent corporation or in the statements of its officers, the
subsidiary is described as a department or division of the parent corporation, or its
business or financial responsibility is referred to as the parent corporation's own.

(i) The parent corporation uses the property of the subsidiary as its own.

(j) The directors or executives of the subsidiary do not act independently in the interest of
the subsidiary but take their orders from the parent corporation.

(k) The formal legal requirements of the subsidiary are not observed.

The Tennessee Supreme Court thus ruled:

In the case at bar only two of the eleven listed indicia occur, namely, the ownership of
most of the capital stock of Lenoir by Southern, and possibly subscription to the capital
stock of Lenoir. . . The complaint must be dismissed.
Similarly, in this jurisdiction, we have held that the doctrine of piercing the corporate veil is
an equitable doctrine developed to address situations where the separate corporate
personality of a corporation is abused or used for wrongful purposes. The doctrine applies
when the corporate fiction is used to defeat public convenience, justify wrong, protect
fraud or defend crime, or when it is made as a shield to confuse the legitimate issues, or
where a corporation is the mere alter ego or business conduit of a person, or where the
corporation is so organized and controlled and its affairs are so conducted as to make it
merely an instrumentality, agency, conduit or adjunct of another corporation.15

In Concept Builders, Inc. v. NLRC,16 we have laid the test in determining the applicability
of the doctrine of piercing the veil of corporate fiction, to wit:

1. Control, not mere majority or complete control, but complete domination, not only of
finances but of policy and business practice in respect to the transaction attacked so that
the corporate entity as to this transaction had at the time no separate mind, will or
existence of its own.

2. Such control must have been used by the defendant to commit fraud or wrong, to
perpetuate the violation of a statutory or other positive legal duty, or dishonest and, unjust
act in contravention of plaintiffs legal rights; and,

3. The aforesaid control and breach of duty must proximately cause the injury or unjust
loss complained of.

The absence of any one of these elements prevents "piercing the corporate veil." In
applying the "instrumentality" or "alter ego" doctrine, the courts are concerned with reality
and not form, with how the corporation operated and the individual defendant's
relationship to the operation.17

Aside from the fact that PNB-IFL is a wholly owned subsidiary of petitioner PNB, there is
no showing of the indicative factors that the former corporation is a mere instrumentality of
the latter are present. Neither is there a demonstration that any of the evils sought to be
prevented by the doctrine of piercing the corporate veil exists. Inescapably, therefore, the
doctrine of piercing the corporate veil based on the alter ego or instrumentality doctrine
finds no application in the case at bar.

In any case, the parent-subsidiary relationship between PNB and PNB-IFL is not the
significant legal relationship involved in this case since the petitioner was not sued
because it is the parent company of PNB-IFL. Rather, the petitioner was sued because it
acted as an attorney-in-fact of PNB-IFL in initiating the foreclosure proceedings. A suit
against an agent cannot without compelling reasons be considered a suit against the
principal. Under the Rules of Court, every action must be prosecuted or defended in the
name of the real party-in-interest, unless otherwise authorized by law or these Rules.18 In
mandatory terms, the Rules require that "parties-in-interest without whom no final
determination can be had, an action shall be joined either as plaintiffs or defendants." 19 In
the case at bar, the injunction suit is directed only against the agent, not the principal.

Anent the issuance of the preliminary injunction, the same must be lifted as it is a mere
provisional remedy but adjunct to the main suit.20 A writ of preliminary injunction is an
ancillary or preventive remedy that may only be resorted to by a litigant to protect or
preserve his rights or interests and for no other purpose during the pendency of the
principal action. The dismissal of the principal action thus results in the denial of the
prayer for the issuance of the writ. Further, there is no showing that respondents are
entitled to the issuance of the writ. Section 3, Rule 58, of the 1997 Rules of Civil
Procedure provides:

SECTION 3. Grounds for issuance of preliminary injunction. — A preliminary injunction

may be granted when it is established:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such
relief consists in restraining the commission or continuance of the act or acts complained
of, or in requiring the performance of an act or acts, either for a limited period or
perpetually,

(b) That the commission, continuance or non-performance of the acts or acts complained
of during the litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or
is procuring or suffering to be done, some act or acts probably in violation of the rights of
the applicant respecting the subject of the action or proceeding, and tending to render the
judgment ineffectual.

Thus, an injunctive remedy may only be resorted to when there is a pressing necessity to
avoid injurious consequences which cannot be remedied under any standard
compensation.21 Respondents do not deny their indebtedness. Their properties are by
their own choice encumbered by real estate mortgages. Upon the non-payment of the
loans, which were secured by the mortgages sought to be foreclosed, the mortgaged
properties are properly subject to a foreclosure sale. Moreover, respondents questioned
the alleged void stipulations in the contract only when petitioner initiated the foreclosure
proceedings. Clearly, respondents have failed to prove that they have a right protected
and that the acts against which the writ is to be directed are violative of said right.22 The
Court is not unmindful of the findings of both the trial court and the appellate court that
there may be serious grounds to nullify the provisions of the loan agreement. However, as
earlier discussed, respondents committed the mistake of filing the case against the wrong
party, thus, they must suffer the consequences of their error.

All told, respondents do not have a cause of action against the petitioner as the latter is
not privy to the contract the provisions of which respondents seek to declare void.
Accordingly, the case before the Regional Trial Court must be dismissed and the
preliminary injunction issued in connection therewith, must be lifted.

IN VIEW OF THE FOREGOING, the petition is hereby GRANTED. The assailed decision
of the Court of Appeals is hereby REVERSED. The Orders dated June 30, 1999 and
October 4, 1999 of the Regional Trial Court of Makati, Branch 147 in Civil Case No.
99-1037 are hereby ANNULLED and SET ASIDE and the complaint in said case
DISMISSED.

SO ORDERED.

G.R. No. 79128 June 16, 1988

ORTIGAS & COMPANY Limited Partnership, petitioner,
vs.
COURT OF APPEALS and SPS DALTON B. KING and CECILIA F. KING, respondents.

YAP, C.J.:

Challenged in this petition is the writ of preliminary mandatory injunction issued by the respondent it Court of Appeals directing
the petitioner herein to reconnect and restore the electrical service to Gondola Unit No. 8 of private respondent at the
Greenhills Shopping Center upon the filing by the latter of an injunction bond in the amount of P15,000. The respondent court
annulled and set aside the order of the Regional Trial Court of Pasig, Metro Manila, Branch 152, dated March 19, 1987 entitled
"Dalton B. King, et al. vs. Ortigas and Company, Limited Partnership" dated March 19, 1987, which denied plaintiffs
application for preliminary mandatory injunction.

We deal in this case only with the matter of the issuance of the writ of preliminary
mandatory injunction to compel petitioners to reconnect the electrical service to private
respondents. We are not called upon to review the merits of the case, for this has still to
be tried and decided by the court a quo.

The antecedent facts are as follows:

In a letter agreement dated October 28, 1983, Ortigas and Company, Limited Partnership
(Ortigas for brevity) through its Greenhills Shopping Center (GSC) Manager, Manuel
Lozano, Jr., leased to Wellington Syquiatco a unit in Gondola alley (Unit No. 8) at
Greenhills Shopping Center, San Juan, Metro Manila for a period of ten (10) years at a
monthly rental of P1,500.00 starting December 1, 1983 and increasing gradually every
year thereafter. The subject unit was used for the operation of a snack counter, known as
"Pied Piper."

On May 10, 1984, Wellington Syquiatco, with the approval of Ortigas, subleased the
subject unit to herein respondent spouses (King spouses for brevity) who occupied the
premises effective May 15, 1984. Later, Wellington Syquiatco, for valuable consideration
(P97,000.00) sold to King spouses his leasehold rights and obligations over the subject
Gondola/unit. This transfer of rights was approved by Ortigas on September 18, 1984.

In August, 1985, Ortigas dismissed its GSC Manager and undertook an audit of his
performance. Ortigas dissevered that the letter-lease agreements signed by the GSC
Manager, allegedly without appropriate authority, uniformly included a clause providing
that "6. Electric and water bins shall be for our (i.e. Ortigas) account."Ortigas also
discovered later that the GSC Manager owned one Gondola unit (Unit No. 1).

Ortigas' new manager, Jose Lim III, met with the Gondola lessees in March 1986 and
proposed to correct the inequities in the lease agreements. Individual electric meters were
to be installed in the respective units. A new contract for the Gondola units was submitted
to the lessees, which provided among others that "electric and other utility costs' were for
the lessees" account. The Kings did not sign the new lease agreement.

The electricity bin for May and June, 1986, amounted to P3,480.02 (including cost of
meter installation) and P2,456.53, respectively, which Ortigas tried to collect from the King
spouses. In a letter dated July 28, 1986, the latter protested the bill, citing paragraph No. 6
of the letter contract of October 28, 1983 which provided that electric and water bills were
for the account of Ortigas.
The subsequent electricity bins for the months of July, August, September and October
amounted to P2,069.06, P2,097.74, P2,018.10 and P2,051.58, respectively, which
including the unpaid bills for May and June, totalled P14,174.03. When the Kings refused
to pay the big, Ortigas disconnected the electricity supply to them. As a consequence, the
Kings filed on January 16, 1987, a complaint against Ortigas with the Regional Trial Court
of Pasig, Metro Manila, Branch 152, docketed as Civil Case No. 54202, for specific
performance and damages, with prayer for the issuance of a writ of preliminary mandatory
injunction to compel restoration and reconnection of the electric power supply to plaintiffs
Gondola unit. Ortigas filed an opposition, dated February 9, 1987, to plaintiffs' application
for a writ of preliminary mandatory injunction, alleging among others that there was a
typographical error in Paragraph No. 6 of the letter agreement, consisting of the omission
of the letter "y" from the word "our;" that taking advantage of such typographical error, the
plaintiffs consumed electricity amounting to a monthly average of P2,362.17, while paying
a monthly rental initially at Pl,500.00, thereby making Ortigas subsidize their occupancy of
the leased premises to the tune of more than P800 per month. Ortigas further alleged that
to grant the writ of preliminary mandatory injunction would allow plaintiffs to enrich
themselves unjustly at the expense of defendant.

After hearing the oral arguments of the parties and considering their pleadings the trial
court on March 19, 1987 denied plaintiff application for a writ of preliminary mandatory
injunction.

The plaintiffs filed a petition with the respondent Court of Appeals for the annulment of the
order of the court a quo dated March 19, 1987, denying their application for a writ of
preliminary mandatory injunction. As stated above, the respondent appellate court issued
its questioned decision dated June 30, 1987, annulling the order of the court a quo and
issuing itself the writ of preliminary mandatory injunction prayed for by the Kings upon the
filing of a bond of P15,000.00.

The basic issue which we have to determine is whether the court a quo committed a grave
abuse of discretion in denying plaintiffs' application for a preliminary mandatory injunction.

We find no such grave abuse of discretion committed by the trial court which would justify
the setting aside of its order by the respondent appellate court and the issuance by the
latter of the writ of preliminary mandatory injunction.

The writ of preliminary injunction, in general, cannot be sought as a matter of right, but its
grant or refusal rests in the sound discretion of the court under the circumstances and the
facts of the particular case. The writ is the "strong arm of equity" and therefore should not
be used to sanction inequity.

The defendant in the case, the petitioner herein, was able to show that the electricity
consumed per month by the King spouses was way above the amount of the monthly
rentals which they were paying to the petitioner, thereby in effect making the latter
subsidize the business of the former in the leased premises. Such an obviously
inequitable situation by which private respondents enriched themselves at the expense of
petitioner cannot be ignored, as private respondents wanted the trial court to do, by
insisting on a strict adherence to the letter of the contract, which petitioner questioned,
alleging inter alia obvious mistake and collusion, and non-approval of the contract by the
principal of the signatory for the lessor defenses which must eventually be considered by
the court a quo in deciding the merits of the case. It is thus not a simple case of a
contracting party having made a bad bargain and who must be made to abide by it. The
trial court, considering the equities of the case, refused to issue the preliminary mandatory
injunction. We hold that in refusing to do so the trial court did not commit a grave abuse of
discretion.

In general, courts should avoid issuing a writ of preliminary injunction which in effect
disposes of the main case without trial. This is precisely the effect of the writ of preliminary
mandatory injunction issued by the respondent appellate court. Having granted through a
writ of preliminary mandatory injunction the main prayer of the complaint, there is
practically nothing left for the trial court to try except the plaintiffs' claim for damages.

WHEREFORE, the appealed decision of the respondent Court of Appeals dated June 30,
1987 is reversed and set aside.

SO ORDERED.

G.R. No. 174996 December 3, 2014

BRO. BERNARD OCA, FSC, BRO. DENNIS MAGBANUA, FSC, MRS. CIRILA MOJICA,
MRS. JOSEFINA PASCUAL AND ST. FRANCIS SCHOOL OF GENERAL TRIAS,
CAVITE, INC., Petitioner,
vs.
LAURITA CUSTODIO, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

Before this Court is a petition for review under Rule 45 of the 1997 Rules of Civil
Procedure assailing the Decision dated September 16, 2005 as well as the
1

Resolution dated October 9, 2006 of the Court of Appeals in CA-G.R. SP No. 79791,
2

entitled "Bro. Bernard Oca, FSC, Bro. Dennis Magbanua, FSC, Mrs. Cirila Mojica, Mrs.
Josefina Pascual and St. Francis School of General Trias, Cavite, Inc. v. Hon. Norbert J.
Quisumbing, Jr., in his capacity as Presiding Judge, Regional Trial Court, Branch 21, Imus,
Cavite, and Mrs. Laurita Custodio". Through said rulings, the appellate court dismissed
the petition for certiorari under Rule 65 with application for the issuance of a temporary
restraining order and/or writ of preliminary injunction against the Orders dated August 5,
2003, August 21, 2003 and October 8, 2003 issued by Branch 21 of the Regional Trial
3 4 5

Court (RTC) of Imus, Cavite in SEC Case No. 024-02, entitled "Laurita Custodio, plaintiff,
versus Bro. Bernard Oca, Bro. Dennis Magbanua, Mrs. Cirila Mojica, Mrs. Josefina
Pascual, and St. Francis School, defendants."

The factual backdrop of the case

The facts of this case, as narrated in the assailed September 16, 2005 Decision of the
Court of Appeals, are as follows:

On July 9, 1973, petitioner St. Francis School of General Trias Cavite, Inc. (School) was
organized and established as a non-stock and non-profit educational institution. The
organization and establishment of the school was accomplished through the assistance of
the La Salle Brothers without any formal agreement with the School. Thus, the
incorporators of the School consist of the following persons: private respondent Custodio,
petitioner Cirila Mojica (Mojica), petitioner Josefina Pascual (Pascual), Rev. Msgr. Feliz
Perez, Bro. Vernon Poore, FSC. The five original incorporators served as the School’s
Members and Board of Trustees until the deaths of Bro. Poore and Msgr. Perez.

On September 8, 1988, to formalize the relationship between the De La Salle Greenhills

(DLSG) and the School, a Memorandum of Agreement (MOA) was executed. This
agreement permitted DLSG to exercise supervisory powers over the School’s academic
affairs. Pursuant to the terms of the MOA, DLSG appointed supervisors who sit in the
meetings of the Board of Trustees without any voting rights. The first such supervisor was
Bro. Victor Franco. Later on, Bro. Franco also became a member of the Board of Trustees
and President of the School. Then, on September 8, 1998, petitioner Bro. Bernard Oca
joined Bro. Franco as DLSG supervisor. In a while, Bro. Oca also served as a member of
the Board of Trustees and President of the School. Bro. Dennis Magbanua also joined Bro.
Franco and Bro. Oca as DLSG supervisor and also as a Treasurer of the School.

Petitioners declare that the membership of the DLSG Brothers in the Board of Trustee[s]
as its officers was valid since an election was conducted to that effect.

On the other hand, Custodio challenges the validity of the membership of the DLSG
Brothers and their purported election as officers of the School. The legality of the
membership and election of the DLSG Brothers is the main issue of the case in the lower
court.

Custodio alleges that sometime in 1992, Bro. Franco was invited by Mrs. Mojica to act as
President of the School. This is because there was only the Tres Marias (referring to the
original incorporators, Pascual, Mojica and Custodio) who [were] left tomanage the affairs
of the school. Bro. Franco accepted the invitation. However, while Bro. Franco acted as
President and presided over meetingsof the Tres Marias, he never participated in the
operation of the School and never exercised voting rights.

Custodio further alleges that on September 8, 1998, during one of the informal meetings
held at the School, Bro. Franco unilaterally declared the said meeting as the Board of
Trustees’ Meeting and at the same time an Annual Meeting of the Members of the
Corporation. During the meeting, Bro. Franco declared that the corporation is composed
of the Tres Marias and their husbands, Dr. Castaneda and himself (Bro. Franco) as
members. On the other hand, the Board of Trustees was declared to be composed of Bro.
Oca, the Tres Marias and himself (Bro. Franco).

According to Custodio, when Bro. Franco eventually left and became inactive in the
School, Bro. Oca assumed his position as President and Chairman of the Board of
Trustees, without being formally admitted as member of the School and without the
benefit of an actual election. Custodio further states that on December 6, 2000, Bro.
Magbanua was introduced to the original incorporators for the first time. Automatically, he
was declared as Member of the School and at the same time, Treasurer by Bro. Oca, also
without any formal admission into the corporate membership and without the benefit of an
actual election.

Custodio alleges that clearly the composition of the membership of the School had no
basis there being no formal admission as members nor election as officers.

It appears that the legality of the membership and assumption as officers of the DLSG
Brothers was questioned by Custodio following a disagreement regarding a proposed
MOA that would replace the existing MOA with the DLSG Brothers and her removal as
Curriculum Administrator through the Board of Trustee[s].
Under the proposed MOA, DLSG will supervise and control not only the academic affairs
of the School but also the matters of the finance, administration and operations of the
latter. Custodio vigorously opposed the proposed MOA. Consequently, unable to
convince Custodio and the academic populace to accept the MOA, the DLSG brothers
withdrew [their] academic support from the School. A day after the rejection of the
proposed MOA, Mojica and Pascual retired as Administrators for Finance and Physical
Resource Development (PRD), respectively. However, they maintained their positions as
Members and Trustees of the School.

Custodio contends that while Pascual and Mojica remained to be Members and Trustees
of the School, upon retirement, they stopped reporting for work. Mr. Al Mojica, son of Mrs.
Mojica, who was then the school cashier, also stopped reporting for work. Thus, Custodio
avers that being the only remaining Administrator, she served as the Over-all Director of
the School. Being the Over-all Director, Custodio made appointments to fill in the vacuum
created by the sudden retirement of Pascual and Mojica. Hence, she appointed Mr.
Joseph Custodio as OIC both for Finance and PRD and [Ms. Herminia] Reynante as
Cashier.

Upon the appointment of Joseph Custodio and Reynante, a special meeting was called by
Bro. Oca in which the petitioners alleged that the prior organizational structure was
restored, and the retirement of Pascual and Mojica disapproved by proper corporate
action. It was agreed to in the meeting that the school was going to revert to the three-man
co-equal structure with Pascual as PRD head, Mojica as Finance head and Custodio as
Curriculum Administrator.

In the same meeting, petitioners alleged that Custodio admitted to having opened an
account with the Luzon Development Bank in her own name for the alleged purpose of
depositing funds for and in behalf of the School. Petitioners alleged that a directive was
issued for the immediate closing of this account. Still, Custodio refused to close such
account.

Subsequently, on January 31, 2002, Mojica and Pascual formally resigned from their
administrative posts. As such as a replacement, Atty. Eleuterio A. Pascual and Mr.
Florante N. Mojica[,] Jr. were appointed by the Board of Trustees as PRD Administrator
and Finance Administrator respectively.

According to petitioners, due to the repeated refusal of Custodio to close the account she
opened in her own name with the Luzon Development Bank, the Board of Trustees, in a
meeting held on March 7, 2002, approved a resolution to file a case against the latter.
Consequently, the Board of Trustees also approved resolutions to the effect that Custodio,
Mr. Joseph Custodio and Reynante be stopped from performing their functions in the
School.

On June 7, 2002, Custodio filed a Complaint in the RTC of Trece Martirez City,
questioning the legality of the Board of the School. The case was docketed as Civil Case
No. TMCV-0033-02, entitled Laurita Custodio v. Bro. Bernard Oca, et al. Custodio prayed
for the issuance of a temporary restraining order and/or writ of preliminary injunction for
the purpose of preventing Bro. Oca as President of the corporation, from calling a special
membership meeting to remove Custodio as Member of the School and the Board of
Trustees. The case was dismissed on July 4, 2002. 6

Summary of the legal proceedings involved

in the present controversy
On July 8, 2002, the Board of Trustees of St. Francis School resolved to remove
respondent Laurita Custodio as a member of the Board of Trustees and as a member of
the Corporation pursuant to Sections 28 and 91 of the Corporation Code as indicated in
Resolution No. 011-2002. 7

Subsequently, respondent was issued a Memorandum dated July 23, 2002 and signed by
petitioner Bro. Bernard Oca, in his capacity as Chairman of the Board of Trustees,
wherein she was informed of her immediate removal as Curriculum Administrator of St.
Francis School on the grounds of willful breach of trust and loss of confidence and for
failure to explain the charges against her despite notice from the Board of Trustees.8

In reaction to her removal, respondent filed with the trial court, on October 3, 2002, a
Complaint with Prayer for the Issuance of a Preliminary Injunction against petitioners
again assailing the legality of the membership of the Board of Trustees of St. Francis
School.9

During the submission of pleadings, respondent filed a Manifestation and Motion. She
alleged that on October 8, 2002, her son,Joseph Custodio, was being prevented from
entering the premises of the school. Also, respondent alleges that a meeting with the
parents of the School’s students was convened wherein the parents were informed that
she had been removed as Member of the corporation and the Board of Trustees, and as
Curriculum Administrator. As such, petitioners directed the parents to give all payments
regarding matriculation and other fees to the corporate treasurer.10

On October 14, 2002, respondent filed another Motion for Clarification asking the trial
court toissue an order as to whom the matriculation fees should be paid pending the
hearing of the complaint and the earlier Manifestation and Motion. 11

Acting on the motions filed by respondent, the trial court in an Order dated October 21,
2002, appointed Herminia Reynante (Reynante) as cashier of the school and required all
parties to turn over all money previously collected with respect to matriculation fees and
other related collectibles of the school to the latter.
12

At this point, it should be noted that petitioners Cirila Mojica and Josefina Pascual put up
another school called the Academy of St. John with the same structure as petitioner St.
Francis School. This fact was testified to by petitioners’ counsel Atty. Armando Fojas
during the preliminary hearings on the main case. 13

On October 30, 2002, petitioners filed a Motion for Reconsideration seeking to set aside
the October 21, 2002 Order of the trial court. Petitioners aver that had they been given an
opportunity to be heard and to present evidence to oppose the appointment ofReynante,
proof would have been adduced to demonstrate the latter’s lackof moral integrity to act as
court appointed cashier.14

Subsequently, on February 19, 2003, petitioners filed a Manifestation informing the trial
court that in compliance with its October 21, 2002 Order, they took steps to turn over the
amount of ₱397,127.64, representing collections from matriculation fees, but the same
was not accepted by the court appointed cashier, Reynante, who preferred to receive the
amount in cash. 15

On February 26, 2003, respondent filed her Comment in which she averred that contrary
to petitioners’ claim, petitioners had not complied with the October 21, 2002 Order for
failure to include in their accounting, the funds allegedly in Special Savings Deposit No.
239 and Special Savings Deposit No. 459 or the retirement fund for the teachers of the
School, amounts paid by the canteen concessionaire, and amounts paid to three resigned
teachers.16

In an Order dated March 24, 2003, the trial court acted upon petitioners’ February 19,
17

2003 Manifestation and respondent’s February 26, 2003 Comment. The text of the said
March 24, 2003 Order is reproduced herein:

This treats of the defendant’s explanation, manifestation and plaintiff’s comment thereto.

A perusal of the allegations of the defendants’ pleadings shows that they merely
turned-over a manager’s check in the amount of ₱397,127.64 representing money
collected from the students from October 2002 to December 2002. The Order of October
21, 2002 directed plaintiff and defendants, as well as Mr. Al Mojica to turn over to Ms.
Herminia Reynante all money previously collected and to submit a report on what have
been collected, how much, from whom and the dates collected.

Defendants and Mr. Al Mojica are hereby directed, within ten days from receipt hereof, to
submit a reportand to turn-over to Ms. Herminia Reynante all money collected by them,
more particularly:

1. ₱4,339,607.54 deposited in the Special Savings Deposit No. 239 (Rural Bank of
General Trias, Inc.);

2. ₱5,639,856.11 deposited in Special Savings Deposit No. 459 (Rural Bank of General
Trias, Inc.);

3. ₱92,970.00 representing amount paid by the school canteen;

4. Other fees collected from January 2003 to February 19, 2003;

5. Accounting on how and how muchdefendants are paying Ms. Daisy Romero and three
(3) other teachers who already resigned. 18

On April 18, 2003, petitioners filed a Manifestation, Observation, Compliance, Exception

and Motion to the March 24, 2003 Order of the trial court which contests the inclusion of
specific funds to be turned over to Reynante. 19

In the first questioned Order dated August 5, 2003, the lower court denied the
20

Manifestation and Motion of petitioners and reiterated its order for petitioners to turn over
the items enumerated in its March 24, 2003 Order.

Subsequently, in the second questioned Order dated August 21, 2003, the trial court,
21

acting favorably on private respondent’s October 9, 2002 Manifestation and Motion ruled:
WHEREFORE, in view of the foregoing, the motion is granted. Accordingly, a status
quoorder is hereby issued wherein the plaintiff is hereby allowed to continue discharging
her functions as school director and curriculum administrator as well as those who are
presently and actually discharging functions as school officer to continue performing their
duties until the application for the issuance of a temporary restraining order is resolved.
22
On September 1, 2003, petitioners filed a Motion for Clarification of the August 5, 2003
Order.23

In an Order dated October 8, 2003, the court ruled, to wit:

24

WHEREFORE, in view of the foregoing, the defendants are hereby ordered to comply with
the mandate contained in the order[s] dated March 24 and August 5, 2003.

Defendants are further directed toinform the court of the total amount of the funds
deposited reserved for teachers’ retirement, and in what bank and under what account the
same is deposited. 25

Dissatisfied with the rulings made by the trial court, petitioners filed with the Court of
Appeals a petition for certiorari under Rule 65 with application for the issuance of a
temporary restraining order and/or writ of preliminary injunction to nullify, for having been
issued with grave abuse of discretion amounting to lack or in excess of jurisdiction, the
Orders dated August 5, 2003, August 21, 2003 and October 8, 2003 that were issued by
the trial court.

However, the Court of Appeals frustrated petitioners’ move through the issuance of the
assailed September 16, 2005 Decision which dismissed outright petitioners’ special civil
action for certiorari. Petitioners moved for reconsideration but this was also thwarted by
the Court of Appeals in the assailed October 9,2006 Resolution.

Thus, petitioners filed the instant petition and submitted the following issues for
consideration in their Memorandum dated October 3, 2007:
26

A.

WHETHER OR NOT THE COURT OF APPEALS, CONTRARY TO LAW AND

JURISPRUDENCE, COMMITTED REVERSIBLE ERROR IN RULING THAT THE TRIAL
COURT HAD NOT DEPRIVED PETITIONERS OF DUE PROCESS IN ISSUING ITS
ORDERS OF 5 AUGUST 2003, 21 AUGUST 2003 AND 8 OCTOBER 2003.

B.

WHETHER OR NOT THE COURT OF APPEALS, CONTRARY TO LAW AND

JURISPRUDENCE, COMMITTED REVERSIBLE ERROR IN RULING THAT THE TRIAL
COURT DID NOT GRAVELY ABUSE ITS DISCRETION IN DISREGARDING THE
PROVISIONS OF THE INTERIM RULES OF PROCEDURE FOR INTRACORPORATE
CONTROVERSIES PERTAINING TO THE ISSUANCE OF A STATUS QUOORDER AND
THE REQUIREMENTS THEREOF. 27

On the other hand, respondent puts forward the following arguments in her
Memorandum dated October 9, 2007:
28

THE HONORABLE COURT OFAPPEALS WAS CORRECT WHEN IT

RULED THAT THE TRIAL COURT (RTC Br. 21) HAD NOT DEPRIVED
PETITIONERS OF DUE PROCESS IN ISSUING ITS ORDERS OF 5
AUGUST 2003, 21 AUGUST 2003 AND 8 OCTOBER 2003.
 THE HONORABLE COURT OFAPPEALS WAS CORRECT WHEN IT
RULED THAT THE TRIAL COURT (RTC Br. 21) DID NOT COMMIT
GRAVE ABUSE OF DISCRETION WHEN IT ISSUED A STATUS
QUOORDER. 29

In fine, the sole issue in this case is whether or not the trial court committed grave abuse
of discretion inissuing the assailed Orders dated August 5, 2003, August 21, 2003 and
October 8, 2003.

Petitioners argue that the Court of Appeals, in its assailed September 16, 2005 Decision,
failed to consider that no adequate proceedings had been accorded to the petitioners by
the trial court for the exercise of its right to be heard on the matters subject of the
questioned Orders. Furthermore, petitioners point out that the Court of Appeals
erroneously gave its imprimatur to the trial court’s issuance of the assailed Status Quo
Order dated August 21, 2003 without first requiring and accepting from respondent the
requisite bond that is required under the Interim Rules of Procedure for Intra-Corporate
Controversies.

On the other hand, respondent maintains that the manner of the issuance of the assailed
Orders of the trial court did not violate the due process rights of petitioners. Respondent
also claims that a valid ground for the issuance of the assailed Status Quo Order dated
August 21, 2003 did exist and that the alleged failure of the trial court to require the
posting of a bond prior to the issuance of a status quoorder was mooted by the assailed
Order dated October 8, 2003 which required respondent and Reynante to file a bond in
the amount of ₱300,000.00 each.

We find the petition to be partly meritorious.

In the case of Garcia v. Executive Secretary, we reiterated what grave abuse of

30

discretion means in this jurisdiction, to wit:

Grave abuse of discretion means such capricious and whimsical exercise of judgment as
is equivalent to lack of jurisdiction. Mere abuse of discretion is not enough. It must be
grave abuse of discretion, as when the power is exercised in an arbitrary or despotic
manner by reason of passion or personal hostility, and must be so patent and so gross as
to amount to an evasion of a positive duty or to a virtual refusal to perform the duty
enjoined or to act at all in contemplation of law.

With regard to the right to due process, we have emphasized in jurisprudence that while it
is true that the right to due process safeguards the opportunity to be heard and to submit
any evidence one may have in support of his claim or defense, the Court has time and
again held that where the opportunity to be heard, either through verbal arguments or
pleadings, is accorded, and the party can "present its side" or defend its "interest in due
course," there is no denial of due process because what the law proscribes is the lack of
opportunity to be heard. 31

In the case at bar, we find that petitioners were not denied due process by the trial court
when it issued the assailed Orders dated August 5, 2003, August 21, 2003 and October 8,
2003. The records would show that petitioners were given the opportunity to ventilate their
arguments through pleadings and that the same pleadings were acknowledged in the text
of the questioned rulings. Thus, petitioners cannot claim grave abuse of discretion on the
part of the trial court on the basis of denial of due process.
However, with respect to the assailed Status Quo Order dated August 21, 2003, we find
that the trial court has failed to comply with the pertinent procedural rules regarding the
issuance of a status quo order.

Jurisprudence tells us that a status quo order is merely intended to maintain the last,
actual, peaceable and uncontested state of things which preceded the controversy. It
further states that, unlike a temporary restraining order or a preliminary injunction, a status
quo order is more in the nature of a cease and desist order, since it neither directs the
doing or undoing of acts as in the case of prohibitory or mandatory injunctive relief. 32

Pertinently, the manner of the issuance of a status quoorder in an intra-corporate suit

such asthe case at bar is governed by Section 1, Rule 10 of the Interim Rules of
Procedure for Intra-Corporate Controversies which reads:

SECTION 1. Provisional remedies. - A party may apply for any of the provisional remedies
provided in the Rules of Court as may be available for the purposes. However, no
temporary restraining order or status quo order shall be issued save in exceptional cases
and only after hearing the parties and the posting of a bond.

In the case before us, the trial court’s August 21, 2003 Status Quo Order conflicted with
the rules and jurisprudence in the following manner:

First, the directive to reinstate respondent to her former position as school director and
curriculum administrator is a command directing the undoing of an act already
consummated which is the exclusive province of prohibitory or mandatory injunctive relief
and not of a status quo order which is limited only to maintaining the last, actual,
peaceable and uncontested state of things which immediately preceded the controversy.
It must be remembered that respondentwas already removed as trustee, member of the
corporation and curriculum administrator by the Board of Trustees of St. Francis School of
General Trias, Cavite, Inc. months prior to her filing of the present case in the trial court.

Second, the trial court’s omission of not requiring respondent to file a bond before the
issuance of the Status Quo Order dated August 21, 2003 is in contravention with the
express instruction of Section 1, Rule 10 of the Interim Rules of Procedure for
Intra-Corporate Controversies. Even the subsequent order to post a bond as indicated in
the assailed October 8, 2003 Order did not cure this defect because a careful reading of
the nature and purpose of the bond would reveal that it was meant by the trial court as
security solely for the teachers’ retirement fund, the possession of which was given by the
trial court to respondent and Reynante. It was never intended and can never be
1âwphi1

considered as the requisite security, in compliance with the express directive of

procedural law, for the assailed Status Quo Order dated August 21, 2003. In any event,
there is nothing on record to indicate that respondent had complied with the posting of the
bond as directed in the October 8, 2003 Order except for the respondent’s
unsubstantiated claim to the contrary as asserted in her Memorandum. 33

Third, it is settled in jurisprudence that an application for a status quo order which in fact
seeks injunctive relief must comply with Section 4, Rule 58 of the Rules of Court: i.e., the
application must be verified aside from the posting of the requisite bond. In the present
34

case, the Manifestation and Motion, through which respondent applied for injunctive relief
or in the alternative a status quo order, was merely signed by her counsel and was
unverified.
In conclusion, we rule that no grave abuse of discretion was present in the issuance of the
assailed August 5, 2003 and October 8, 2003 Orders of the trial court. However, we find
that the issuance of the assailed August 21, 2003 Status Quo Order was unwarranted for
non-compliance with the rules. Therefore, the said status quo order must be set aside.

At this point, the Court finds it apropos to note that the Status Quo Order on its face states
that the same is effective until the application for the issuance of a temporary restraining
order is resolved. However, respondent's prayer for a temporary restraining order or a writ
of preliminary injunction in her Complaint still appears to be pending before the trial court.
For this reason, the Court deems it necessary to direct the trial court to resolve the same
at the soonest possible time.

WHEREFORE, premises considered, the petition is PARTLY GRANTED. The assailed

Decision dated September 16, 2005 and the Resolution dated October 9, 2006 of the
Court of Appeals in CA-G.R. SP No. 79791 are hereby AFFIRMED in part insofar as they
upheld the assailed August 5, 2003 and October 8, 2003 Orders of the trial court. They
are REVERSED with respect to the assailed August 21, 2003 Status Quo Order which is
hereby SET ASIDE for having been issued with grave abuse of discretion. The trial court
is further DIRECTED to resolve respondent's application for injunctive relief with dispatch.

SO ORDERED.

G.R. No. L-50402 August 19, 1982

PHILIPPINE COMMERCIAL AND INDUSTRIAL BANK and THE MANILA BANKING

CORPORATION, petitioners
vs.
NATIONAL MINES & ALLIED WORKERS UNION (NAMAWU-MIF), NATIONAL LABOR
RELATIONS COMMISSION (REGIONAL BRANCH NO. IV) ATLAS CONSOLIDATED
MINING AND DEVELOPMENT CORPORATION, respondents.

Remulla, Estrella & Associates and Sycip, Salazar, Feliciano, Hernandez & Castillo Law
Offices for petitioners.

The Solicitor General for respondent NLRC.

Villaruz, Padilla & Amansec Law Offices, for respondent National Mines and Allied
Workers Union.

Luis M. Ermitano for respondent Atlas Consolidated Mining and Development

Corporation.

&

BARREDO, J.: 1äw phï 1.ñ ët

Petition for certiorari filed on April 23, 1979 to annul and set aside the order of April 18,
1979 of the National Labor Relations Commission issued in N.L.R.C. Case No.
RB-IV-3322-75, thru Labor Arbiter Manuel H. Lorenzo, praying at the same time that this
Court order the said respondent Commission to stop delivery of the check of
P4,298,307.77 of private respondent Atlas Consolidated Mining and Development and/or
for Us to stop payment to the respondent Union on the ground that the issuance of said
order of April 18, 1979 was a grave abuse of discretion and/or in excess of the
Commission's jurisdiction.

On May 4, 1979, We issued the following resolution: 1äw phï1 .ñët

On December 22, 1975 the National Mines & Allied Workers' Union obtained in NLRC
Case No. RB-VI-3322-75 a judgment ordering the Philippine Iron Mines, Inc. to pay the
union P4,298,307.77 as severance pay, etc. The judgment became final and executory on
January 6, 1976.

On April 18, 1979 the NLRC, through a Labor Arbiter, granted the union's ex parte motion
of April 16, 1979 for the garnishment of the amount of P4,298,307.77 due from Atlas
Consolidated Mining and Development Corporation to the Philippine Commercial and
Industrial Bank and the Manila Banking Corporation, as part of the price for which the
mining machinery and equipment of the Philippine Iron Mines (acquired under foreclosure
sale by the two banks) was sold by the two banks to Atlas. (The total price was thirty
million pesos.)

On that same date, April 18, Atlas complied with the writ of garnishment and delivered to
the sheriff a check for P4,298,307.77.

The order of garnishment and Atlas' compliance with it are assailed in this certiorari
proceeding on the ground of lack of jurisdiction since the two banks were not parties in the
labor case and the funds garnished were not due to the judgment debtor, Philippine Iron
Mines.

After deliberating on these facts, the Court Resolved (1) to REQUIRE the respondents
within ten (10) days from notice to ANSWER the petition (not to file a motion to dismiss)
and (2) to ISSUE a WRIT OF PRELIMINARY INJUNCTION after the petitioners had filed
a satisfactory bond in the sum of one hundred thousand pesos (P100,000). It should be
specified in the writ that Atlas is directed to stop payment on the said check, that
respondent Union is enjoined from cashing the check and, if the check has not yet been
delivered to the union, then respondent sheriff is directed to return the check to Atlas. If
the check has been delivered to the Union, the latter is enjoined from distributing the
proceeds thereof to its members and to return the check to Atlas. (Vol. 1, Record.) with
the corresponding writ of preliminary injunction after the required bond was filed on May 9,
1979, after petitioners filed their supplemental petition of April 24, 1979 and Urgent Motion
of April 30, 1979.

It appears, however, as stated in the answer of respondent Union dated October 10, 1979,
that "the check turned over by the Sheriff of the NLRC to herein respondent on April 20,
1979 was encashed on April 23, 1979 and the proceeds thereof were duly distributed to
its members/claimants on the same day (April 23, 1979) and everyday thereafter, until the
distribution was finished on May 5, 1979. In fact, on May 10, 1979, respondent union filed
with the Labor Arbiter a "Report of Compliance and Motion for Admission and Approval of
Schedule of Distribution" dated May 10, 1979, a copy of which is herewith attached and
made part hereof as Annex "18". A corresponding order approving the aforesaid
distribution was issued by Labor Arbiter Manuel B. Lorenzo on May 12, 1979, a copy of
which is herewith attached and made part hereof as Annex "19". Under the present
circumstances, respondent union can only invoke the following legal principle: 1äwphï 1.ñ ët

The established principle is that when the events sought to be prevented by injunction or
prohibition have already happened, nothing more could be enjoined or prohibited because
nothing more could be done in reference thereto. (Aragones vs. Subido, L-24303, Sept.
23, 1968, 25 SCRA 95) (Pp. 442- 443, Vol. II, Record.)

Thus, in the light of the prayer of the petition herein which reads: 1äwphï1. ñët

WHEREFORE, petitioners respectfully pray that:

1. This Petition is given due course;

2. Pending determination of the merits of this Petition, a Writ of Preliminary Mandatory

Injunction upon such bond as this Honorable Court may fix, be issued ordering the Atlas
Consolidated Mining and Development Corporation to stop payment of the check
delivered to the NLRC Sheriff, the National Labor Relations Commission (Regional
Branch No. IV), particularly the Sheriff thereof, from delivering said check to the Union,
and the National Mines & Allied Workers' Union (NAMAWU-MIF) from distributing the
proceeds of the said check to its members; and to return the proceeds of the chock for
P4,341,290.84 to the petitioners;

3. After appropriate proceedings, judgment be rendered making the Writ of Preliminary

Mandatory Injunction permanent and setting aside the NLRC Order dated 18 April 1979.

Petitioners likewise pray for such other relief as may be deemed just and equitable under
the premises. (Page 18, Vol. I, Record.)

it would seem that this case is now moot and academic, the prohibitory injunction prayed
for being already impossible of enforcement, the acts sought to be enjoined having been
already consummated.

But it is obvious from the allegations of the petition that the main and real remedy aimed at
by petitioners is for them to be considered as in no way liable for the money paid to the
laborers of respondent Philippine Iron Mines by virtue of the writ of execution and
garnishment in question and that the obedience or compliance thereto by respondent
Atlas was uncalled for, hence Atlas should be held still liable to them for the amount
aforementioned it had delivered to the Sheriff in order to complete the P30 M purchase
price of the PIM properties sold by them to Atlas.

To complete the material facts summarized in our abovequoted resolution of May 4, 1979,
We have only to add the following:

1. That the judgment obtained by the respondent Union from the NLRC on December 22,
1975 was the result of an unfair labor practice case filed by said Union against PIM
because of its failure to comply with the condition imposed upon it by the Minister of Labor
when it was granted clearance to shut down its operation and lay off all its personnel due
to its bankruptcy to the effect that said clearance was "subject to such rights and benefits
accruing to the workers and employees of your company under (the) existing collective
bargaining agreement and relevant provisions of the Labor Code."

2. That PIM was a mortgage debtor separately of the Development Bank of the
Philippines and of herein petitioners,

3. On account of the failure of PIM to pay its obligations just referred to, PCIB and Manila
Bank foreclosed all mortgages in their favor on December 20, 1975 and as they were the
only bidders at the auction sale, they eventually secured final conveyances in their favor
of said properties.

4. To be sure, respondent Union had already been able to levy on certain properties of
PIM which allegedly were not covered by the mortgages to petitioners, and so there are
now in the lower courts suits wherein petitioners and the Union are contesting as to who of
them have the superior right over said properties. Additionally, there is a proceeding for
contempt pending in the NLRC because petitioners' men would not allow the Sheriff to
enforce execution of some of said properties.

We do not see any need to clutter this opinion with the details of those suits and contempt
proceedings, considering the view We are taking of the primordial issue as to whether or
not petitioners, as auction purchasers of the properties of PIM mortgaged to them and as
sellers thereof to Atlas are subject to the claims of the Union finally adjudged by the
NLRC.

There are, to Our mind, at least two indubitable grounds why petitioners are liable to the
Union for the judgment against PIM.

a. The deed of Sale (Annex M, Petition) by which petitioners conveyed their rights to Atlas,
contains the following unequivocal and unambiguous warranties: 1äwphï1. ñët

1. Warranties of Sellers. — Sellers (the petitioners in the case at bar) warrant that (1) they
have full and sufficient title over the PROPERTIES and that (2) the PROPERTIES are free
from all liens and encumbrances, (3) the BUYER (Atlas) being hereby saved free and
harmless from all claims in incidental actions of National Mines & Allied Workers' Union
(NAMAWU) including its action for annulment of the Sheriffs sale with respect to the
contents of a certain bodega (Civil Case No. 2727 of Branch II of the Camarines Norte
CFI); (4) the SELLERS have full rights and capacity to convey title to and effect peaceful
delivery of these properties their authority to do so having been obtained from the
government of the Republic of the Philippines, copy of which is enclosed and made an
integral part hereof; and taxes and charges thereon have been fully paid and should any
be accrued on the plate of these presents, the same shall be for SELLERS account.
(Emphasis supplied.) (Page 789, Vol. 11, Record.)

As Atlas very aptly puts it in its reply-memorandum dated June 13, 1980: 1äwphï 1.ñë t

To the extent of being repetitious but if only to bring home the point, under the
above-quoted Deed of Sale unconditionally and unqualifiedly protective of Atlas, the
petitioners, as the sellers, legally and validly warranted unto Atlas, as the buyer,
(1) full and (2) unencumbered title to the subject properties, (3) that they have full rights
and capacity to convey title to and effect peaceful delivery of these properties to Atlas,
and, very importantly, (4) that they shall hold Atlas "free and harmless from all claims and
incidental actions of National Mines & Allied Workers Unions (NAMAWU)" inclusive of
NAMAWU's action for annulment (Civil Case No. 2727, Branch 11, CFI-Camarines Norte).

The above warranties of the petitioners in favor of Atlas need no further interpretation.
With due respect, this Honorable Court must instead apply and enforce these warranties
against the petitioners, pristinely and unequivocally clear as these warranties are.
Clearly, the facts of the instant petition viewed vis-a-vis the above- quoted legal and
contractual warranties, guarantees and duties of the petitioners in favor of Atlas show that
the former have no cause of action against the latter. (Page 790, Vol. II, Record.)

b. We cannot but agree with the Solicitor General that: 1äw phï1 .ñët

Fourthly, since the decision of December 22, 1975 in the aforementioned NLRC case was
brought about by the cessation or shutdown of business by PIM, its workers enjoy first
preference as regards wages due for services rendered prior to the bankruptcy or
liquidation, as against other creditors, like herein petitioners, notwithstanding any
provision of law to the contrary. Thus, Article 110 of the New Labor Code, as amended, as
well as Section 10, Rule VIII, Book II, of the Rules and Regulations Implementing the New
Labor Code provide: 1äwphï1.ñ ët

Art. 110. Worker Preference in case of bankcruptcy. — In the event of bankcruptcy or

liquidation of an employer's business, his workers shall enjoy first preference as regards
wages due them for services rendered during the period prior to the bankcruptcy or
liquidation, any provision of law to the contrary notwithstanding. Unpaid wages shall be
paid in full before other creditors may establish any claim to share in the assets of the
employer. (New Labor Code)

Section 10. Payment of wages in case of bankcruptcy. — Unpaid wages earned by the
employees before the declaration of bankcruptcy or judicial liquidation of the employer's
business shall be given first preference and shall be paid in full before other creditors may
establish any claim to a share in the assets of the employees. (Rules and Regulations
Implementing the Labor Code, Book III, Rule VIII)

It must be noted that the word 'wage' paid to any employee is defined as "the
remuneration or earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece, or commission basis, or other
method of calculating the same, which is payable by an employer to an employee under a
written contract of employment for work done or to be done, or for services rendered or to
be rendered, and includes the fair and reasonable value, as determined by the Secretary
of Labor, of board, lodging or other facilities customarily furnished by the employer to the
employees." (Art. 97, par. f, Title II, Chapter I, New Labor Code). Stated differently,
'wages' refer to all remunerations, earnings and other benefits in terms of money accruing
to the (employees or workers for services rendered.

Thus, all benefits of the employees under a Collective Bargaining Agreement, like
severance pay, educational allowance, accrued vacation leave earned but not enjoyed, as
wen as workmen's compensation awards and unpaid salaries for services rendered, fan
under the term 'wages' which enjoy first preference over all other claims against the
employer. As such, therefore, even if the employer's properties encumbered by means of
a mortgage contract, still the workers'wages which enjoy first preference in case of
bankcruptcy or liquidation are duly protected by an automatic first lien over and above all
other earlier encumbrances on the said properties. Otherwise, workers'wages may be
imperilled by foreclosure of mortgages, and as a consequence, the aforecited provision of
the New Labor Code would be rendered meaningless. (Pp. 760-762, Vol. II, Record

The reason behind the provisions of the Labor Code giving preference to claims of labor in
the liquidation of a business or industrial concern is patent and manifest. It is but humane
and partakes of the divine that labor, as human beings, must be treated over and above
chattels, machineries and other kinds of properties and the interests of the employer who
can afford and survive the hardships of life better than their workers. Universal sense of
human justice, not to speak of our specific social justice and protection to labor
constitutional injunctions dictate the preferential lien that the above provisions accord to
labor.

Petitioners are trying to make much of the circumstance that the foreclosure sale in their
favor antedated by two days the judgment of the NLRC. In this connection, We hold that
the right of the Union members over the properties or assets of PIM became vested from
the date the Minister of Labor approved PIM's application for clearance on May 7, 1975. In
the most legal sense and, again, consonant with the principles of social justice and
protection to labor under the Constitution of the Philippines above referred to the NLRC
decision was only confirmatory of such right, not unlike the juridical effect of the issuance
of a Torrens title over a piece of land already covered by a legitimate Spanish title. And so,
when petitioners acquired the properties of PIM in the foreclosure sales, those properties
were already encumbered in favor of the Union members/claimants by force of law. Worse,
petitioners were well aware they were foreclosing on properties of a mortgage debtor who
had already secured from the Ministry of Labor a corresponding clearance for shutdown
due to liquidation, and, needless to say, petitioners are presumed to know the law on the
matter already referred to above.

Indeed, from whatever point of view We try to look at the situation of petitioners, it always
comes out that they cannot cheat the Union claimants/members of what is due them by
law for work actually done by them and other benefits. They bought the properties in
question with open eyes. They sold the same knowing they were saddled with the rights of
ït¢@lFº

the laborers of PIM under the clearance of the Ministry of Labor. The deed of sale
included, as it should, a warranty that the properties are free from all liens and
encumbrances. ATLAS had the right to receive the properties free from any lien and
encumbrance, and when the garnishment was served on it, it was perfectly in the right in
slashing the P4,298,307.77 from the P30M it had to pay petitioners in order to satisfy the
long existing and vested right of the laborers of financially moribund PIM, without any
liability to petitioners for reimbursement thereof.

With this declaration of the respective rights of the parties, it follows that all proceedings or
suits pending in the lower courts are subordinated to such declaration, if they may not be
deemed already moot and academic.

PREMISES CONSIDERED, judgment is hereby rendered dismissing the petition and

settling the respective rights of the parties hereto as above declared, with costs against
petitioners.

Aquino, Guerrero, De Castro and Escolin, JJ., concur. 1äwp hï1. ñët