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G.R.Nos. 139275-76 and 140949 November 25, 2004 LRTA vs. CA and T.N. LAL & CO., LTD. D E C I S I O N AUSTRIA-MARTINEZ, J.:

Both filed by petitioner Light Rail Transit Authority (LRTA), G.R. Nos. 139275-76 assail the Decision dated February 26, 1999, rendered by the Court of Appeals (CA) in the consolidated petitions docketed as CA-G.R. SP Nos. 44220 and 44227;1 G.R. No. 140949, on the other hand, questions the Decision dated November 12, 1999, issued by the CA in CA-G.R. SP No. 52382.2 These cases originated from the orders issued by the Regional Trial Court of Pasay City (Branch 111) in Civil Case No. 97-0423.

The antecedent facts of these consolidated petitions were summed up by the CA in CA-G.R. SP Nos. 44220 and 44227, as follows:

On October 1, 1986, T.N. LAL & CO., LTD. (private respondent herein and hereafter to be referred to as LAL for short) donated a stereo system to the LRTA, to provide music for relaxation and amusement in the 18 stations and all the rail vehicles of LRTA along its Line 1. On March 19, 1990, LAL and the LRTA entered into an agreement whereby LAL was authorized to air commercial advertisements through the aforesaid stereo system for a period of five (5) years and three (3) months from March 19, 1990, in consideration of a fee equivalent to thirty percent (30%) of the gross sales of advertisements (less any agency commission) annually, with minimum annual guaranteed fees. Subsequently, the period of the contract was amended to five (5) years from April 1, 1992, or until March 31, 1997.

On March 31, 1997, LAL filed an action for reformation of contract and damages (with application for preliminary mandatory & prohibitory injunction and Temporary Restraining Order) against LRTA with the Regional Trial Court at Pasay City, and the same was docketed as Civil Case No. 97-0423 and raffled to Branch 111, presided over by the respondent judge.

The complaint alleged that vibrations and noises coming from the light rail vehicles caused disruptions in the sound system, resulting in a sharp decline of advertisements aired over the said system. LAL requested for a moratorium of the agreement until the said problem can be solved, but LRTA refused to grant such request. Hence, the complaint prays that the contract be reformed by including therein a provision allowing a moratorium in case of disruption affecting the system attributable to mechanical/technical problems in the LRT line or light rail vehicles, including a pro rata extension of the agreement. The complaint also prays for a temporary restraining order and preliminary injunction ordering the defendant to maintain the status quo and prohibiting it or any of its agents from disrupting, cutting, severing or disconnecting the electric power supplied to the plaintiff’s sound system.

Upon receipt of the complaint, the respondent Judge issued a Temporary Restraining Order enjoining the parties to maintain the status quo, and restraining the LRTA from disrupting, cutting, severing or disconnecting the electric power supplied to LAL’s sound system installed in all the LRT stations and vehicles. The TRO was to expire on April 20, 1997.

On April 16, 1997, after notice and hearing, the respondent judge issued an Order, the dispositive portion of which is as follows:

WHEREFORE, with all the foregoing considerations, and subject to the condition of plaintiff posting a bond in the amount of Five Hundred Thousand Pesos (P500,000.00), Philippine Currency, conditioned to answer for any damage which the defendant may suffer by reason of the injunction herein granted, let therefore, a Writ of Preliminary Injunction be issued in favor of the plaintiff against the defendant who is enjoined from:

(a) Terminating or declaring as terminated the Agreement dated March 19, 1990 as

amended on August 6, 1993 and to observe the status quo before March 31, 1997; and,

(b) As a consequence thereof, to desist from removing, disrupting, interfering, disconnecting or tampering the power supply leading to plaintiff’s sound system, in all places, sites and locations within the defendant’s area of responsibility for the duration of this proceedings, UNLESS THIS ORDER IS EARLIER RECALLED by this Court.

SO ORDERED. (p. 57, Rollo)

On April 22, 1997, LRTA filed a Manifestation alleging that the failure of LAL to post a bond has rendered the Order dated April 16, 1997 ineffective. On the same day, LRTA unplugged the electrical connection of the sound system.

However, on April 25, 1997, LAL filed an injunction bond in the amount of P500,000.00, and the writ of preliminary injunction was issued by the respondent judge. The same was served on LRTA on the same day.

On April 25, 1997, LAL filed a "Motion to Cite the Defendant in Contempt", alleging that on April 22, 1997, in defiance of the court’s Order of March 31, 1997 (sic), the defendant disconnected and cut off the power supply to its sound system thereby disrupting and disturbing the regular programs and advertisements aired therein. The motion was set for hearing on April 29, 1997.

On April 28, 1997, LRTA filed a motion for postponement which was granted and the hearing was reset to May 15, 1997. However, the respondent judge issued an order dated April 29, 1997, the dispositive portion of which is as follows:

WHEREFORE, pending resolution of plaintiff’s ‘Motion To Cite Defendant In Contempt’ which is calendared anew on May 15, 1997 at 8:30 A.M., defendant Light Rail Transit Authority as well as its counsel are hereby ORDERED to comply with the Order of this Court dated April 16, 1997 to cause the complete restoration of the sound system to its original status/condition immediately upon receipt hereof. Let this Order be served for prompt implementation by the Sheriff of this Court who is directed to submit his report/return on the action taken in this regard.

so ordered. (p. 32, Rollo)

On April 30, 1997, the LRTA filed a motion for reconsideration of the said order.

On May 5, 1997, LAL filed another motion to cite Evangeline M. Razon, Geronima P. Anastacio and Atty. Moises S. Tolentino, [Jr.] for civil contempt, for refusing to comply with the order of the court dated April 29, 1997. The motion was requested to be submitted for[to] the court for proper decision "immediately upon receipt hereof".

On May 7, 1997, LRTA filed an opposition to the two motions to cite in contempt.

On May 13, 1997, the respondent judge issued the herein assailed order the dispositive portion of which is as follows:

WHEREFORE, this Court finds the defendants guilty of indirect contempt for defying the Orders of April 16 and 29, 1997 and the Writ of Preliminary Injunction issued in this case. Since the act committed can still be corrected or capable of being undone by the officers of the defendant corporation and/or its agents/operators themselves, let therefore a Warrant of Arrest be issued against the following persons, namely:

1) Evangeline M. Razon, Officer-in-charge, LRTA;

2) Geronima P. Anastacio, Head of LRTA, Legal Department; and,

3) Moises S. Tolentino, [Jr.], General Manager, Metro Transit Organization, Operators of the LRT system.

for their apprehension and incarceration/imprisonment until such time when they have performed or cause to be performed the act complained of in this case, by reconnecting, replugging or reactivating plaintiff’s sound system at all LRT facilities and restoring them in the same state and condition as it was on April 16, 1997.

SO ORDERED. (p. 25, Rollo)

Accordingly, warrants of arrest were issued against the persons named in the order. Motions to quash warrants of arrest were filed by LRTA, Evangeline M. Razon, [and] Geronima P. Anastacio. At the same time, the LRTA filed a motion for the respondent judge to inhibit himself from further hearing the case. …3

Atty. Moises S. Tolentino, Jr., General Manager of Metro Transit Organization (operators of the LRT system), then filed a special civil action for certiorari and prohibition (CA-G.R. SP No. 44227) on May 21, 1997, assailing the trial court’s order dated May 13, 1997, finding him, Evangeline M. Razon, and Geronima P. Anastacio, guilty of indirect contempt and ordering the issuance of warrants of arrest against them. Atty. Tolentino contended that the trial court issued the orders in disregard of substantive and procedural due process.4

Petitioner LRTA, meanwhile, filed a special civil action for certiorari (CA-G.R. SP No. 44220) on May 28, 1997, seeking the annulment of the following orders issued by the trial court: (1) Order dated April 29, 1997, ordering petitioner to comply with the trial court’s Order dated April 16, 1997; and (2) Order dated May 13, 1997, denying petitioner’s motion for reconsideration and finding Atty. Tolentino, Razon, and Anastacio, guilty of indirect contempt and ordering the issuance of warrants of arrest against them.

CA-G.R. SP Nos. 44220 and 44227 were thereafter consolidated as both involved related issues.5

On February 26, 1999, the CA rendered its decision in the above-mentioned cases, the decretal portion of which reads:

WHEREFORE, the petitions filed in these cases are hereby GIVEN DUE COURSE, and judgment is hereby rendered ANNULLING AND SETTING ASIDE the Order dated May 13, 1997 and the warrants of arrest in connection therewith, issued by the respondent judge in Civil Case No. 97-0423.

SO ORDERED.6

While the CA annulled the Order dated May 13, 1997 and the warrants of arrest issued by the trial court in Civil Case No. 97-0423, it nevertheless ruled that the writ of preliminary injunction issued by the trial court per Order dated April 16, 1997, as well as the Order dated April 29, 1997, is valid and binding.7

Respondent then filed with the trial court a Motion to Enforce the Order dated April 16, 1997. Petitioner, on the other hand, filed a Manifestation asking that the resolution of respondent’s motion be suspended on the ground that there appears to be an inconsistency with the body and the dispositive portion of the CA’s decision.8

Notwithstanding petitioner’s manifestation, the trial court issued an order dated April 7, 1999, granting respondent’s motion and ordering petitioner to immediately restore the power supply to respondent’s sound system within 24 hours.9 Petitioner filed a motion for reconsideration but the trial court denied it in another (second) order dated April 7, 1999.

On April 22, 1999, the trial court issued an order amending the second order dated April 7, 1999, to be dated April 20, 1999.10

Thus, petitioner filed on April 22, 1999, another special civil action for certiorari (CA-G.R. SP No. 52382) with the CA, contesting the trial court’s orders dated April 7, 1999 and April 20, 1999 (previously dated April 7, 1999).

Petitioner alleged that the assailed orders were issued with grave abuse of discretion, as these are not in accordance with the CA’s decision dated February 26, 1999.11

In the meantime, petitioner, on April 14, 1999, filed in CA-G.R. SP Nos. 44220 and 44227 a Motion for Clarification of Decision,12 but it was denied by the CA per Resolution dated May 21, 1999.13 Petitioner sought reconsideration but it was also denied per Resolution dated July 9, 1999,14 prompting petitioner to institute on July 29, 1999, a petition for certiorari with this Court, docketed as G.R. Nos. 139275-76.

The CA then promulgated its decision in CA-G.R. SP No. 52382 on November 12, 1999, dismissing the petition and affirming the assailed orders dated April 7, 1999 and April 20, 1999. Petitioner elevated the dismissal to this Court via petition for review filed on December 20, 1999, docketed as G.R. No. 140949.

On February 21, 2000, the Court ordered the consolidation of G.R. Nos. 139275-76 and G.R. No. 140949.15

In G.R. Nos. 139275-76, petitioner raises the following issues:

I

IF THE BODY OF THE DECISION IN THE SAID CONSOLIDATED CASES IS IN CONFLICT WHICH HAS BECOME FINAL CONFLICTS WITH THE DISPOSITIVE PORTION THEREOF, WHICH OF THEM SHALL PREVAIL?

II

CAN THE LIFETIME OF AN EXPIRED CONTRACT BE EXTENDED BY A PRELIMINARY INJUNCTION?16

In G.R. No. 140949, the following:

1. CAN A BODY OF THE DECISION [WHICH DOES NOT HAVE ANY SUPPORT IN OR CONTRARY TO THE DISPOSITIVE PORTION THEREOF] BE ENFORCED OR EXECUTED?

2. WHETHER OR NOT THE ORDER OF THE TRIAL COURT A QUO DATED APRIL 7, 1999 AND THE OTHER ONE ALSO DATED APRIL 7, 1999 [WHICH WAS LATER AMENDED BY THE TRIAL COURT A QUO TO BE DATED APRIL 20, 1999 IN AN ORDER DATED APRIL 22, 1999] ENFORCING THE BODY OF THE DECISION OF THE HONORABLE COURT OF APPEALS DATED FEBRUARY 26, 1999 IN CA-G.R. SP NO. 44220 AND CA-G.R. SP NO. 44227 ARE NULL AND VOID.17

Petitioner’s argument rests mainly on its adamant belief that the discussion of the CA in the body of its Decision dated February 26, 1999, rendered in CA-G.R. SP Nos. 44220 and 44227, is inconsistent with its fallo, which nullified and set aside the trial court’s order dated May 13, 1997. According to petitioner, since the May 13, 1997 order is premised on the April 16, 1997 (granting the issuance of the writ of preliminary injunction) and April 29, 1997 (enforcing compliance with the injunctive writ) orders, therefore, these orders are likewise invalid, and respondent cannot seek its enforcement.

The Court, however, has carefully read the assailed decision and cannot find anything inconsistent with the body and fallo. Even a student of law can understand its import. It has been said that, to understand the dispositive portion of a decision, one has only to ascertain the issues of the action.18

CA-G.R. SP Nos. 44220 and 44227 involved three issues. First is whether or not an injunction order, as embodied in the April 16, 1997 order, is effective prior to the posting of an injunction bond and the issuance of the injunctive writ;19 second, whether or not the Order of April 29, 1997 is valid and binding;20 and the third is whether or not the petitioners were validly held guilty of contempt of court per Order dated May 13, 1997.21

On the first issue, the CA categorically ruled that the April 16, 1997 order is binding even without the filing of the injunction bond.22 On the second issue, the CA likewise ruled that the April 29, 1997 Order is valid and binding.23It was on the third issue that the CA found grave abuse of discretion committed by the trial court, and the Order dated May 13, 1997 was consequently rendered null and void. The CA is clear on this score. It held, viz.:

The Motion to Cite Defendant in Contempt, dated April 23, 1997 (Annex "G", Petition, SP No. 44227) does not name them as respondents. It prays only that the defendant (LRTA) "and its officers and employees who are responsible for the act complained of" be held in contempt. It is only in the Motion to Cite Defendants for Civil Contempt Under Rule 71, Section 7 of the Revised Rules of Court dated May 5, 1997 (sic) that Evangeline M. Razon, Geronima P. Atanacio, and Moises S. Tolentino, [Jr.] are mentioned as "responsible on the continuing defiance of the Orders of the Honorable Court." But the said motion was fatally defective in that it did not contain a proper notice of hearing, as required by Sec. 4, Rule 15 of the Revised Rules of Court. It only contains the request to the Branch Clerk of Court that the said motion be submitted to the court "immediately upon receipt hereof."

Worst of all, the respondent judge issued his disputed order …, two (2) days before the date that he himself fixed for the hearing of the motion to cite

the defendant in contempt. Clearly, the said persons were denied their day in court.

Moreover, we have reviewed the transcript of the ex parte hearing conducted by the respondent judge on April 29, 1997 (on the motion to cite defendant in contempt dated April 23, 1997), and we find that the evidence presented against the abovenamed persons (who are now facing warrants of arrest) were basically hearsay testimony. … The respondent judge acted with grave abuse of discretion in issuing his disputed order, and its corresponding warrants of arrest, without a hearing, and on the basis of flimsy evidence.24 (Emphasis Ours)

It is plain to see that only the May 13, 1997 order was nullified by the CA. The April 16 and 29, 1997 orders remain valid and binding. Petitioner’s argument that these two orders should likewise have been nullified because the May 13, 1997 order is based thereon, is misplaced. The nullity of the May 13, 1997 order was not based on these 2 orders, but on grounds of lack of due process and evidence. These grounds inevitably led to the dispositive portion of the CA’s decision. It must be stressed that it is the dispositive part of the judgment that actually settles and declares the rights and obligations of the parties, finally, definitively, and authoritatively, notwithstanding the existence of inconsistent statements in the body that may tend to confuse.25

If there was any error committed by the CA, it was in failing to state in the dispositive portion of the decision that the petition was only partially granted. But this does not affect the decision, as its import can be grasped notwithstanding the lapse. Consequently, the Decision dated February 26, 1999 in CA-G.R. SP Nos. 44220 and 44227 nullifying the Order dated May 13, 1997 is a valid decision.

Nevertheless, the Court agrees with petitioner that the trial court committed grave abuse of discretion in issuing the injunctive writ.

Section 3 of Rule 58 of the Rules of Court provides for the grounds justifying the issuance of a preliminary injunction, to wit:

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.

The purpose of a preliminary injunction is to prevent threatened or continuous irremediable injury to some of the parties before their claims can be thoroughly studied and

adjudicated. To be entitled to an injunctive writ, the petitioner has the burden to establish the following requisites:26

(1) a right in esse or a clear and unmistakable right to be protected;

(2) a violation of that right;

(3) that there is an urgent and permanent act and urgent necessity for the writ to prevent serious damage.

In the present case, respondent’s entitlement to the injunctive writ is found on its prima facie legal right to remain in the premises and continue broadcasting commercial advertisements within the LRT stations. The only way to determine this is to look into the terms of the contract between petitioner and respondent, as it provides for their respective rights and obligations. It is fundamental that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control. No amount of extrinsic aids are required and no further extraneous sources are necessary in order to ascertain the parties’ intent 27

The "Agreement" contains the following stipulations, inter alia:

Whereas, for purposes of adjusting the five-year period corresponding to the annual minimum guaranteed amount disrupted by the start-up ninety-day period and the six-month moratorium period effective September 1, 1990, to end March 1, 1991, the parties have agreed to formally amend the "Agreement" to reflect the changes thereon;

…

1. Article I (a) of the "Agreement" is hereby amended to read as follows:

(a.) This Agreement shall be effective for five (5) years to commence on April 1, 1992 until March 31, 1997, unless sooner terminated as provided hereunder."28

The contract explicitly states that it was due to expire on March 31, 1997, the same day respondent filed its action for reformation of contract. When the trial court issued its Order dated April 16, 1997, ordering petitioner to refrain from terminating the contract and to retain respondent’s services until further orders from the court, the contract had already expired. Respondent, therefore, has no clear and unmistakable right to be protected by the issuance of the writ. This is but a consequence of their stipulation of a determinate period for its expiration.29 The injunction, in effect, virtually extended the original period agreed upon.

It was the trial court’s belief that to allow the contract to expire would render respondent’s action for reformation of contract moot and academic.30 Needless to say, a contract can be renewed, revived or extended only by mutual consent of the parties. No court can compel a party to agree to a contract through the instrumentality of a writ of preliminary injunction.31 Also, the possibility of irreparable damage without proof of actual existing right is not a ground for an injunction.32

WHEREFORE, the petitions in G.R. Nos. 139275-76 and 140949, are hereby GRANTED. The Decision dated February 26, 1999, in CA-G.R. SP Nos. 44220 and 44227, and the Decision dated November 12, 1999, in CA-G.R. SP No. 52382,

rendered by the Court of Appeals are hereby SET ASIDE. Consequently, the Orders dated April 16 and 29, 1997, issued by the Regional Trial Court of Pasay City (Branch 111) in Civil Case No. 97-0423, and all other orders appurtenant thereto, are NULLIFIED.

The trial court is ORDERED to proceed with Civil Case No. 97-0423 with immediate dispatch.

G.R. No. 144755 June 8, 2005

SPOUSES ELISEO F. ESTARES and ROSENDA P. ESTARES, petitioners, vs.COURT OF APPEALS, HON. DAMASO HERRERA as Presiding Judge of the RTC, Branch 24, Biñan, Laguna PROMINENT LENDING & CREDIT CORPORATION, PROVINCIAL SHERIFF OF LAGUNA and Sheriff IV ARNEL G. MAGAT, respondents.

D E C I S I O N AUSTRIA-MARTINEZ, J.:

Before us is a petition for certiorari and prohibition under Rule 65 of the Rules of Court which assails the Decision1 and Resolution of the Court of Appeals dated April 17, 2000 and July 7, 2000, respectively, in CA-G.R. SP No. 56123.

The factual background of the case is as follows:

On May 21, 1999, petitioner Spouses Eliseo F. Estares and Rosenda P. Estares (Estares spouses for brevity) filed a complaint for "Damages and Preliminary Prohibitory Injunction" against private respondent Prominent Lending & Credit Corporation (PLCC) before the Regional Trial Court, Branch 24, Biñan, Laguna, docketed as Civil Case No. B-5476.2

They alleged that: on January 12, 1998, they obtained a loan from PLCC for P800,000.00 secured by a real estate mortgage over a 363-square meter parcel of land with improvements situated in the Municipality of Santa Rosa, Laguna, covered by Transfer Certificate of Title (TCT) No. 99261; the promissory note and the real estate mortgage were falsified because they affixed their signatures on two blank documents; the monthly interest of 3.5% and 3% penalty on each delayed monthly interest are different from the 18% interest per annum to which they agreed to; for failure to pay their obligation despite repeated demands, PLCC filed a petition for extrajudicial foreclosure with the Office of the Provincial Sheriff of Laguna; and on June 8, 1999, the Sheriff sent a Notice of Extrajudicial Sale to the Estares spouses.

Accordingly, the Estares spouses sought to declare as null and void the promissory note and the real estate mortgage for not reflecting their true agreement. In the interim, they prayed for a temporary restraining order (TRO) and/or writ of preliminary injunction to enjoin PLCC from taking possession of the mortgaged property and proceeding with the extrajudicial sale scheduled on July 13, 1999 at 10:00 a.m.

On June 30, 1999, the Estares spouses amended their complaint to include the Register of Deeds of Laguna-Calamba Branch, the Provincial Sheriff of Laguna and Sheriff IV Arnel G. Magat as party-defendants.3

On July 12, 1999, the trial court issued a TRO in favor of the Estares spouses.4 The parties subsequently agreed to maintain the status quo until August 20, 1999.5

On August 6, 1999, PLCC filed its Answer with Counterclaim alleging that the Estares spouses were duly apprised of the terms and conditions of the loan, including the rate of interest, penalties and other charges, in accordance with the Truth in Lending Act or Republic Act No. 3765. It opposed the prayer for restraining order on the ground that there is no factual and legal basis for its issuance since the Estares spouses’ fear of eviction is false.6

At the hearing on the Estares spouses’ application for a writ of preliminary injunction, Rosenda P. Estares (Rosenda for brevity) testified that: the loan proceeds of P637,000.00, received on January 12, 1998, was used in the improvement and renovation of their boarding house; they did not question PLCC in writing why they only received P637,000.00; when they received the Statement of Account, they did not question the figures appearing therein; when they received PLCC’s demand letter, they went to the former’s office not to question the loan’s terms and conditions but merely to request for extension of three months to pay their obligation. They adduced in evidence the promissory note, real estate mortgage, statement of account, petition for extrajudicial foreclosure and the notice of extrajudicial sale. The Estares spouses then rested their case.

In opposition to the application for a writ of preliminary injunction, PLCC presented its manager, Rey Arambulo, who testified that the Estares spouses were duly apprised of the terms and conditions of the loan, including the rate of interest, penalties and other charges, in accordance with the Truth in Lending Act or Republic Act No. 3765. It submitted the same evidence offered by the Estares spouses, along with the latter’s credit application, the credit investigation report, the receipts PLCC issued, and the disclosure statement on the loan.

On August 18, 1999, the trial court denied the Estares spouses’ application for a writ of preliminary injunction, holding that the latter failed to establish the facts necessary for an injunction to issue.7

On August 31, 1999, the Estares spouses filed a motion for reconsideration.8 During the hearing on the motion for reconsideration on September 17, 1999, Eliseo P. Estares (Eliseo for brevity) moved that he be allowed to testify on the circumstances of the loan but the trial court denied it. The trial court deemed it best that he be presented during the trial on the merits.9 On October 1, 1999, the trial court denied the motion for reconsideration.10

On December 7, 1999, the Estares spouses filed a petition for certiorari and prohibition in the Court of Appeals ascribing grave abuse of discretion upon the trial court in issuing the Orders dated August 18, 1999 and October 1, 1999 which denied their prayer for a writ of preliminary injunction and motion for reconsideration, respectively.11

On December 14, 1999, without giving due course to the petition, the Court of Appeals issued a Resolution requiring the PLCC to file its comment to the petition. The action on the Estares spouses’ application for a TRO and writ of preliminary injunction was deferred and held in abeyance until after receipt of the comment.12

With no restraining order enjoining him, Sheriff Magat conducted an auction sale on January 5, 2000, with PLCC as highest bidder for P1,500,000.00.13

In its Comment dated January 15, 2000, PLCC claimed that the trial court did not commit grave abuse of discretion in denying the Estares spouses’ application for a writ of preliminary injunction since the latter failed to prove their right to injunctive relief and the action sought to be enjoined has been rendered moot by the auction sale conducted on January 5, 2000.14

On April 17, 2000, the Court of Appeals dismissed the petition for lack of merit, holding that the trial court did not abuse its discretion in denying the Estares spouses’ application for a writ of preliminary injunction since the latter failed to prove the requisites for the issuance thereof. 15

The Estares spouses then moved for reconsideration of the April 17, 2000 decision. In addition, they prayed that the auction sale on January 5, 2000, as well as the minutes of auction sale and certificate of sale, be declared null and void not only because there was no publication of the notice of auction sale but the auction sale preempted the Court of Appeals in the disposition of the case and was conducted in defiance of the Resolution dated December 14, 1999.16

On July 7, 2000, the Court of Appeals denied the Estares spouses’ motion for reconsideration.17

On September 16, 2000, the Estares spouses filed the present petition for certiorari and prohibition anchored on the following grounds:

I

THE COURT OF APPEALS ERRED IN NOT GRANTING A WRIT OF PRELIMINARY INJUNCTION TO PREVENT RESPONDENTS PLCC AND PROVINCIAL SHERIFF OF LAGUNA/ SHERIFF ARNEL MAGAT FROM FORECLOSING THE MORTGAGE AND CONDUCTING THE AUCTION SALE OF PETITIONERS’ PROPERTY AND/OR IN UPHOLDING THE ORDER DATED AUGUST 18, 1999 OF JUDGE DAMASO A. HERRERA, RTC-BRANCH 24, LAGUNA.

II

THE COURT OF APPEALS ERRED IN NOT DECLARING AS NULL AND VOID AND/OR SETTING ASIDE THE AUCTION SALE OF THE PETITIONERS’ HOUSE AND LOT CONDUCTED BY SHERIFF ARNEL MAGAT ON JANUARY 5, 2000 FOR LACK OF RE-PUBLICATION OF NOTICE OF EXTRA-JUDICIAL SALE, FOR PRE-EMPTING THE COURT OF APPEALS IN DECIDING THE CASE, AND FOR RENDERING THE PETITION IN CA-G.R. SP NO. 56123 MOOT AND ACADEMIC.

III

THE COURT OF APPEALS ERRED IN NOT DECLARING DENIAL OF DUE PROCESS TO OVERSEAS CONTRACT WORKER ELISEO ESTARES WHEN JUDGE DAMASO A. HERRERA REFUSED TO ALLOW HIM TO TESTIFY ON THE CIRCUMSTANCES OF THEIR LOAN WITH PLCC.18

Anent the first ground, the Estares spouses insist that they firmly established their right to injunctive relief. They claim that the promissory note, credit application, disbursement voucher, disclosure statement and real estate mortgage are falsified; the promissory note is not reflective of the true amount of the loan, as well as the term, interest and charges thereon; the P126,362.28 represent additional charges, not as part of the loan, that were not agreed upon prior to or before the consummation of the loan; and the amount of the loan and rate of interest stated in the falsified promissory note are fictitious or simulated.

With respect to the second ground, they maintain that the auction sale conducted on January 5, 2000 should be nullified because it lacked republication of the notice of auction sale and it was conducted in violation of the Court of Appeals’ Resolution dated December 14, 1999 which enjoined the parties to maintain the status quo pending the filing by the respondents of their Comment to the petition. They argue that PLCC and Sheriff Magat preempted the Court of Appeals from resolving their petition by conducting the auction sale on January 5, 2000.

As to the third ground, they aver that Eliseo was denied due process when the trial court refused to allow him to testify during the hearing on the motion for reconsideration. They contend that Eliseo, an overseas contract worker, purposely took leave from work in the Middle East to testify on the circumstances of the loan and his testimony was material to clarify the matter of notarization of the real estate mortgage and show that said document was falsified.

On October 2, 2000, the Court granted the TRO prayed for in the petition and required the respondents to comment thereon.19

In its Comment dated October 25, 2000, PLCC asserts that the petition should be dismissed for being deficient on both procedural and substantive aspects.

As to the procedural aspect, PLCC posits that the petition is filed beyond the sixty-day period required by the rules and therefore filed out of time. PLCC further claims that the verification and certification of non-forum shopping are both insufficient. The verification speaks of a "Pre-Trial Brief" while the certification of non-forum shopping was executed only by Rosenda.

As to the substance of the petition, PLCC argues that the Estares spouses failed to establish their right to injunctive relief; the validity of the January 5, 2000 auction sale was brought only in the motion for reconsideration which is improper because it is a factual issue best addressed to the trial court; Sheriff Magat did not preempt the Court of Appeals in deciding CA-G.R. SP No. 56123 when he conducted the auction sale on January 5, 2000 because the Resolution dated December 14, 1999 of the said court did not suspend or restrain the sheriff from conducting the foreclosure sale; Eliseo was not denied due process because he sought to testify on factual matters in the hearing on their motion for reconsideration which is improper as factual matters are best brought and proved during the trial on the merits of the case.

The Court gave due course to the petition and required the parties to submit their respective memoranda20 which they complied with.21

Before ruling on the issues raised in the petition, it is necessary to dwell on the procedural aspects of the case.

From a reading of the grounds on which the instant petition for certiorari and prohibition are based, it is readily apparent that the Estares spouses are appealing a decision of the Court of Appeals by resorting to Rule 65, when their remedy should be based on Rule 45 of the Rules of Court. A petition for review under Rule 45 is not similar to a petition for certiorari under Rule 65.

Under Rule 45, decisions, final orders or resolutions of the Court of Appeals in any case, i.e., regardless of the nature of the action or proceedings involved, may be appealed to us by filing a petition for review on certiorari, which would be but a continuation of the appellate process over the original case.22 In contrast, a special civil action under Rule 65 is an independent action based on the specific grounds therein provided and proper only if there is no appeal or any plain, speedy and adequate remedy in the ordinary course of law.23 Thus, certiorari cannot be availed of as a substitute for the lost remedy of an ordinary appeal.24

By their own account, the Estares spouses received the Order dated July 7, 2000 denying their motion for reconsideration from the Court of Appeals on July 18, 2000. Instead of filing a petition for review with this Court within 15 days thereof or until August 2, 2000, they filed this special civil action by registered mail on September 16, 2000 or 60 days from receipt of the Order dated July 7, 2000. By then, they had already lost the remedy of appeal. By availing of a wrong remedy, the instant petition should have merited outright dismissal.

Concerning the verification, we note that Rosenda stated therein that she caused the preparation of the "foregoing Pre-Trial Brief" but we consider the same as a slight error and

honest mistake in the preparation of the petition. In any event, the purpose of requiring a verification is simply to secure an assurance that the allegations of the petition have been made in good faith; or are true and correct, not merely speculative.25 This requirement is simply a condition affecting the form of pleadings, and noncompliance therewith does not necessarily render it fatally defective.26 Indeed, verification is only a formal, not a jurisdictional, requirement.27

With regard to the certification of non-forum shopping signed only by Rosenda, the rule is that the certificate of non-forum shopping must be signed by all the petitioners or plaintiffs in a case and the signing by only one of them is insufficient because a lone signatory cannot be presumed to have personal knowledge of the matters required to be stated in the attestation.28

However, the Court has also stressed that the rules on forum shopping, which were designed to promote and facilitate the orderly administration of justice, should not be interpreted with such absolute literalness as to subvert its own ultimate and legitimate objective which is simply to prohibit and penalize the evils of forumshopping.29 The fact that the rules on forumshopping require strict compliance merely underscores its mandatory nature that it cannot be dispensed with or its requirements altogether disregarded, but it does not thereby interdict substantial compliance with its provisions under justifiable circumstances.30

We find that the execution by Rosenda of the certificate of non-forum shopping in behalf of her co-petitioner and husband, Eliseo, constitutes substantial compliance with the Rules. After all they share a common interest in the property involved since it is conjugal property, and the petition questioning the propriety of the decision of the Court of Appeals originated from an action brought by the spouses, and is clearly intended for the benefit of the conjugal partnership. Considering that the husband was at that time an overseas contract worker working in Algeria, whereas the petition was prepared in Sta. Rosa, Laguna, a rigid application of the rules on forumshopping that would disauthorize the wife’s signing the certification in her behalf and that of her husband is too harsh and clearly uncalled for.31

In any event, we find that this petition must still be dismissed as the Court of Appeals did not commit any grave abuse of discretion amounting to want or excess of jurisdiction in dismissing the petition.

Generally, injunction is a preservative remedy for the protection of substantive rights or interests. It is not a cause of action in itself but merely a provisional remedy, an adjunct to a main suit. The controlling reason for the existence of the judicial power to issue the writ is that the court may thereby prevent a threatened or continuous irremediable injury to some of the parties before their claims can be thoroughly investigated and advisedly adjudicated. It is to be resorted to only when there is a pressing necessity to avoid injurious consequences which cannot be remedied under any standard of compensation. The application of the writ rests upon an alleged existence of an emergency or of a special reason for such an order before the case can be regularly heard, and the essential conditions for granting such temporary injunctive relief are that the complaint alleges facts which appear to be sufficient to constitute a cause of action for injunction and that on the entire showing from both sides, it appears, in view of all the circumstances, that the injunction is reasonably

necessary to protect the legal rights of plaintiff pending the litigation.32

The Estares spouses had the burden in the trial court to establish the following requirements for them to be entitled to injunctive relief: (a) the existence of their right to be protected; and (b) that the acts against which the injunction is to be directed are violative of such right.33] To be entitled to an injunctive writ, the petitioner must show, inter alia, the existence of a clear and unmistakable right and an urgent and paramount necessity for the writ to prevent serious damage.34 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.35

In the present case, the Estares spouses failed to establish their right to injunctive relief. They do not deny that they are indebted to PLCC but only question the amount thereof. Their property is by their own choice encumbered by a real estate mortgage. Upon the nonpayment of the loan, which was secured by the mortgage, the mortgaged property is properly subject to a foreclosure sale.

Rosenda’s testimony sealed the fate of the necessity of the writ of preliminary injunction. She admitted that: they did not question PLCC in writing why they only received P637,000.00; they did not question the figures appearing in the Statement of Account when they received it; and, when they received PLCC’s demand letter, they went to the former’s office not to question the loan’s terms and conditions but merely to request for extension of three months to pay their obligation.36 She acknowledged that they only raised the alleged discrepancy of the amount loaned and the amount received, as well as the blank documents which they allegedly signed, after PLCC initiated the foreclosure proceedings.37

It must be stressed that the assessment and evaluation of evidence in the issuance of the writ of preliminary injunction involve findings of facts ordinarily left to the trial court for its conclusive determination.38 As such, a trial court’s decision to grant or to deny injunctive relief will not be set aside on appeal unless the court abused its discretion. In granting or denying injunctive relief, a court abuses its discretion when it lacks jurisdiction, fails to consider and make a record of the factors relevant to its determination, relies on clearly erroneous factual findings, considers clearly irrelevant or improper factors, clearly gives too much weight to one factor, relies on erroneous conclusions of law or equity, or misapplies its factual or legal conclusions.39

In the present case, the Estares spouses clearly 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. Hence, the Court of Appeals did not commit a grave abuse of its discretion amounting to excess or lack of jurisdiction in dismissing petitioners’ petition for certiorari.

There is likewise no merit to the claim that the Court of Appeals gravely abused its discretion when it denied the prayer to nullify the auction sale held on January 5, 2000 for lack of republication of the notice of auction sale and for preempting the Court of Appeals in deciding the case and rendering the petition in CA-G.R. SP No. 56123 moot and academic.

The absence of republication of the notice of auction sale is a factual matter which by the weight of judicial precedents

cannot be inquired into by this Court in a petition for certiorari. It is best addressed to the attention of the trial court and taken up in the trial of the case, necessitating presentation of evidence by both parties. The propriety of the auction sale is a matter which the trial court is in the best position to determine. For it is basic that certiorari under Rule 65 is a remedy narrow in scope and inflexible in character. It is not a general utility tool in the legal workshop.40 It offers only a limited form of review. Its principal function is to keep an inferior tribunal within its jurisdiction.41 It can be invoked only for an error of jurisdiction, that is, one where the act complained of was issued by the court, officer or a quasi-judicial body without or in excess of jurisdiction, or with grave abuse of discretion which is tantamount to lack or in excess of jurisdiction,42 not to be used for any other purpose,43 such as to cure errors in proceedings or to correct erroneous conclusions of law or fact.44 Again suffice it to say that the only issue settled here is the propriety of the non-issuance of a writ of preliminary injunction pending the final outcome of the case.

As to petitioners’ assertion that the Court of Appeals in its Resolution dated December 14, 1999 impliedly directed the parties to maintain the status quo, we deemed it worthy to quote in full the said Resolution, thus:

Without necessarily giving due course to the petition, the Court requires the respondents to file their comment (not motion to dismiss) within ten (10) days from notice, which may be treated as their Answer should the petition be given due course.

Respondents are likewise ordered to show cause in the same Comment why a temporary restraining order and writ of preliminary injunction should not be issued.

The action of the petitioners’ application for a temporary restraining order and writ of preliminary injunction is deferred and held in abeyance until after receipt of respondents’ Comment.45

Clearly, the Court of Appeals did not give due course to the petition but merely required PLCC to comment thereon. The Court of Appeals did not enjoin the conduct of the auction sale. In any case, the necessity for the issuance of the writ of injunction has been found wanting.

Lastly, the Estares spouses’ claim that Eliseo was denied due process when the trial court refused to allow him to testify during hearing on the motion for reconsideration deserves scant consideration.

It must be remembered that a writ of preliminary injunction is generally based solely on initial and incomplete evidence. The evidence submitted during the hearing on an application for a writ of preliminary injunction is not conclusive or complete for only a "sampling" is needed to give the trial court an idea of the justification for the preliminary injunction pending the decision of the case on the merits.46

We note that it was the Estares spouses’ choice to present only Rosenda to testify on the circumstances of the loan at the hearing on their application for a writ of preliminary injunction and they cannot assert that Eliseo should have been accorded that opportunity during the hearing on the motion for reconsideration. The essence of due process is found in the reasonable opportunity to be heard and submit any evidence one may have in support of one's defense. What

the law proscribes is the lack of opportunity to be heard.47 As long as a party is given the opportunity to defend his interests in due course, he would have no reason to complain, for it is this opportunity to be heard that makes up the essence of due process.48 Eliseo cannot complain that he was deprived of due process since he is given the full opportunity to testify on the circumstances of the loan during the trial of the main case.49

All told, no grave abuse of discretion could therefore be imputed to the Court of Appeals in dismissing petitioners’ petition for certiorari with prohibition, for lack of merit.

WHEREFORE, the instant petition for certiorari and prohibition is DISMISSED. The assailed Decision and Resolution of the Court of Appeals dated April 17, 2000 and July 7, 2000, respectively, in CA-G.R. SP No. 56123 are AFFIRMED in all respects. The temporary restraining order issued by this Court is lifted. Costs against petitioners.

G.R. No. 140058            August 1, 2002

MABAYO FARMS, INC., herein represented by its President MRS. RORAIMA SILVA, petitioner, vs.HON. COURT OF APPEALS and ANTONIO SANTOS, respondents.

R E S O L U T I O N

QUISUMBING, J.:

This petition for review seeks to reverse the decision1 promulgated on August 27, 1999, of the Court of Appeals in CA-G.R. SP No. 51375. The appellate court enjoined the enforcement of the writ of preliminary injunction dated April 14, 1998, issued by the Regional Trial Court of Balanga, Bataan, Branch 1, in Civil Case No. 6695 against private respondent, Antonio Santos.

The factual antecedents of this case are as follows:

On August 22, 1969, the Bureau of Lands declared Francisco Domingo, Reynaldo Florida, Cornelio Pilipino and Severino Vistan, lawful possessors of Lot 1379 of the Morong, Bataan Cadastre. Lot 1379 consists of 144 hectares. Domingo, Florida, Pilipino and Vistan through their forebears and by themselves had been in open, notorious, and exclusive possession of portions of Lot 1379 since 1933 in the concept of owners. The Bureau then directed them to confirm their titles over the property by filing the appropriate applications for the portions of the property respectively occupied by them.1âwphi1.nêt

In October 1970, petitioner bought the respective portions of Domingo, Florida, Pilipino and Vistan, totaling 69,932 square meters and entered into a compromise settlement with six other persons occupying the property, whose applications had been rejected by the Bureau. Petitioner then filed an application for land registration docketed as LRC Cad. Rec. No. N-209 with the then Court of First Instance of Bataan, Branch 1. The application was contested by several oppositors, among them the heirs of one Toribio Alejandro.

On December 20, 1991, the trial court decided the land registration case in petitioner’s favor. The losing parties appealed to the Court of Appeals, where the case was docketed as CA-G.R. CV No. 40452. On March 14, 2000, the appellate court affirmed the lower court’s decision.2

In June 1997, a group of occupants entered the land, destroyed the fences and drove away livestock owned by petitioner.

On October 9, 1997, petitioner filed a complaint for injunction with damages, with a prayer for a temporary restraining order, docketed as Civil Case No. 6695, with the RTC of Balanga, Bataan. Named as defendants were Juanito Infante, Domingo Infante, Lito Mangalidan, Jaime Aquino, John Doe, Peter Doe, and Richard Doe.

The trial court issued the temporary restraining order (TRO) and on January 16, 1998, the sheriff served copies on the defendants. The sheriff accompanied petitioner’s president to the property where they found five (5) persons cultivating the land. The latter refused to give their names or receive copies of the TRO. They claimed that they were only farm workers of a certain Antonio Santos who allegedly owned the land.3

On April 14, 1998, the trial court issued a writ of preliminary injunction restraining the defendants or persons acting on their behalf from entering and cultivating the disputed property. The aforementioned writ was also served upon respondent who was occupying a portion of Lot No. 1379.4

On February 24, 1999, private respondent filed a special civil action for certiorari docketed as CA-G.R. SP No. 51375 with the Court of Appeals. Private respondent averred that he only learned about the writ of preliminary injunction on February 16, 1999, when he secured a copy of the order. He claimed that he was an innocent purchaser for value of the property from Francisco, Armando, and Conchita, all surnamed Alejandro and the injunction prevented him from using his property. He alleged that he was not a party to Civil Case No. 6695 and that it was grave abuse of discretion for the trial court to enforce the injunctive writ against him since it did not have jurisdiction over him.

On August 27, 1999, the appellate court decided CA-G.R. SP No. 51375 in private respondent’s favor, thus:

WHEREFORE, premises considered the instant Petition is hereby GRANTED. Public respondent is enjoined from imposing the questioned writ of preliminary injunction dated April 14, 199[8] against petitioner [Santos].

SO ORDERED.5

Hence, the instant petition, submitting the following issues for our consideration:

A. WHETHER [PRIVATE] RESPONDENT WAS DEPRIVED OF HIS CONSTITUTIONAL RIGHT TO BE HEARD.

B. WHETHER RULE 3, SEC. 11 OF THE 1997 RULES OF CIVIL PROCEDURE6 IS APPLICABLE IN THE ABOVE-ENTITLED CASE.

We find the lone issue to be: Is private respondent bound by the writ of preliminary injunction issued by the trial court?

First, petitioner contends that the injunctive writ of April 14, 1998 was issued not only against all named defendants in Civil Case No. 6695, but also against three unnamed "Does." It now argues that the "Does" in the complaint are all those who violated its rights, including private respondent. Petitioner asks us to note that the writ of injunction was served not only against the defendants in Civil Case No. 6695, but also against other persons who were seen entering and cultivating petitioner’s property, including private respondent. Since the latter personally received the injunctive order on June 5, 1998, he was already forewarned to intervene in Civil Case No. 6695 if he had any right or interest to protect in the disputed property. This he failed to do. Since private respondent did not then take the opportunity to present his side, he cannot now claim that he was denied due process when the writ was enforced against him.

In his comment, private respondent counters that he was not legally bound nor required by law to file his pleadings in Civil Case No. 6695 as he was not a party in said case. Likewise, he

was not required to act on or protest the injunctive writ in the aforementioned civil case. Private respondent avers that what petitioner wants is to have a continuing writ in its favor, to include not only the defendants in Civil Case No. 6695 but also all those who may subsequently intrude into the land dispute. Private respondent submits that the court a quo committed no error in describing petitioner’s posture as a violation of the fundamental rights to notice and hearing.

We have minutely scrutinized the order granting the writ of preliminary injunction and are unable to say that the writ applied to private respondent. The order merely stated "[L]et a writ of preliminary injunction be issued enjoining and restraining the defendants or any person or persons acting in their place or stead from further entering and cultivating the said land of the plaintiff subject matter of this case until further order from the Court."7The persons specifically enjoined in the order were the defendants in Civil Case No. 6695 or persons acting in their stead. Petitioner itself admitted that private respondent was not a defendant in Civil Case No. 6695 since "at the institution of the case in 1997, he (private respondent) did not have a right over any portion of petitioner’s lot."8 Neither was he a trespasser then.9 Also, nothing in the records indicate that private respondent was acting on behalf of any of the defendants. Taking all these into consideration, we must hold that the writ of preliminary injunction thus cannot be made to apply to private respondent.

A preliminary injunction is an order granted at any stage of an action prior to final judgment, requiring a person to refrain from a particular act.10 As an ancillary or preventive remedy, a writ of preliminary injunction may therefore be resorted to by a party to protect or preserve his rights and for no other purpose during the pendency of the principal action.11 Its object is to preserve the status quo until the merits of the case can be heard.12 It is not a cause of action in itself but merely a provisional remedy, an adjunct to a main suit.13 Thus, a person who is not a party in the main suit, like private respondent in the instant case, cannot be bound by an ancillary writ, such as the writ of preliminary injunction issued against the defendants in Civil Case No. 6695. He cannot be affected by any proceeding to which he is a stranger.14

Second, petitioner contends that the Court of Appeals erred when it observed that petitioner should have impleaded private respondent as defendant in Civil Case No. 6695 pursuant to Section 11, Rule 3 of the 1997 Rules of Civil Procedure.15 Instead, private respondent should have intervened in Civil Case No. 6695 to protect his rights. Petitioner avers that at the time the injunctive writ was issued, it had already rested its case and to require it to amend its complaint to include private respondent was too late.

Private respondent counters that there was no reason why Section 11, Rule 3 of the 1997 Rules of Civil Procedure should not be made to apply to Civil Case No. 6695. He argues that contrary to petitioner’s posture, his inclusion as a defendant in Civil Case No. 6695 is procedurally correct since no final judgment had yet been rendered in said case. Moreover, he avers that petitioner cannot insist that private respondent be vigilant in protecting his rights by intervening in Civil Case No. 6695.1âwphi1.nêt

We agree with private respondent. First, private respondent had no duty to intervene in the proceedings in Civil Case No. 6695. Intervention in an action is neither compulsory nor mandatory but only optional and permissive.16Second, to warrant intervention, two requisites must concur: (a) the movant has a legal interest in the matter in litigation,17 and (b) intervention must not unduly delay or prejudice the adjudication of the rights of the parties18nor should the claim of the intervenor be capable of being properly decided in a

separate proceeding.19 The interest, which entitles a person to intervene in a suit, must involve the matter in litigation and of such direct and immediate character that the intervenor will either gain or lose by the direct legal operation and effect of the judgment.20 Civil Case No. 6695 was an action for permanent injunction and damages. As a stranger to the case, private respondent had neither legal interest in a permanent injunction nor an interest on the damages to be imposed, if any, in Civil Case No. 6695. To allow him to intervene would have unnecessarily complicated and prolonged the case.

We agree with the Court of Appeals that to make the injunctive writ applicable against private respondent, petitioner should have impleaded the latter as an additional defendant in Civil Case No. 6695. Petitioner’s insistence that it had rested its case and hence was too late to include defendant finds no support in Section 11. The rule categorically provides that "Parties may be dropped or added by order of the court on motion of any party or on its own initiative at any stage of the action (stress supplied) and on such terms as are just."21 We find it inexplicable why petitioner pointedly resisted the advice of the appellate court to implead private respondent as an additional defendant in Civil Case No. 6695.

WHEREFORE, the instant petition is DENIED and the assailed decision of the Court of Appeals in CA-G.R. SP No. 51375 AFFIRMED. No pronouncement as to costs.

CHINA BANKING CORPORATION, SPOUSES JOEY & MARY JEANNIE CASTRO and SPOUSES RICHARD & EDITHA NOGOY,Petitioners,

- versus -

BENJAMIN CO, ENGR. DALE OLEA and THREE KINGS CONSTRUCTION & REALTY CORPORATION, Respondents.

G.R. No. 174569

Present:

QUISUMBING, J., Chairperson,

CARPIO MORALES,TINGA, VELASCO, JR., and BRION, JJ.

Promulgated:September 17, 2008

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N

CARPIO MORALES, J.:

Petitioner China Banking Corporation sold a lot located at St. Benedict Subdivision, Sindalan, San Fernando, Pampanga, which was covered by Transfer Certificate of Title (TCT) No. 450216-R to petitioner-spouses Joey and Mary Jeannie Castro (the Castro spouses). It sold two other lots also located in the same place covered by TCT Nos. 450212-R and 450213-R to petitioner-spouses Richard and Editha Nogoy (the Nogoy spouses).

The lots of the Castro spouses and the Nogoy spouses are commonly bound on their southeastern side by Lot No. 3783-E, which is covered by TCT No. 269758-R in the name of respondent Benjamin Co (Co) and his siblings.

Co and his siblings entered into a joint venture with respondent Three Kings Construction and Realty Corporation for the development of the Northwoods Estates, a subdivision project covering Lot No. 3783-E and adjacent lots. For this purpose, they contracted the services of respondent, Engineer Dale Olea.

In 2003, respondents started constructing a perimeter wall on Lot No. 3783-E.

On November 28, 2003, petitioners, through counsel, wrote respondents asking them to stop constructing the wall, and remove all installed construction materials and restore the former condition of Lot No. [3]783-E which they (petitioners) claimed to be a road lot.1 They also claimed that the construction obstructed and closed the only means of ingress and egress of the Nogoy spouses and their family, and at the same time, caved in and impeded the ventilation and clearance due the Castro spouses’ residential house.2

Petitioners’ demand remained unheeded, prompting them to file before the Regional Trial Court (RTC) of San Fernando, Pampanga a complaint,3 docketed as Civil Case No. 12834, for injunction, restoration of road lot/right of way and damages with prayer for temporary restraining order and/or writ of preliminary injunction.

Before respondents filed their Answer,4 petitioners filed an Amended Complaint,5 alleging that the construction of the perimeter wall was almost finished and thus modifying their prayer for a writ of preliminary injunction to a writ of preliminary mandatory injunction, viz:

WHEREFORE, it is respectfully prayed of this Honorable Court that:

A. Before trial on the merits, a temporary restraining order be issued immediately restraining the defendants from doing further construction of the perimeter wall on the premises, and thereafter, a writ ofpreliminary mandatory injunction be issued enjoining the defendants from perpetrating and continuing with the said act and directing them jointly and severally, to restore the road lot, Lot 3783-E to its previous condition.

x x x x 6 (Underscoring in the original; emphasis supplied)

After hearing petitioners’ application for a writ of preliminary mandatory injunction, Branch 44 of the San Fernando, Pampanga RTC denied the same, without prejudice to its resolution after the trial of the case on the merits, in light of the following considerations:

After a judicious evaluation of the evidence, the Commissioner’s Report on the Conduct of the Ocular Inspection held on February 14, 2004, as well as the pleadings, the Court is of the opinion and so holds that a writ of preliminary injunction should not be issued at this time. Plaintiffs have not clearly shown that their rights have been violated and that they are entitled to the relief prayed for and that irreparable damage would be suffered by them if an injunction is not issued. Whether lot 3783-E is a road lot or not is a factual issue which should be resolved after the presentation of evidence. This Court is not inclined to rely only on the subdivision plans presented by plaintiffs since, as correctly argued by defendants, the subdivision plans do not refer to lot 3783-E hence are not conclusive as to the status or classification of lot 3783-E. This court notes further that Subdivision Plan Psd-03-000577 of Lot 3783 from which the other subdivision plans originates [ sic ] does not indicate lot 3783-E as a road lot.

Even the physical evidence reveals that lot 3783-E is not a road lot. The Court noticed during the ocular inspection on February 14, 2004, that there is a PLDT box almost in front of lot 3783-E. There is no visible pathway either in the form of a beaten path or paved path on lot 3783-E. Visible to everyone including this court are wild plants, grasses, and bushes of various kinds. Lot 3783-E could not have been a road lot because Sps. Nogoy, one of the plaintiffs, even built a structure on lot 3783-E which they used as a coffin factory.

Plaintiffs failed to prove that they will be prejudiced by the construction of the wall. The ocular inspection showed that they will not lose access to their residences. As a matter of fact, lot 3783-E is not being used as an access road to their residences and there is an existing secondary road within St. Benedict Subdivision that serves as the main access road to the highway. With respect to the blocking of ventilation and light of the residence of the Sps. Castro, suffice it to state that they are not deprived of light and ventilation. The perimeter wall of the defendants is situated on the left side of the garage and its front entrance is still open and freely accessible.

This is indeed an issue of fact which should be ventilated in a full blown trial, determinable through further presentation of evidence by the parties. x x x

x x x x

WHEREFORE, premises considered, plaintiffs’ application for the issuance of a writ of preliminary mandatory injunction is denied without prejudice to its resolution after the trial of the case on the merits.7(Underscoring supplied)

Their Motion for Reconsideration8 having been denied, petitioners filed a petition for certiorari9 before the Court of Appeals which dismissed the same10 and denied their subsequent Motion for Reconsideration.11

Hence, the petitioners filed the present petition,12 faulting the Court of Appeals in

I.

. . . DECID[ING] AND RESOLV[ING] A QUESTION OF SUBSTANCE NOT IN ACCORD WITH THE BASIC GOVERNING LAW (PRESIDENTIAL DECREE NO. 1529) AND APPLICABLE DECISIONS OF THIS HONORABLE COURT.

II.

. . . PROMOTING THE LOWER COURT’S RATIOCINATION THAT PETITIONERS ARE SEEKING THE ESTABLISHMENT OF AN EASEMENT OF RIGHT OF WAY, WHEN THEY ARE CLAIMING THE ENFORCEMENT OF THE STATUTORY PROHIBITION AGAINST CLOSURE OR DISPOSITION OF AN ESTABLISHED ROAD LOT.

III.

. . . SANCTION[ING] THE LOWER COURT’S PATENT GRAVE ABUSE OF DISCRETION IN PERFUNCTORILY DENYING PETITIONERS’ APPLICATION FOR WRIT OF PRELIMINARY INJUNCTION.13

It is settled that the grant of a preliminary mandatory injunction rests on the sound discretion of the court, and the exercise of sound judicial discretion by the lower court should not be interfered with except in cases of manifest abuse.14

It is likewise settled that a court should avoid issuing a writ of preliminary mandatory injunction which would effectively dispose of the main case without trial.15

In the case at bar, petitioners base their prayer for preliminary mandatory injunction on Section 44 of Act No. 496 (as amended by Republic Act No. 440), Section 50 of Presidential Decree 1529, and their claim that Lot No. 3783-E is a road lot.

To be entitled to a writ of preliminary injunction, however, the petitioners must establish the following requisites: (a) the invasion of the right sought to be protected is material and substantial; (b) the right of the complainant is clear and unmistakable; and (c) there is an urgent and permanent necessity for the writ to prevent serious damage.16

Since a preliminary mandatory injunction commands the performance of an act, it does not preserve the status quo and is thus more cautiously regarded than a mere prohibitive injunction.17 Accordingly, the issuance of a writ of preliminary mandatory injunction is justified only in a clear case, free from doubt or dispute.18 When the complainant’s right is thus doubtful or disputed, he does not have a clear legal right and, therefore, the issuance of injunctive relief is improper.

Section 44 of Act 496,19 which petitioners invoke, provides:

x x x x

Any owner subdividing a tract of registered land into lots shall file with the Chief of the General Land Registration Office a subdivision plan of such land on which all boundaries, streets

and passageways, if any, shall be distinctly and accurately delineated. If no streets or passageways are indicated or no alteration of the perimeter of the land is made, and it appears that the land as subdivided does not need of them and that the plan has been approved by the Chief of the General Land Registration Office, or by the Director of Lands as provided in section fifty-eight of this Act, the Register of Deeds may issue new certificates of title for any lot in accordance with said subdivision plan. If there are streets and/or passageways, no new certificates shall be issued until said plan has been approved by the Court of First Instance of the province or city in which the land is situated. A petition for that purpose shall be filed by the registered owner, and the court after notice and hearing, and after considering the report of the Chief of the General Land Registration Office, may grant the petition, subject to the condition, which shall be noted on the proper certificate, that no portion of any street or passageway so delineated on the plan shall be closed or otherwise disposed of by the registered owner without approval of the court first had, or may render such judgment as justice and equity may require.20 (Underscoring supplied by the petitioners)

Section 50 of Presidential Decree No. 1529,21 which petitioners likewise invoke, provides:

SECTION 50. Subdivision and consolidation plans. – Any owner subdividing a tract of registered land into lots which do not constitute a subdivision project as defined and provided for under P.D. No. 957, shall file with the Commissioner of Land Registration or with the Bureau of Lands a subdivision plan of such land on which all boundaries, streets, passageways and waterways, if any, shall be distinctly and accurately delineated.

If a subdivision plan, be it simple or complex, duly approved by the Commissioner of Land Registration or the Bureau of Lands together with the approved technical descriptions and the corresponding owner's duplicate certificate of title is presented for registration, the Register of Deeds shall, without requiring further court approval of said plan, register the same in accordance with the provisions of the Land Registration Act, as amended: Provided, however, that the Register of Deeds shall annotate on the new certificate of title covering the street, passageway or open space, a memorandum to the effect that except by way of donation in favor of the national government, province, city or municipality, no portion of any street, passageway, waterway or open space so delineated on the plan shall be closed or otherwise disposed of by the registered owner without the approval of the Court of First Instance of the province or city in which the land is situated. x x x22 (Underscoring supplied by petitioner)

The best evidence thus that Lot No. 3783-E is a road lot would be a memorandum to that effect annotated on the certificate of title covering it. Petitioners presented TCT No. 185702-R covering Lot No. 3783-E in the name of Sunny Acres Realty Management Corporation which states that the registration is subject to "the restrictions imposed by Section 44 of Act 496, as amended by Rep. Act No. 440."23 The annotation does not explicitly state, however, that Lot No. 3783-E is a road lot.1awphi1.net

In any event, TCT No. 185702-R had been cancelled and in its stead was issued TCT No. 247778-R24which, in turn, was cancelled by TCT No. 269758-R25 in the name of respondent Co and his siblings.

TCT No. 247778-R and respondent Co’s TCT No. 269758-R do not now contain the aforementioned memorandum annotated on TCT No. 185702-R re the registration being "subject to restrictions imposed by Section 44 of Act 496, as amended by Republic Act No. 440." Given the immediately foregoing

circumstances, there is doubt on whether Lot No. 3783-E is covered by a road lot.

While petitioners correctly argue that certain requirements must be observed before encumbrances, in this case the condition of the lot’s registration as being subject to the law, may be discharged and before road lots may be appropriated26 gratuity assuming that the lot in question was indeed one, TCT Nos. 247778-R and 269758-R enjoy the presumption of regularity27 and the legal requirements for the removal of the memorandum annotated on TCT No. 185702-R are presumed to have been followed.28

At all events, given the following factual observations of the trial court after conducting an ocular inspection of Lot 3783-E, viz:

x x x The ocular inspection showed that [petitioners] will not lose access to their residences. As a matter of fact, lot 3783-E is not being used as an access road to their residences and there is an existing secondary road within St. Benedict Subdivision that serves as the main access road to the highway.29With respect to the blocking of ventilation and light of the residence of the Sps. Castro, suffice it to state that they are not deprived of light and ventilation. The perimeter wall of the defendants is situated on the left side of the garage and its front entrance is still open and freely accessible,30

and the absence of a showing that petitioners have an urgent and paramount need for a writ of preliminary mandatory injunction to prevent irreparable damage, they are not entitled to such writ.

WHEREFORE, the petition is DENIED.

G.R. No. 157494   December 10, 2004 BACOLOD CITY WATER DISTRICT, petitioner, vs. THE HON. EMMA C. LABAYEN, Presiding Judge, RTC of Bacolod City, Br. 46 and the City of Bacolod,respondents. D E C I S I O N PUNO, J.:

First, the chronology of facts. Petitioner Bacolod City Water District (BACIWA) is a water district established pursuant to Presidential Decree No. 198 as a government-owned and controlled corporation with original charter. It is in the business of providing safe and potable water to Bacolod City.

Public respondent City of Bacolod is a municipal corporation created by Commonwealth Act No. 326, otherwise known as the Charter of Bacolod.

On March 26, 1999, respondent City filed a case for Injunction With a Prayer for Temporary Restraining Order And/Or Preliminary Mandatory Injunction against petitioner in the sala of public respondent judge. The petition stated that on January 15, 1999, BACIWA published in the Visayan Daily Star,1 a local paper of general circulation, a Schedule of Automatic Water Rates Adjustments for the years 1999, 2000 and 2001. The rates were supposed to take effect seven (7) days after its posting in the local papers or on January 22, 1999. The increase was aborted after petitioner unilaterally suspended the January 22, 1999 scheduled implementation. On March 15, 1999, however, petitioner announced that the rate hike will be implemented on April 1, 1999. 2

Respondent City opposed. It alleged that the proposed water rates would violate due process as they were to be imposed without the public hearing required under Letter of Instructions No. 7003 and Presidential Decree No. 1479.4 Hence, it prayed that before the hearing of the main case, a temporary restraining order or a preliminary injunction be issued.5

On March 30, 1999, the court a quo issued an Order6 summoning the parties with their counsels to attend the preliminary hearing for the issuance of a temporary restraining order or preliminary mandatory injunction. On April 8, 1999, it required the parties to simultaneously submit their respective memoranda on whether it had jurisdiction over the case and whether a public hearing was conducted re the proposed increase in water rates.7

Petitioner filed its Position Paper dated April 15, 1999. It attached documents evidencing the conduct of extensive and lengthy public hearings in fifty-eight (58) of the sixty-one (61) barangays of Bacolod City. It opined that original jurisdiction over cases on rate review is vested in the Local Water Utilities Administration (LWUA); appellate jurisdiction is vested in the National Water Resources [Board] (NWRB) whose decisions shall be appealable to the Office of the President.8

On May 5, 1999, petitioner also filed a Motion to Dismiss. In an Order9 dated May 7, 1999, the court directed respondent City to file its Opposition to petitioner’s Motion to Dismiss within fifteen (15) days.

On June 17, 1999, respondent City filed a Motion to Set [for] Hearing10 its application for a temporary restraining order or preliminary mandatory injunction. It alleged that the parties had already submitted their respective memoranda and it has already submitted its Opposition to petitioner’s Motion to Dismiss. It also alleged that petitioner had already effected

the water rates increase and collection, hence, causing irreparable injury to the public.

Petitioner opposed the Motion. On July 20, 1999, respondent City filed its Reply to Opposition and reiterated that the application for the issuance of a temporary restraining order or preliminary mandatory injunction be heard since petitioner continued to violate the right of the public to due process and it might take time before the case would be finally resolved.11 On the same date, petitioner filed a Manifestation and Motion12 stating that the hearing may no longer be necessary as the respective positions of both parties have already been presented and amplified in their pleadings and memoranda.

On July 22, 1999, respondent trial court issued an Order13 stating that there was no more need to hear the caseon the merits14 as both parties have already submitted their position papers and documents to prove their respective allegations.

On July 23, 1999, petitioner filed its Reply15 to respondent City’s Opposition to the Motion to Dismiss reiterating that petitioner failed to exhaust administrative remedies provided by law hence the petition be dismissed for utter lack of merit.

After a hiatus of nearly seven (7) months, or on February 18, 2000, respondent City filed an Urgent Motion for the Issuance of Temporary Restraining Order And[/]Or Writ of Preliminary Injunction16 praying that the case be set for hearing on February 24, 2000. On the same date requested, respondent court heard respondent’s application for temporary restraining order and issued an Order17 commanding petitioner to stop, desist and refrain from implementing the proposed water rates for the year 2000 which were then supposed to take effect on March 1, 2000.

On March 7, 2000, petitioner filed an Urgent Motion for Reconsideration and Dissolution of the Temporary Restraining Order.18 Respondent court a quo issued on March 10, 2000 an Order19 directing respondent City to file an Opposition to the Urgent Motion. In its Opposition, respondent City20 contended that the temporary restraining order issued was not infirmed with procedural and substantive defects. It also averred that respondent court has jurisdiction over the case since the sole question of the lack of public hearing does not require the special knowledge or expertise of an administrative agency and may be resolved by respondent court, hence the doctrine of primary jurisdiction does not apply.

Respondent court continued with the proceedings by receiving the evidence of petitioner in support of its Motion for Reconsideration and Dissolution of Temporary Restraining Order. It further issued Orders dated March 17, 200021 and March 20, 2000.22

On April 6, 2000, respondent court issued an Order23 finding petitioner’s Urgent Motion for Reconsideration and Dissolution of Temporary Restraining Order moot and academic considering petitioner’s compliance of said temporary restraining order.

Four (4) days after, in an Order24 dated April 10, 2000, it denied petitioner’s Motion to Dismiss for lack of merit.

On April 19, 2000, respondent City filed a Manifestation praying that respondent trial court issue a writ of preliminary injunction against petitioner, stating thus:

A Temporary Restraining Order was issued against the respondents which, however, expired before the

parties were able to finish the presentation of their respective witnesses and evidences;

The instant case was submitted for resolution and decision of this Honorable Court during the last week of March but while awaiting the decision of this Honorable Court, several complaints had reached the petitioner that the respondents had already reflected in the water billings for the month of April the new water rates for the year 2000;

x x x 25

Petitioner, for its part, filed a Motion for Reconsideration26 of respondent trial court’s Order denying its Motion to Dismiss. Respondent City filed an Opposition to [the] Motion for Reconsideration27 on June 1, 2000.

Respondent court did not act upon petitioner’s Motion for Reconsideration until respondent City filed an [Ex Parte] Motion for Speedy Resolution28 of the case on October 6, 2000 praying that the case be resolved before the year 2000 ends in order to prevent the implementation of the water rates increase for the year 2001 which was to be imposed allegedly without the benefit of a public hearing.

On December 21, 2000, respondent court issued the assailed Decision29 granting the final injunction which allegedly confirmed the previous preliminary injunction.

Petitioner filed its Motion for Reconsideration30 of the assailed Decision on January 11, 2001 asserting, among others, that the case was not yet ripe for decision when the court granted the final injunction, the petitioner having had no opportunity to file its answer, avail of the mandatory pre-trial conference and have the case tried on the merits.

Respondent court denied the Motion for Reconsideration for lack of merit in an Order31 dated January 24, 2001. Petitioner then filed a special civil action for certiorari under Rule 65 in the Court of Appeals. It alleged that public respondent judge acted without or in excess of jurisdiction and/or with grave and patent abuse of discretion amounting to lack or excess of jurisdiction when she issued the final injunction in disregard of petitioner’s basic right to due process.32

The Court of Appeals dismissed the petition for review on certiorari, ratiocinating thus:

In the case at bar, the [O]rder of public respondent dated 24 February 2000, though termed by BACIWA as a temporary restraining order, is in fact a preliminary injunction. The period of the restraint was not limited. By its wordings, it can be safely inferred that the increased water rates must not be effected until final disposition of the main case. This note of semi-permanence simply cannot issue from a mere temporary restraining order. It must be further noted that the temporary restraining order has been elevated to the same level as the preliminary injunction in the procedure, grounds and requirements of its obtention by S[ection] 4, Rule 58. Thus, to set [a] distinction, the present practice is to categorically refer to it as a temporary restraining order. In which case, the omission by the public respondent in referring to the 24 February 2000 order as a temporary restraining order could not have been a mere oversight but deliberate.33

Resorting to this Court, petitioner raises the following issues:

I

THE COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED AND REFUSED TO RULE THAT RESPONDENT COURT HAD ACTED WITHOUT OR IN EXCESS OF JURISDICTION AND/OR WITH GRAVE ABUSE OF DISCRETION FOR ARBITRARILY AND CAPRICIOUSLY RENDERING A DECISION PURPORTING TO ISSUE A FINAL INJUNCTION AND CONFIRMING ITS ALLEGED PRELIMINARY INJUNCTION, DESPITE THE FACT THAT:

A. NO PRELIMINARY INJUNCTION HAD BEEN ISSUED;

B. THE RESPONDENT LOWER COURT DID NOT RESOLVE HEREIN PETITIONER’S MOTION FOR RECONSIDERATION OF THE ORDER DENYING PETITIONER’S MOTION TO DISMISS;

C. THE HEREIN PETITIONER HAD NOT YET FILED ITS ANSWER TO THE PETITION;

D. THERE WAS STILL NO JOINDER OF THE ISSUES SINCE NO ANSWER HAD YET BEEN FILED;

E. THE MANDATORY PRE-TRIAL CONFERENCE WAS NOT YET CONDUCTED;

F. THERE WAS NO TRIAL ON THE MERITS FOR THE MAIN CASE.

II

THE COURT OF APPEALS GRAVELY ERRED WHEN IT INSISTED THAT THE 24 FEBRUARY 2000 ORDER (ANNEX R) ISSUED BY THE TRIAL COURT WAS A PRELIMINARY INJUNCTION WHEN THE RECORDS CLEARLY AND INDUBITABLY SHOW THAT IT WAS A TEMPORARY RESTRAINING ORDER (TRO).

III

BY DISMISSING THE PETITION FOR CERTIORARI, THE COURT OF APPEALS GRAVELY ERRED WHEN IT EFFECTIVELY PREVENTED PETITIONER FROM FULLY VENTILATING ITS CASE IN THE MAIN ACTION DUE TO THE IRREGULAR AND CONFUSED PROCEEDINGS CONDUCTED BY THE RESPONDENT COURT.34

We rule in favor of petitioner.

The initial issue is the proper characterization of the Order dated February 24, 2000.

The sequence of events and the proceedings that transpired in the trial court make a clear conclusion that the Order issued was a temporary restraining order and not a preliminary injunction.

First. We quote the pertinent parts of the questioned Order:

x x x

When this motion was called for hearing wherein both parties have argued exhaustedly their respective sides, this court denied the ten (10) days

extension for further amplification of the arguments of the respondent to oppose the said motion for issuance of a temporary restraining order.

It appearing therefore, that the acts of the defendant will actually affect the plaintiff before the decision of this court can be rendered and in order to afford the court to pass on the issues without the same becoming moot and academic and considering the urgency of the matter that immediate action should be taken, and pursuant to Administrative Circular No. 6, Paragraph 4 and sub-paragraph 15 and The Interim Rules and Guidelines [set forth] by the Rules of Court, this court hereby orders the respondent[,] its agents, representatives or any person acting in his behalf to stop, desist and refrain from implementing in their billings the new water rate increase which will start on March 1, 2000. The Deputy Provincial Sheriff of this court is hereby ordered to furnish copy of this order to the respondent Bacolod City Water District as well as to its agents or representatives acting [o]n his behalf.

x x x 35 (emphases supplied)

It can be gleaned from the afore-quoted Order that what the trial court issued was a temporary restraining order and not a preliminary injunction. The trial court has always referred to it as a temporary restraining order in the succeeding Orders it issued on March 10, 200036 and April 6, 2000.37

The parties, in their succeeding pleadings,38 also referred to the assailed Order as a temporary restraining order. The petitioner filed an Urgent Motion for Reconsideration and Dissolution of Temporary Restraining Order (TRO)39 on March 1, 2000. This was opposed by respondent City itself in its Opposition to Motion for Reconsideration and Dissolution of Temporary Restraining Order (TRO)40 dated March 14, 2000. Further, respondent City, in its Manifestation dated April 19, 2000 stated, viz:

x x x

A Temporary Restraining Order was issued against the respondents which, however, expired before the parties were able to finish the presentation of their respective witnesses and evidences;

x x x

WHEREFORE, it is most respectfully prayed that while waiting for the decision and order of the Honorable Court, a preliminary injunction as prayed for in the petition be issued against the respondents.

x x x41 (emphases supplied)

It can be gleaned from the foregoing that both parties and respondent trial court have consistently referred to the directive as a temporary restraining order. It was only in the respondent court’s assailed Decision that the Order was referred to as a preliminary injunction, viz:

x x x

This Court therefore grants the final injunction prayed for restraining the respondent from the commission of the act complained of for the year

2001 and hereby confirming the preliminary injunction previously ordered.

x x x 42 (emphasis supplied)

Again, it was only when petitioner expressed its vehement objection on the ruling that the final injunction confirmed the preliminary injunction previously issued, when the respondent City and the respondent trial court started to insist that the questioned Order was a preliminary injunction. Given the previous undeviating references to it as a temporary restraining order, respondents cannot now consider it as a preliminary injunction to justify the validity of the assailed Decision. The attendant facts and circumstances clearly show that the respondent trial court issued a temporary restraining order.

Second. 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.43

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 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.44 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.45

A restraining order, on the other hand, is issued to preserve the status quo until the hearing of the application for preliminary injunction which cannot be issued ex parte. Under Rule 5846 of the Rules of Court, a judge may issue a temporary restraining order with a limited life of twenty (20) days from date of issue. If before the expiration of the twenty (20)-day period the application for preliminary injunction is denied, the temporary restraining order would be deemed automatically vacated. If no action is taken by the judge on the application for preliminary injunction within the said twenty (20) days, the temporary restraining order would automatically expire on the 20th day by the sheer force of law, no judicial declaration to that effect being necessary.47

Hence, in the case at bar, since no preliminary injunction was issued, the temporary restraining order granted automatically expired after twenty (20) days under the Rules. The fact that respondent court merely ordered "the respondent[,] its agents, representatives or any person acting in his behalf to stop, desist and refrain from implementing in their billings the new water rate increase which will start on March 1, 2000"48 without stating the period for the restraint does not convert the temporary restraining order to a preliminary injunction.

The rule against the non-extendibility of the twenty (20)-day limited period of effectivity of a temporary restraining order is absolute if issued by a regional trial court. The failure of respondent court to fix a period for the ordered restraint did not lend the temporary restraining order a breath of semi-permanence which can only be characteristic of a preliminary injunction. The twenty (20)-day period provided by the Rules of Court should be deemed incorporated in the Order where there is an omission to do so. It is because of this rule on non-

extendibility that respondent City was prompted to move that hearings be set for its application of a preliminary injunction. Respondent City cannot take advantage of this omission by respondent trial court.

Third. Even if we assume that the issued Order was a preliminary injunction, petitioner is correct in contending that the assailed Decision is premature.

The records reveal that respondent court did not resolve petitioner’s Motion for Reconsideration of the Order denying its Motion to Dismiss before it issued the assailed Decision. Consequently, there was no answer filed by petitioner, no joinder of issues, no mandatory pre-trial conference, and no trial on the merits, yet, a Decision was handed down by the respondent trial court.

The short circuiting of the procedural process denied the petitioner due process of law. It was not able to allege its defenses in an answer and prove them in a hearing. The convoluted procedure allowed by the respondent trial court and the pleadings filed by the parties which are not models of clarity certainly created confusion. But this confusion should not be seized as a reason to deny a party the constitutional right to due process. Over and above every desideratum in litigation is fairness. All doubts should be resolved in favor of fairness.

IN VIEW WHEREOF, the petition is GRANTED. The Decision and Resolution of the Court of Appeals dated November 27, 2002 and February 28, 2003, respectively, are REVERSED and SET ASIDE. The case is remanded to the court a quo for further proceedings.

BACOLOD CITY WATER DISTRICTv.LABAYEN

FACTS

Respondent City filed a case for Injunction with a Prayer for Temporary Restraining Orderand/or Preliminary Mandatory Injunction

(TRO and/or PMI for brevity)

against Petitioner for theimplementation of its new rates because it was imposed without public hearing in violation of dueprocess. At first, the complaint was dismissed for failure to

exhaust administrative remedies. Later,Respondent City filed an Urgent Motion for the Issuance of TRO and/or PMI praying that the case be setfor hearing. The Court granted the TRO. The judge issued a final injunction allegedly confirming theprevious preliminary injunction which is in truth, the judge referring to is the TRO earlier issued.Petitioner filed a Motion for Reconsideration raising that it issued a final injunction without thepetitioner being heard which was denied. The petitioner filed a Petition for Review at the Court of Appeals but was likewise, denied on the ground that the TRO earlier issued has been elevated to thesame level as the preliminary injunction in the procedure, grounds and requirements by Section 4, Rule58 because the Judge has deliberately omitted to call it as TRO in the latter orders.:

ISSUE

Whether or not there is a writ of preliminary injunction issued.:

HELD

NONE. It was clear that a TRO was clearly stated in the order. It was only when Petitionerexpressed its vehement objection on the latter Order when Respondents just wanted to construe theTRO as a preliminary injunction to justify the validity of the final injunction. A restraining order, is issuedto preserve the

status quo

until the hearing of the application for preliminary injunction which cannotbe issued

ex parte

. Under Rule 58 of the Rules of Court, a judge may issue a temporary restraining orderwith a limited life of twenty (20) days from date of issue. If no action is taken by the judge on theapplication for preliminary injunction within the said twenty (20) days, the temporary restraining orderwould automatically vacated and expire on the 20th day by the sheer force of law, no judicialdeclaration to that effect being necessary. The failure of respondent court to fix a period for the orderedrestraint did not lend the temporary restraining order a breath of semi-permanence which can only becharacteristic of a preliminary injunction. The twenty (20) day period provided by the Rules of Courtshould be deemed incorporated in the Order where there is an omission to do so. The court held that itis because of this rule on non-extendibility that Respondent City was prompted to move that hearingsbe set for its application of a preliminary injunction. Now, they cannot take advantage of this omissionby respondent trial court.

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 courta 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.

G.R. No. 82985 April 22, 1991 MERVILLE PARK HOMEOWNERS ASSOCIATION, INC., , vs. HON. FRANCISCO X. VELEZ and EDGARDO M. SALANDANAN

Petitioner Merville Park Homeowners Association, Inc. ("MPHAI"), a non-stock, non-profit corporation, became the owner of the pipelines and waterworks system ("waterworks system") of Merville Park Subdivision in Paranaque, Metro Manila, by virtue of a deed of donation dated 24 February 1977 executed in its favor by Merville Development Corporation.

On 19 December 1978, MPHAI, through its then President Ernesto N. Gonzales, entered into a contract of lease with private respondent Edgardo Salandanan covering its waterworks system to insure efficient water service within the Merville Park Subdivision ("Subdivision"). That lease contract required respondent Salandanan to construct additional wells, to put into full operational condition Wells Nos. 4 and 5 as well as to rehabilitate Wells Nos. 1, 2 and 3. The contract also allowed respondent Salandanan to increase annually the water rates but only to the extent of ten percent (10%) of the preceding year's rates. The water rates set out in the contract could be charged only upon completion of Well No. 5. The lease contract was later on amended to provide for, inter alia, a period of ten (10) years commencing from its signing on 20 July 1981. In that amended contract, the parties agreed to

increase the water rates which increase was in turn approved by the National Water Resources Council. It was also there provided that each homeowner shall pay a deposit in the amount of P300.00 which was to be used to pay for respondent Salandanan's overdue electric bill with Meralco, and thereafter, to be credited against the homeowner's future water bills.

Subsequently, respondent Salandanan again asked for an increase in water rates. MPHAI was at first adamant to the point of filing a case in court against respondent Salandanan. But sometime in 1982, MPHAI and respondent Salandanan arrived at a compromise. In that compromise agreement, MPHAI consented to an increase in the water rates as urged by respondent Salandanan but conditioned upon his completion of Well No. 2 (New Madrid Well). The compromise agreement was later amended and provided for a new water rate schedule effective 1 July 1984, but similarly conditioned upon Salandanan's completion of Well No. 2.

On 16 July 1985, MPHAI commenced an action, Civil Case No. 11124, before Branch 136 of the Regional Trial Court (RTC) of Makati, presided over by Judge Ricardo Francisco, against respondent Salandanan. In this suit, MPHAI sought to rescind the amended lease contract and the amended compromise agreement, and prayed for issuance of a writ of preliminary mandatory injunction. MPHAI alleged in its complaint that sometime in 1984 for failure of respondent Salandanan to pay his electric bills amounting to P1,035,000.00, Meralco had cut off the electric power supply of his rented water pumps resulting in a severe water shortage within the Subdivision and thereby endangering the lives and health of the residents thereof; that aside from respondent Salandanan's failure to pay his electric bills, he had violated his contract with petitioner by neglecting to drill and complete new wells and undertake immediate repairs of broken water pumps; that there was an immediate need to issue a writ of preliminary mandatory injunction in its favor to enable it to take possession and control of the water works system.

Judge Francisco, in an order dated 23 July 1985, granted MPHAI's prayer for a writ of preliminary mandatory injunction and directed respondent Salandanan to turn over to MPHAI the operation and control of the waterworks system. This prompted respondent Salandanan to file an urgent motion for reconsideration stating, among other things, that the regular courts had no jurisdiction over the subject matter of the case, the same being under the jurisdiction of the National Water Resources Council; and that the case was filed prematurely considering that MPHAI had not as yet exhausted the available administrative remedies.

After private respondent had filed an answer with counterclaim and third-party complaint, the case was re-raffled to Branch 180 presided over by Judge Benigno M. Puno, who in an order dated 12 August 1985, lifted the writ of preliminary mandatory injunction. The case, however, was once more reraffled and this time it went to Branch 149 with Judge Manuel Yuzon, presiding. Judge Yuzon, upon MPHAI's motion for reconsideration and upon its filing of a surety bond in the amount of P26,000.00, issued an order dated 11 August 1986 reinstating the writ of preliminary mandatory injunction. Respondent Salandanan, however, in turn moved for reconsideration on the ground that such a writ was not a proper remedy to deliver property in the possession of one party to another. But, before Salandanan's motion could be resolved, the case was, for the third time, re-raffled and transferred this time to the sala of respondent Judge Francisco X. Velez. Judge Velez, on 6 August 1987, issued an order lifting and setting aside the writ, and on 30 March 1988, an order directing the Deputy Sheriff to return and restore to respondent Salandanan the possession of the waterworks system.

And so the present Petition for Certiorari was filed.The Court issued a Temporary Restraining Order on 6 May 1988 enjoining respondent Judge Velez from enforcing his two

(2) orders, ordering petitioner MPHAI to file a bond in the amount of P50,000.00, and requiring private respondent Salandanan to file a Comment on the Petition. After additional pleadings and counter- pleadings, the Court granted due course to the Petition and required the parties to file simultaneous Memoranda. The parties complied; private respondent Salandanan also submitted a Supplemental Memorandum.

Deliberating on the instant Petition for Certiorari and after careful examination of the record of this case, the Court considers that petitioner has failed to show any grave abuse of discretion, or any act without or in excess of jurisdiction, on the part of respondent Judge in issuing the orders dated 6 August 1987 and 30 March 1988, lifting and setting aside the writ of preliminary mandatory injunction earlier issued in Civil Case No. 11124, and ordering private respondent restored to the possession of the waterworks system involved.

A preliminary mandatory injunction is not a proper remedy to take property, possession of which is being disputed, out of the possession and control of one party and to deliver the same to the other party. It may issue pendente lite only in cases of extreme urgency, 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 wilful and unlawful invasion of plaintiffs 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. 1 Obviously, it is for the party requesting the writ to demonstrate clearly the presence of one or more of the above grounds.

Under the terms and conditions of the amended contract of lease, private respondent Salandanan is entitled to possess and manage the waterworks system for a period of ten (10) years beginning 20 March 1981, unless, of course, the contract is judicially rescinded. Petitioner's action for the rescission of the amended lease contract was pending before the trial court at the time petitioner had recourse to the Supreme Court, and that action, so far as the records before us show, remains pending to this date. Petitioner has failed to show the existence of some extraordinary situation imposing upon it irreparable injury and clearly calling for the issuance and maintenance of the writ of preliminary mandatory injunction. Petitioner alleged that sometime in 1984, the power supply of the water pumps had been cut off by Meralco for failure of private respondent Salandanan to pay his electric bills, resulting in a severe water shortage within the Subdivision. There was, however, no showing that this condition remained subsisting three (3) years later, at the time respondent Judge's orders here assailed were rendered (August 1987 and March 1988) and at the time the Petition for Certiorari was filed (May 1988) before the Supreme Court. There was, in other words, no showing that the severe water shortage had not been remedied at or before the said material times and that a clear and present danger of the same or similar default on Salandanan's part, threatening the same severe consequences for the subdivision residents, persisted. On the contrary, it appears from the record that the Metropolitan Waterworks and Sewerage System ("MWSS") had commenced servicing the Subdivision before issuance of the respondent Judge's orders here sought to be annulled, which circumstance surely reduced the probabilities of recurrence of such breakdown of water supply. Succinctly put, petitioner has not shown that the continued possession of the leased waterworks system by respondent Salandanan created a continuing, clear and imminent danger that the Subdivision would suffer from lack of adequate supply of potable water.

Accordingly, the Court believes that respondent Judge was not merely acting arbitrarily and capriciously in holding that private respondent Salandanan was entitled to be maintained in the possession of the leased waterworks system pending resolution of the on-going action for rescission of the amended contract of lease and amended compromise agreement. At the same time, it appears to the Court that the relations between the petitioner MPHAI and private respondent Salandanan have been strained and frayed by the controversies and litigation between them. In order to protect the Subdivision residents from the hardships that would ensue from any recurrence of the problems encountered in 1984 after delivery of the possession of the waterworks system to private respondent Salandanan, private respondent should be required to post either a cash deposit or a surety bond from a surety company of indubitable solvency, in the amount of P100,000.00, conditioned upon the continued and adequate supply of potable water to Subdivision residents by private respondent and faithful compliance with his other obligations under existing agreements with petitioner. This deposit or bond shall be in addition to any performance bond required from private respondent under existing contractual arrangements. Moreover, it goes without saying that the trial court has full authority to issue such further order or orders may become necessary to protect adequately the Subdivision residents from disruption of water service within the Subdivision, attributable to the failure of either petitioner MPHAI or private respondent Salandanan to comply with any of their respective contractual obligations during the pendency of the action for rescission of contract.

WHEREFORE, the Petition for Certiorari is hereby DISMISSED for lack of merit. Private respondent Salandanan is hereby REQUIRED to put up either a cash deposit or a surety bond issued by a surety company of indubitable solvency acceptable to this Court in the amount of P100,000.00, within a non-extendible period of ten (10) days from notice hereof, to indemnify the members of petitioner MPHAI for any damages or inconvenience they may suffer by reason of failure of private respondent Salandanan to provide a continuous and adequate supply of potable water and otherwise to comply faithfully with all of his obligations under the amended contract of lease and amended compromise agreement. No pronouncement as to costs. This Resolution is immediately executory.

G.R. No. L-30070 August 29, 1980 FEDERICO DECANO, petitioner-appellee, vs. ROMEO F. EDU, as Acting Commissioner of Land Transportation and CIPRIANO POSADAS, as Acting Registrar, Land Transportation Commission, Dagupan City Agency, respondents-appellants. TEEHANKEE, J.:

In this appeal, the Court upholds the jurisdiction of the Court of First Instance of Pangasinan over the petition for "Mandamus and Injunction" filed by herein petitioner-appellee against respondents-appellants, although the official station of the first named respondent, whose official actuation is assailed, is in Quezon City which is outside the jurisdictional district of the said court. The main issue raised is the correctness and legality of said national official's order dismissing petitioner from the service of the Land Transportation Commission, and the power of judicial review of the administrative decisions of national officials is not confined to the courts of first instance of Metropolitan Manila where their offices are maintained to the exclusion of the courts of first instance in those localities where the aggrieved parties reside and the questioned decisions are sought to be enforced. The Court further affirms the decision of said court adjudging the order of removal from office as null and void for having been issued by said respondent who was not the appointing authority and had no authority to remove, since

under the applicable law, the power to remove petitioner was vested in the department head as the appointing authority.

The facts are undisputed.

On September 12, 1962, the then Undersecretary of Public Works and Communications issued to Federico Decano, herein petitioner-appellee, a temporary appointment to the position of janitor in the Motor Vehicles Office,1 Dagupan City Agency, with compensation at the rate of P1,440.00 per annum. The appointment having been approved by the Commissioner of Civil Service, the said appointee assumed office on September 10, 1962 and he served therein for almost four years, or until April 29, 1966 when herein respondent-appellant Cipriano Posadas, as Acting Registrar, Land Transportation Commission, Dagupan City, received a telegram from respondent-appellant Romeo F. Edu, in his then capacity as Acting Commissioner of Land Transportation Commission (LTC), terminating his (Decano's) services effective as of the close of business on that day.

Shortly thereafter, the aggrieved petitioner-appellee filed before the Court of First Instance of Pangasinan a petition for "Mandamus and Injunction" claiming that the aforementioned officials of the LTC acted without power and in excess of authority in removing him from the service, and therefore praying of the court to declare as null and void the order for his removal, to declare him entitled to the position, to compel his reinstatement and payment of his regular salary, and to enjoin, preliminary, and then permanently, respondents from disturbing, molesting or otherwise ousting him from his position as janitor.

As prayed for, a writ of preliminary injunction was issued by the trial court at the commencement of the proceedings commanding respondents "to desist and refrain from disturbing, molesting or otherwise ousting the petitioner from his position as janitor in the Land Transportation Commission, Dagupan City Agency, and to pay the petitioner his corresponding salary from the date of notice of said preliminary injunction, until further orders from the Court."

After trial, while agreeing with respondent Edu that petitioner's appointment as janitor was temporary and therefore the latter could be ousted from his position at any time with or without cause, the lower court nevertheless declared in its judgment of October 29, 1968 that petitioner's removal was null and void upon the ground that under the law, respondent Commissioner of Land Transportation was not the appointing authority insofar as the position of petitioner and an other minor positions in his office were concerned; and thus lacking the power of appointment, said respondent had neither the power of removal.

Hence, this appeal interposed by respondents-appellants which we find to be not well taken.

There is no question that petitioner could be removed from office at any time, for it has been held repeatedly 2that the acceptance of a temporary appointment divests an appointee of the right to security of tenure against removal without cause. it is readily apparent from petitioner's appointment papers that the character of his term of office was "Temporary" and signed by the then Undersecretary of Public Works and Communications. 3 He could therefore be removed at the pleasure of the appointing official.

But this is not to say that petitioner could be removed by the respondent Commissioner of Land Transportation since the latter was not the official who appointed him but the Undersecretary acting for the Secretary of Public Works and Communications nor had said respondent been granted by law the power of removal.

Per section 79(d) of the Revised Administrative Code, the provision then in force, it is the department head, upon the recommendation of the chief of the bureau or office concerned, who has the power to "appoint all subordinate officers and employees whose appointment is not expressly vested by the law in the President of the Philippines; 4and it is also the department head who may remove or punish such employees, except as especially provided otherwise in the Civil Service Law." 5 It appears that this provision has been precisely applied in the appointment of petitioner, for upon the recommendation of the then Administrator of the defunct Motor Vehicles Office, it was signed and issued by the Undersecretary of Public Works and Communications.

It should be further noted that after petitioner's aforementioned appointment as janitor in the then Motor Vehicles Office, Republic Act No. 4136 known as the Transportation and Traffic Code created the Land Transportation Commission from which law respondent Edu is supposed to have derived his powers as Commissioner. Perusal of this law however shows nothing that vests in the said commissioner any power to appoint or to remove employees in that new office. On the contrary, the placement of said commission under the Department of Public Works and Communications is specifically provided. 6 Hence, the power to appoint, and the corollary power to remove, employees in the Land Transportation Commission thus remained with the Secretary of Public Works and Communications. As generally the power to remove is inherent in the power to appoint 7, it follows that the termination of petitioner's services by respondent Edu, who then had no power to appoint, was without authority and therefore null and void.

In seeking reversal of the trial court's decision, respondents make capital of the fact that the petition for mandamus with injunction was filed in the Court of First Instance of Pangasinan while respondent Edu holds office in Quezon City which, they claim, is beyond the territorial jurisdiction of the said court. Respondents cite the long line of cases from the 1960 case of Acosta vs. Alvendia 8 where this Court, pursuant to sec. 44 (h) of the Judiciary Act, jointly or alternatively with sec. 4, Rule 65 of the Rules of Court and/or section 2 of Rule 58, ruled that a court of first instance has no jurisdiction to require or control the execution of an act committed beyond the limits of its territorial jurisdiction. These cases invariably involved petitions for writs of injunction seeking to control the actions of courts or officers outside the territorial jurisdiction of the respondent courts of first instance where said petitions had been filed. The Acosta ruling of non-jurisdiction does not apply, however, to the facts and circumstances at bar.

Here, petitioner seeks primarily the annulment of the dismissal order issued by respondent Edu, mandamus and injunction being then merely coronary remedies to the main relief sought, and what is prayed to be enjoined, as in fact the trial court did enjoin by preliminary injunction, is the implementation of the termination order against the petitioner. It is true that the order of dismissal was issued by respondent Edu, but it was to be implemented in Dagupan City by his subordinate officer, respondent Acting Registrar of the LTC stationed at Dagupan City. Insofar, therefore, as respondent Edu is concerned, the order terminating the services of respondent was a fait accompli and this he had done without authority, as earlier discussed. The injunction is question, consequently, must be taken only to restrain the implementation of respondent Edu's order by his co-respondent whose official station at Dagupan City is within the territorial boundaries of the trial court's jurisdictional district.

Thus, in Director of the Bureau of Telecommunications vs. Aligaen, et al., 9 in which the acts sought to be controlled by "Injunction with Preliminary Injunction" were relative to the establishment of a local telephone system being done within the territorial boundaries of the judicial district of the Court of First Instance of Roxas, the Court similarly upheld the

jurisdiction of the Court of First Instance of Roxas over the petition, although two of the respondents named therein the Director of the Bureau of Telecommunications, and the Regional Superintendent of Region IV of the Bureau of Telecommunications — had their official stations at Manila and Iloilo City, respectively, as follows:

... In the instant case, the acts relative to the establishment of a local telephone system by petitioners were being done within the territorial boundaries of the province or district of respondent Court, and so said Court had jurisdiction to restrain them by injunction. It does not matter that some of the respondents in the trial court, at whom the injunction order was issued, had their official 'residence outside the territorial jurisdiction of the trial court. In the case of Gonzales vs. Secretary of Public Works, et al., (G.R. No. L-21988, September 30, 1966, 18 SCRA 296), wherein the only question raised was whether the Court of First Instance of Davao had jurisdiction to entertain a case the main purpose of which was to prevent the enforcement of a decision of the Secretary of Public Works who was in Manila this Court held that, inasmuch as the acts sought to be restrained were to be performed within the territorial boundaries of the province of Davao, the Court of First Instance of Davao had jurisdiction to hear and decide the case, and to issue the necessary injunction order. This Gonzales case was an action for certiorari and prohibition with preliminary injunction and/or preliminary mandatory injunction to prevent the demolition of Gonzales' dam in Davao in compliance with the order of the Secretary of Public Works.

It follows, therefore, that since the acts to be restrained were being done in Roxas City, or within the territorial jurisdiction of respondent court, the latter had jurisdiction to restrain said acts even if the office of respondent Director of the Bureau of Telecommunications is in Manila, and that of respondent Regional Superintendent of Region IV is in Iloilo City.

As in the above-cited case of Aligaen, the national official stationed at Quezon City, namely, respondent Commissioner Edu, was impleaded as respondent in the Pangasinan court for a complete determination of the issues involved, the legality of Edu's order of dismissal being the pivotal issue to determine the merits of the mandamus and injunction aspects of the petition. In other words, Mr. Edu was joined as respondent not for injunction purposes but mainly for testing the legality of his dismissal order and his transmittal thereof to his corespondent registrar at Dagupan City to implement the same and terminate the services of the petitioner in Dagupan City.

As held by the Court in the 1965 case of Gayacao vs. The Honorable Executive Secretary, etc, et al., 10 where the issue is the correctness of a national official's decision, the provincial courts of first instance have equal jurisdiction with the Manila courts to review decisions of national officials, as otherwise litigants of ted means would practically be denied access to the courts of the localities where the reside and where the questioned acts are sought to be enforced. Thus, Justice J.B.L. Reyes stressed on behalf of the Court that —

A careful analysis of the allegations made in the petition wig show that the petitioner's principal complaint was that the decision of the Director of Lands, as affirmed by the Secretary of Agriculture and the Executive Secretary, was contrary to law in giving retroactive application to Lands Administrative Order No. 7-1. In other words, the remedy sought was the judicial review of the administrative decision in question and its annulment on account of errors of law allegedly committed. ...

The doctrines invoked in support of the theory of non-jurisdiction (Castano vs. Lobingier, 7 Phil. 91;Acosta vs. Alvendia, L-14958, Oct. 31, 1960; Samar Mining Co. vs. Arnado, L-17109, June 30, 1961) are inapplicable, in that those cases involved petitions for writs of injunction seeking to control the actions of courts or officers outside the territorial jurisdiction of the respondent courts involved. Here the sole point in issue is whether the decision of the respondent public officers was legally correct or not and without going into the merits of the case, we see no cogent reason why this power of judicial review should be confined to the courts of first instance of the locality where the offices of respondents are maintained, to the exclusion of the courts of first instance in those localities where the plaintiffs reside, and where the questioned decisions are being enforced.

It is easy to see that if the contested ruling of the court below is sustained, the same would result not only in hardship to litigants of limited means, practically amounting to denial of access to the courts, but would also unnecessarily encumber the Manila courts whose dockets are already over — burdened. Actually, since Ortua vs. Singson, 59 Phil. 440, the power of provincial courts of first instance to review administrative decisions of national officials has been consistently recognized.

While the petitioner herein also prayed that the land authorities be ordered to reinstate her original application, such remedy is purely a corollary to the main relief sought; for, as the allegations now stand, reversal' of the questioned administrative decision would necessarily lead to the same result.

Respondents finally raise a technical point referring to the allegedly defective verification of the petition filed in the trial court, contending that the clause in the verification statement "that I have read the contents of the said petition; and that [to] the best of my knowledge are true and correct" is insufficient since under section 6 of Rule 7,11 it is required that the person verifying must have read the pleading and that the allegations thereof are true of his own knowledge. We do not see any reason for rendering the said verification void. The statement "to the best of my knowledge are true and correct" referring to the allegations in the petition does not mean mere "knowledge, information and belief." It constitutes substantial compliance with the requirement of section 6 of Rule 7, as held in Madrigal vs. Rodas. 12 At any rate, this petty technicality deserves scant consideration where the question at issue is one purely of law and there is no need of delving into the veracity of the allegations in the petition, which are not disputed at all by respondents. As we have held time and

again, imperfections of form and technicalities of procedure are to be disregarded except where substantial rights would otherwise be prejudiced.

ACCORDINGLY, the decision appealed from is hereby affirmed.

[G.R. Nos. 135180-81; 135425-26. August 16, 2000] Heirs of the Late Justice JOSE B. L. REYES represented by ADORACION D. REYES and Heirs of EDMUNDO A. REYES, namely, MA. TERESA P. REYES and CARLOS P. REYES, petitioners, vs. COURT OF APPEALS AND METRO MANILA BUILDERS, INC., respondents.D E C I S I O NPARDO, J.:

The cases before the Court are consolidated petitions for review on certiorari to nullify: (1) the decision of the Court of Appeals[1] setting aside that of the Metropolitan Trial Court, Pasay City, Branch 45[2] and the orders of the Regional Trial Court, Pasay City branch 231[3], and ordering petitioners to restore the subject property to the possession of respondent MMB, Inc. until the expiration of the lease contract, and (2) the resolution of the Court of Appeals[4] allowing execution pending appeal[5] of its aforesaid decision and issuing a writ of execution[6] depriving petitioners of possession of the leased property and giving its possession to respondent MMB, Inc.[7] which was a deforciant and worse, declaring petitioners guilty of indirect contempt of court and sentencing them to pay a fine of P30,000.00.

The factual background of the case dates back to November 30, 1976. Brothers Justice Jose Benedicto Luna Reyes (also known as Justice J. B. L. Reyes) and Dr. Edmundo A. Reyes were co-owners of a parcel of land located at Taft Avenue, Pasay City, near Buendia, with a land area of more than one hectare, covered by two Transfer Certificates of Title[8]. On November 30, 1976, the brothers entered into a 25-year lease contract[9]with Metro Manila Builders, Inc. (MMB, Inc.) at a very low rate of rental (P15,000.00 to P30,000.00 a month) in consideration of the fact that the lessee would cover all present and future improvements in the property with insurance against certain risks and maintain the premises in good, sanitary and tenantable condition at all times.

However, in the course of the lease, petitioners found out that respondent MMB, Inc. had not properly maintained the premises or covered the same with an adequate insurance policy. Worse, respondent MMB, Inc. had sub-leased the property to third parties and was earning therefrom about P500,000.00 a month. On December 2, 1996, petitioners served on respondent MMB, Inc. a notice terminating the lease contract and demanding that they vacate and surrender the premises subject of the lease to petitioners.

Failing to do so, on February 3, 1997, petitioners filed with the Metropolitan Trial Court, Pasay City, Branch 45 a complaint for unlawful detainer[10] based on breach of the contract of lease.

On March 5, 1997, respondent MMB, Inc. filed its answer to the complaint. MMB, Inc. did not deny the violations imputed to it but questioned the absence of a judicial rescission of the contract of lease.[11]

On May 9, 1997, the trial court rendered a decision in favor of petitioners, thus:

"WHEREFORE, and considering the foregoing, judgment is hereby rendered in favor of the plaintiff heirs of J.B.L. Reyes, thru Adoracion D. Reyes, and heirs of Edmundo Reyes namely Ma. Teresa P. Reyes, and Carlos P. Reyes and against the defendant Metro Manila Builders, Inc. ordering the latter:

1. And all persons claiming right under it to vacate, surrender and cede possession of the leased premises to plaintiffs;

2. To pay plaintiffs, P300,000.00 for every month from notice to vacate until possession is finally turned over to plaintiffs, with legal interest;

3. To pay plaintiff the amount of P20,000.00 as for attorneys fees; and,

4. To pay the cost of suit"[12]

On May 16, 1997, petitioners filed with the Metropolitan Trial Court, Pasay City, Branch 45 a motion for execution of the judgment of eviction.[13] On the other hand, respondent appealed the decision to the Regional Trial Court, Pasay City, Branch 113.[14] However, respondents failed to file their appeal memorandum on time and so the court dismissed their appeal. In its appeal to the RTC, respondent MMB, Inc. never raised the issue of jurisdiction. Hence, on November 5, 1997, respondent MMB, Inc. filed an appeal to the Court of Appeals.[15]

On November 26, 1997, MTC Branch 45, Pasay City,[16] granted the motion for execution that petitioners filed. Consequently, on December 1, 1997, the trial court issued the corresponding writ of execution.[17] However, on December 8, 1997, the Court of Appeals issued a temporary restraining order[18] against the execution of the ejectment judgment.

Even before the appellate court could rule on the injunctive relief, respondent MMB, Inc. withdrew its appeal.[19] In a resolution dated February 17, 1998, the Court of Appeals allowed the withdrawal.[20]

Simultaneously with the withdrawal of the first CA case,[21] on February 17, 1998, private respondent also filed a petition for annulment of the ejectment decision before the Regional Trial Court, Pasay City, Branch 231 (RTC 231)[22] on the ground that the MTC had no jurisdiction over the ejectment case. MMB, Inc. prayed for a temporary restraining order and/or preliminary injunction against the execution of the ejectment decision. The court, however, did not issue a temporary restraining order (TRO) against MTC Branch 45, Pasay City.

On March 5, 1998, petitioners filed with the Regional Trial Court their memorandum in support of their opposition against the injunctive relief sought by MMB, Inc.[23] On March 20, 1998, petitioners filed with the same court a motion to dismiss.[24]

In an attempt to dramatize its plea, on March 23, 1998, respondent MMB, Inc. filed another petition with the Court of Appeals[25], for certiorari and mandamus complaining about what it termed as the sub-silencio denial by the lower court of their application for injunctive relief.[26]

On March 23, 1998, the Court of Appeals issued a resolution giving petitioners, as respondents therein, ten ((10) days from notice within which to file their comment on the petition, not a motion to dismiss, and in the meantime, restrained them from enforcing the writ of execution in Civil Case No. 113-97, MTC-Pasay City, Branch 45.[27]

Incidentally, the resolution was signed by only two members of the Court of Appeals, Special Fourth Division, namely, Justice Demetrio G. Demetria, ponente, and Justice Ramon A. Barcelona, member, concurring. Justice Omar U. Amin, member, did not sign. Hence, the resolution is void, which the division clerk of court should not have received for filing,

much less served on the parties. By law, the attendance of three members of the Court of Appeals shall constitute a quorum for the sessions of a division. The unanimous vote of three members of a division shall be necessary for the pronouncement of a decision, or final resolution which shall be reached in consultation before the writing of the opinion by any member of the division.[28] This rule applies to interlocutory resolutions.[29] True, any member of the Court of Appeals may issue preliminary injunction or temporary restraining order.[30] However, this power is exercised only in case of extreme urgency, and in the tradition of the Supreme Court, the Court en banc or division ratifies or confirms the act of the single justice at the very next session of the Court.

On April 14, 1998, upon motion of petitioners, RTC-Pasay 231 issued an order dismissing the petition on the ground that respondent's remedy is appeal in due time which, when withdrawn, was effectively abandoned. The Regional Trial Court, Pasay City, Branch 231, thus ruled:

"If jurisdiction was indeed a valid concern of the petitioner, it should have been raised at the first opportunity i.e. At the inception of the ejectment case before the Metropolitan Trial Court. Although, the question of jurisdiction may be raised at any stage of the proceedings, it should not be used as a scheme to delay the proceedings and petitioner cannot feign ignorance or inadvertence in a manner aptly illustrated by the respondents, to wit:

6.1 What gave petitioner away is its silence on why it failed, nay refused to raise the issue of jurisdiction in its petition before the appellate court. Jurisdiction it is elementary may be raised anytime even before the first time on appeal. (Govt. vs. American Surety Company 11 PHIL 203; Vda De Roxas vs. Rafferty, 37 PHIL 957; People vs. Que Po Lay, 94 PHIL 6400).

Furthermore, this Court reiterates that “the remedy under Rule 47 is unavailable to the petitioner." It can be availed of only "as the last remedy and cannot be resorted to if the ordinary remedies of a new trial, appeal, petition for relief or other appropriate remedies are available." In this case, appeal is the ordinary remedy which was available to and had in fact been availed of by the petitioner. Lamentably, it caused the withdrawal of its appeal expressing preference and venturing to obtain instead relief under Rule 47 which appears inappropriate under the circumstances."[31]

With the imminent expiration of the temporary restraining order,[32] respondent MMB, Inc. filed with the Court of Appeals a series of petitions and motions urging the Court of Appeals to issue injunctive relief.[33] Thus, on May 14, 1998, respondent MMB, Inc. filed with the Court of Appeals a motion for leave of court to admit a supplemental petition.[34]

On May 18, 1998, respondent MMB, Inc. filed with the Court of Appeals an urgent motion for the issuance of another temporary restraining order in the second CA case.[35] Respondent sought a TRO to enjoin the MTC-Branch 45, Pasay City from enforcing the writ of execution of the decision in Civil Case No. 113-97 and the Regional Trial Court from proceeding with Civil Case No. 98-0366 pending the resolution of the supplemental petition.

Also on the same date, respondent filed with the Court of Appeals a manifestation alleging that it filed with the Regional Trial Court, Quezon City, Branch 88 an action for annulment of the unilateral termination of lease contract and damages.[36] On the ground that such case was still pending, respondents prayed for a temporary restraining order and a writ of preliminary injunction to prevent the execution of the judgment in Civil Case No. 113-97.[37]

On May 20, 1998, respondent MMB, Inc. filed with the Court of Appeals[38] another case seeking to set aside the order of the RTC Pasay, Branch 231, dismissing the action and praying that a temporary restraining order be issued against the MTC-45 Pasay City enjoining the writ of execution issued in Civil Case No. 113-97, to desist from proceeding with CA-G. R. SP No. 47158, to declare the order of respondent judge in Civil Case No. 98-0366 as null and void for being issued in grave abuse of discretion, without or in excess of its jurisdiction, and to declare the TRO/injunction permanent.

On May 22, 1998, the Court of Appeals consolidated the second[39] and third[40] CA cases.

In the meantime, on June 29, 1998, the Court of Appeals issued a resolution in the third CA case,[41] as follows:

"We hereby resolve:

a. to require the respondent in CA GR SP. No. 47720 to file the petition, not a motion to dismiss, which may be considered as their answer should we decide to give it due course;

b. Considering that respondent's comment and petitioner's reply in C.A. G.R. SP. No. 47158, to set for hearing the application for preliminary injunction on July 15, 1998, at 2:00 A.M. at Paras Hall, Court of Appeals, Ma. Orosa St., Ermita Manila; and

c. For a comprehensive appreciation of the consolidated cases before us, to require the RTC Branch 231 of Pasay City to Elevate the Original Records of Civil Case No. 98-0366 and other pertinent pleadings and papers related thereto within five (5) days from notice.”[42]

On July 2, 1998, respondents filed with the Regional Trial Court, Branch 110, Pasay City a petition seeking a temporary restraining order to enjoin MTC Branch 45, Pasay City,[43] and the sheriff [44] from enforcing the writ of execution issued on December 1, 1997.

In compliance with the said resolution, on July 15, 1998, petitioners filed their comment/opposition, alleging that:

a. The petition of private respondent is moot and academic as the entire premises has already been turned over by the sheriff of MTC-45 Albert Zaragoza except 14 lessees which were allowed by the petitioners to remove their improvements within fifteen days;

b. Assuming the dismissal of the petition for annulment was erroneous, the remedy is appeal not certiorari;

c. Private respondent is guilty of forum shopping as the issue pending in the Second CA Case, which in RTC-Q.C. is docketed as Civil Case No. Q-98-34382 (for annulment of unilateral termination of lease contract) and the third CA Case are one and the same;

d. Judge Ylagan committed no abuse of discretion. Petitioners are not guilty of contempt since there is no order violated;

e. The dismissal order (April 14, 1998) did not pre-empt the Second CA case;

f. Private respondent failed to allege, much less prove, irreparable injury to it.

On August 21, 1998, the Court of Appeals promulgated its decision, the dispositive portion of which reads as follows:

"WHEREFORE, the decision of the Metropolitan Trial Court, Branch 45, Pasay City in Civil Case No. 113-97 dated May 9, 1997 is SET ASIDE and the orders dated March 23, 1998 and April 14, 1998, issued in Civil Case No. 98-0366 are likewise SET ASIDE. Private respondent is hereby ordered to restore the subject property in the possession of petitioner and are hereby permanently enjoined from further committing acts disturbing physical possession of the subject property by petitioner until after the expiration of the Contract of Lease.”[45]

On the same date the decision of the Court of Appeals was promulgated, respondent MMB, Inc. filed with that court a very urgent ex-parte motion for execution pending appea1.[46] On August 26, 1998, the Court of Appeals required petitioners to comment on such motion for execution pending appeal within ten (10) days from notice.[47]

On August 25, 1998, respondent filed with the Court of Appeals another motion ex-parte for execution pending appeal, motion to cite in contempt and motion to stop demolition.[48]

On August 27, 1998, the Court of Appeals issued a resolution stating thus:

"a. Considering that discretionary execution may only issue after due hearing pursuant to Section (2)a, Rule 39 of the 1997 Rules on Civil Procedure, to set for hearing the very urgent motion for execution pending appeal on September 1, 1998, at 10:00 AM at Moran Hall, Court of Appeals x x x;

"b. To require private respondents and counsel to explain within five (5) days from receipt hereof why they should not be cited for contempt; and

"c. To restrain private respondents and all persons acting in their behalf from further demolishing the buildings and improvements on the subject premises.”[49]

On August 31, 1998, petitioners filed with the Court of Appeals a motion requesting for an extension of time to file explanation on the motion to declare petitioners and counsel in contempt.[50] In a resolution dated September 3, 1998, the Court of Appeals granted the motion, giving petitioners and counsel ten (10) days from September 1, 1998, or up to September 11, 1998, within which to file the explanation.[51] The case was set for oral argument, parties were directed to submit simultaneously their respective memoranda to the very urgent motion for the issuance of a writ of execution pending appeal/motion to stop demolition within ten (10) days from date, or until September 11, 1998.[52]

On September 11, 1998, petitioners filed with the Court of Appeals a motion for extension of time to file comment/memorandum for at least five (5) days from September 11, 1998, or up September 16, 1998 .[53]

On September 14, 1998, petitioners filed with the Supreme Court a petition for review of the decision of the Court of Appeals.[54] On September 17, 1998, petitioners filed with the Court of Appeals their consolidated comment to the very urgent motion for execution pending appeal, manifestation/motion to cite in contempt/motion to stop demolition, with motion to defer consideration.[55]

The Court of Appeals, however, despite the pending petition with this Court, promulgated on September 18, 1998, its resolution, the dispositive portion of which reads:

"Accordingly, this Court hereby RESOLVES to grant the instant petition.

"1. A writ of Execution Pending Appeal of the Decision of this Court dated August 21, 1998 is hereby issued.

"The Division Clerk of this Court is hereby ordered to furnish a certified true copy of this resolution and the decision of this Court dated August 21, 1998 to the Metropolitan Trial Court, Branch 45, and Regional Trial Court, Branch 231 both of Pasay City.

"2. Private respondents and their counsel are hereby adjudged guilty of indirect contempt of this Honorable Court and are hereby sentenced to pay a fine of P30,000.00. Private respondents and counsel are also directed to make a complete restoration to petitioner of the subject property.

"SO ORDERED."[56]

On September 21, 1998, the Court of Appeals designated a special sheriff[57] to enforce the writ, and on the same day, he evicted petitioners from the premises and restored possession in favor of private respondent.[58]

On September 29, 1998, petitioners filed with the Supreme Court a petition for certiorari to nullify the resolution of the Court of Appeals allowing execution pending appeal and the writ of execution issued pursuant thereto and more, finding petitioners guilty of indirect contempt of court and sentencing them to pay a fine of P30,000.00.[59]

The issues raised in the petitions may be summed up as to whether or not the Court of Appeals erred:

1. In ruling that the nature of the complaint is for rescission of contract, not ejectment, over which the Metropolitan Trial Court, Pasay City did not have jurisdiction;

2. In directing that respondent MMB, Inc. be restored in possession of the leased premises;

3. In immediately executing its resolution dated September 18, 1998, transferring possession of the property from petitioners to respondent MMB, Inc. by a "special sheriff".

4. In declaring petitioners guilty of indirect contempt of court, and sentencing them to pay a fine of P30,000.00.

The crux of the case is whether there was a need for judicial rescission of the contract of lease before respondent MMB, Inc. may be compelled to move out of the leased premises.

We find the petitions impressed with merit.

We rule that there is no need for a judicial rescission of the lease contract between lessors heirs of Justice J. B. L. Reyes, et al. and lessee MMB, Inc. The contract provides:

"Section 18, paragraph 4 (a) In the event of default or breach of any of the condition of this contract x x x.

(b) x x x the LESSOR may, in his absolute discretion declare the contract cancelled and terminated and require the TENANT to vacate the leased premises x x x

MMB, Inc. violated the following conditions of the contract:

1. Par. 8 requiring MMB, Inc. to cover all buildings and improvements on the leased premises with insurance against fire, earthquake and extended coverage risks;

2. Par. 9 and 10 of the contract requiring MMB, Inc. to maintain the leased premises and all the buildings and improvements thereon in a state of security and first class repair, in a clean and sanitary condition, to repair and restore or reconstruct such damaged on destroyed improvements;

3. Par. 11 of the contract requiring defendant to secure LESSOR's prior written consent before it may assign or transfer any of its rights under the contacts.

We have ruled that "there is nothing wrong if the parties to a lease contract agreed on certain mandatory provisions concerning their respective rights and obligations, such as the procurement of the insurance and the rescission clause. For it is well to recall that contracts are respected as the law between the contracting parties, and they may establish such stipulations, clauses, terms and conditions as they may want to include. As long as such agreements are not contrary to law, morals, good customs, public policy or public order they shall have the force of law between them."[60]

The law on obligations and contracts does not prohibit parties from entering into agreement providing that a violation of the terms of the contract would cause its cancellation even without judicial intervention.[61] This is what petitioners and respondent entered into, a lease contract with stipulation that the contract is rescinded upon violation of its substantial provisions, which MMB, Inc. does not deny they violated.

The basic issue having been disposed of, we need not resolve the other issues petitioners raised.

On hindsight, the Court of Appeals declared petitioners guilty of indirect contempt of court because they implemented the writ of execution of the trial court despite the order of the court to elevate the entire original records. And petitioners proceeded to demolish the improvements on the property without authority of the Court of Appeals. However, this was because the temporary restraining order issued by the Court of Appeals had lapsed after sixty (60) days.[62] No more restraining order was in effect until the court decided the case on its merits. Hence, petitioners acted in good faith in the exercise of their proprietary rights. There was no willful disobedience to a lawful order. Petitioners were not guilty of contempt. The salutary rule is that the power to punish for contempt must be exercised on the preservative, not vindictive principle, and on the corrective and not retaliatory idea of punishment.[63] The courts must exercise the power to punish for contempt for purposes that are impersonal because that power is intended as a safeguard not for the judges as persons but for the functions that they exercise.[64] The court must exercise the power of contempt judiciously and sparingly, with utmost self-restraint.[65]

One final word. It was bad enough that the Court of Appeals erred in ruling that the lease contract must be judicially rescinded before respondent MMB, Inc. may be evicted from the premises. It was worse that the Court of Appeals immediately enforced its decision pending appeal restoring respondent in possession of the leased premises and worst, appointed a special sheriff to carry out the writ of execution. In the first place, we emphatically rule that the Court of

Appeals has no authority to issue immediate execution pending appeal of its own decision. Discretionary execution under Rule 39, Section 2 (a), 1997 Rules of Civil Procedure, as amended, is allowed pending appeal of a judgment or final order of the trial court, upon good reasons to be stated in a special order after due hearing. A judgment of the Court of Appeals cannot be executed pending appeal. Once final and executory, the judgment must be remanded to the lower court, where a motion for its execution may be filed only after its entry.[66] In other words, before its finality, the judgment cannot be executed. There can be no discretionary execution of a decision of the Court of Appeals. In the second place, even in discretionary executions, the same must be firmly founded upon good reasons. The court must state in a special order the "good reasons" justifying the issuance of the writ.[67] The good reasons allowing execution pending appeal must constitute superior circumstances demanding urgency that will outweigh the injuries or damages to the adverse party if the decision is reversed.[68] Jurisprudence teaches us what are "good reasons" that justify a premature execution of judgment, such as "deterioration of commodities subject of litigation"[69] and "the deteriorating condition of the vessel, M/V 'Valiant' . . . left to rot at the pier and without a crew to guard it".[70]In this case, the good reasons given by the Court of Appeals to support the discretionary execution of its decision are (1) that respondent would be deprived of income from its business endeavors; (2) that "it is of public knowledge" that the Court of Appeals and the Supreme Court are clogged with cases and it may take some time before the decision in the case may attain its finality; and (3) that petitioners acted with bad faith and malice.[71] None of the cited reasons is "good" enough. According to jurisprudence, respondent's precarious financial condition is not a compelling circumstance warranting immediate execution.[72] The assertion that "it is of public knowledge" that the Supreme Court is clogged with cases that may take time to decide mocks the integrity and derides the competence of this Court. The remark erodes and undermines the people's trust and confidence in the judiciary, ironically coming from one of its subordinate courts. This is an assault on the Supreme Court that borders on contempt; we cannot permit such attack to pass without sanction. This we cannot countenance. Litigants, lawyers and judges share the responsibility of unclogging the dockets of the judiciary.[73] No lower court justice or judge may deride, chastise or chide the Supreme Court even speaking "with due respect" in his ponencia. In fact, it is the duty of lower courts to obey the decisions of the Supreme Court and render obeisance to its status as the apex of the hierarchy of courts. "A becoming modesty of inferior courts demands conscious realization of the position that they occupy in the interrelation and operation of the integrated judicial system of the nation."[74] "There is only one Supreme Court from whose decision all other courts should take their bearings" so spoke Justice J. B. L. Reyes.[75] We echo this golden nugget of advice. If a judge of a lower court cannot do so in conscience, he has no alternative but to yield his judicial robe and resign.[76] More, it has been held that urgency resulting from years of delay in the disposal of a case is not a good reason for premature execution of the decision.[77] Bad faith and malice are not indicated simply because petitioners insisted on their rights and exhausted judicial remedies. On the contrary, good faith is always presumed.[78] In the third place, on September 14, 1998, petitioners elevated the decision of the Court of Appeals to the Supreme Court by petition for review.[79] By the mere fact of the filing of the petition, the finality of the Court of Appeals' decision was stayed, and there could be no entry of judgment therein,[80] and, hence, no premature execution could be had. The Court of Appeals adopted its resolution granting execution pending appeal on September 18, 1998, after the petition for review was already filed in the Supreme Court.[81] It thereby encroached on the hallowed grounds of the Supreme Court. Worst of all, the Court of Appeals has no authority to appoint a special sheriff.[82] It appointed an employee of the mailing section, who was not even bonded as required by law.[83] Such display of keen interest in the immediate execution of its decision coupled with the exercise of excessive authority by

illegally appointing a "special sheriff' makes the concerned members of the Court of Appeals liable to disciplinary action and the imposition of appropriate penalty.[84]

WHEREFORE, the Court declares VOID the resolution of the Court of Appeals, dated September 18, 1998 in CA-G. R. SP No. 47158 and SP No. 47720, and the writ of execution dated September 21, 1998, issued pursuant thereto. Petitioners are acquitted of the charge of contempt of court.

The Court REVERSES the decision of the Court of Appeals promulgated on August 21, 1998, in CA-G. R. SP No. 47158 and SP No. 47720, and REINSTATES the decision of the Regional Trial Court, Pasay City, Branch 231, dated March 23, 1998, and order dated April 14, 1998, in Civil Case 98-0366.

Costs against respondent MMB, Inc.

Let a copy of this decision be furnished to the Presiding Justice, Court of Appeals, Manila, for dissemination to the Associate Justices, Court of Appeals, for their information and guidance.

BROCKA vs ENRILE December 10, 1990(192 SCRA 183)

HELD: The primary issue here is the legality of enjoining the criminal prosecution of a case, since the two other issues raised by Brocka, et al. are matters of defense against the sedition charge. We rule in favor of Brocka, et al. and enjoin their criminal prosecution for the second offense of inciting to sedition. Indeed, the general rule is that criminal prosecution may not be restrained or stayed by injunction, preliminary or final. There are however exceptions, among which are: a. To afford adequate protection to the constitutional rights of the accused " b. When necessary for the orderly administration of justice or to avoid oppression or multiplicity of actions "

c. When there is a pre-judicial question which is sub judice

d. When the acts of the officer are without or in excess of authority

e. Where the prosecution is under an invalid law, ordinance or regulation

f. When double jeopardy is clearly apparent "

g. Where the court has no jurisdiction over the offense

h. Where it is a case of persecution rather than prosecution

i. Where the charges are manifestly false and motivated by the lust for vengeance, and

j. When there is clearly no prima facie case against the accused and a motion to quash on that ground has been denied. In the petition before us, Brocka, et al. have cited the circumstances to show that the criminal proceedings had become a case of persecution, having been undertaken by state officials in bad faith

LINO BROCKA, BENJAMIN CERVANTES, COSME GARCIA, RODOLFO SANTOS, VALENTINO SALIPSIP, RICARDO VEGA, ERIC MARIANO, JOSE EMMANUEL OYALES, RONNIE MATTA, ALFREDO VIAJE, RUBEN EUGENIO, REYNALDO ORTIZ, ORLANDO ORTIZ, NOEL REYES, EDUARDO IMPERIAL, NESTOR

SARMIENTO, FRANCO PALISOC, VIRGILIO DE GUZMAN, ALBERTO REYES, JESSIE PINILI, ROMULO AUGUIS, DOMINADOR RESURRECION III, RONNIE LAYGO, ROSAURO ROQUE, CLARENCE SORIANO, OCTAVO DEPAWA, CARLITO LA TORRE, SEVERNO ILANO, JR., DOMINGO CAJIPE, ALAN ALEGRE, RAMON MARTINEZ, MA. GILDA HERNANDEZ, EDNA P. VILLANUEVA, DOLLY S. CANU, MELQUIADES C. ATIENZA, ELIGIO P. VERA CRUZ, ROGER C. BAGAN, ABUNDIO M. CALISTE, Petitioners, vs. JUAN PONCE ENRILE, MAJ. GENERAL FIDEL V. RAMOS, BRIG. GENERAL PEDRO BALBANERO, COL. ABAD, COL. DAWIS, SERGIO APOSTOL, P/LT, RODOLFO M. GARCIA and JUDGE RICARDO TENSUAN, Respondents. D E C I S I O N MEDIALDEA, J.:

This petition was originally filed on February 13, 1985 to secure the release of petitioners on habeas corpus and to permanently enjoin the City Fiscal of Quezon City from investigating charges of "Inciting to Sedition" against petitioners Lino Brocka, Benjamin Cervantes, Cosme Garcia and Rodolfo Santos, (hereafter Brocka, et al.). On learning that the corresponding informations for this offense has been filed by the City Fiscal against them on February 11, 1985, a supplemental petition was filed on February 19, 1985 (p. 51, Rollo) to implead the Presiding Judge, 1 and to enjoin the prosecution of Criminal Cases Nos. Q-38023, Q-38024 and Q-38025 (p. 349, Rollo) and the issuance of warrants for their arrests, including their arraignment. Since then President Ferdinand E. Marcos had ordered the provisional release of Brocka, et al., the issue on habeas corpus has become moot and academic (p. 396, Rollo). We shall thus focus on the question of whether or not the prosecution of the criminal cases for Inciting to Sedition may lawfully be enjoined.:-cralaw

Petitioners were arrested on January 28, 1985 by elements of the Northern Police District following the forcible and violent dispersal of a demonstration held in sympathy with the jeepney strike called by the Alliance of Concerned Transport Organization (ACTO). Thereafter, they were charged with Illegal Assembly in Criminal Cases Nos. 37783, 37787 and 37788 with Branch 108, Regional Trial Court, NCJR, Quezon City. 2

Except for Brocka, et al. who were charged as leaders of the offense of Illegal Assembly and for whom no bail was recommended, the other petitioners were released on bail of P3,000.00 each. Brocka, et al.'s provisional release was ordered only upon an urgent petition for bail for which daily hearings from February 1-7, 1985 were held.

However, despite service of the order of release on February 9, 1985, Brocka, et al. remained in detention, respondents having invoked a Preventive Detention Action (PDA) allegedly issued against them on January 28, 1985 (p. 6, Rollo). Neither the original, duplicate original nor certified true copy of the PDA was ever shown to them (p. 367, Rollo).

Brocka, et al. were subsequently charged on February 11, 1985 with Inciting to Sedition, docketed as Criminal Cases Nos. Q-38023, Q-38024 and Q-38025 (p. 349, Rollo), without prior notice to their counsel (p. 7, Rollo). The original informations filed recommended no bail (p. 349, Rollo). The circumstances surrounding the hasty filing of this second offense are cited by Brocka, et al. (quoting from a separate petition filed on their behalf in G.R. Nos. 69848-50 entitled "Sedfrey A. Ordoñez vs. Col. Julian Arzaga, et al."), as follows:

"x x x

"6. The sham' character of the inquest examination concocted by all respondents is starkly bizarre when we consider that as early as 10:30 A.M. today, February 11, 1985, Benjamin Cervantes was able to contact undersigned petitioner by phone informing counsel that said Benjamin Cervantes and the 4 other persons who are the subjects of this petition will be brought before the Quezon City Fiscal at 2:30 for

undisclosed reasons: subsequently, another phone call was received by petitioning counsel informing him that the appearance of Benjamin Cervantes et al. was to be at 2:00 P.M. When petitioning counsel arrived in the office of Assistant City Fiscal Arturo Tugonon, the complainants' affidavits had not yet been received by any of the panel of three assistant city fiscals, although the five persons under detention were already in the office of said assistant fiscal as early as 2:00 P.M. It was only at 3:00 when a representative of the military arrived bringing with him alleged statements of complainants against Lino Broka (sic) et al. for alleged inciting to sedition, whereupon undersigned counsel asked respondent Colonel Agapito Abad 'who ordered the detained persons to be brought to the office of Assistant Fiscal Arturo Tugonon since there were no charges on file;' and said Colonel Agapito Abad said aloud: 'I only received a telephone call from Colonel Arzaga about 11:00 A.M. to bring the detained persons today — I am only the custodian.' At 3:15, petitioning counsel inquired from the Records Custodian when the charges against Lino Broka (sic) had been officially received and he was informed that the said charges were never coursed through the Records Office.

"7. Under the facts narrated above, respondents have conspired to use the strong arm of the law and hatched the nefarious scheme to deprive Lino Broka (sic) et al. the right to bail because the utterances allegedly constituting inciting to sedition under Article 142 of the Revised Penal Code are, except for varying nuances, almost verbatim the same utterances which are the subject of Criminal Cases No. 37783, 37787 and 37788 and for which said detained persons are entitled to be released on bail as a matter of constitutional right. Among the utterances allegedly made by the accused and which the respondents claimed to be violative of Article 142 of the Revised Penal Code are: 'Makiisa sa mga drivers, "Makiisa sa aming layunin, "Digmaang bayan ang sagot sa kahirapan,' Itigil ang pakikialam ng imperyalismo sa Pilipinas,' 'Rollback ng presyo ng langis sa 95 Centavos.' (See Annex B)

"8. That when petitioning counsel and other members of the defense panel requested that they be given 7 days within which said counsel may confer with their clients — the detained persons named above, the panel of assistant fiscals demanded that said detained persons should sign a 'waiver' of their rights under Article 125 of the Revised Penal Code as a condition for the grant of said request, which is a harassing requirement considering that Lino Broka (sic) et al. were already under the detention, albeit illegally, and they could not have waived the right under Rule 125 which they did not enjoy at the time the ruling was made by the panel of assistant city fiscals." (pp. 4-6, Rollo in G.R. 69848-50).

They were released provisionally on February 14, 1985, on orders of then President F. E. Marcos. The circumstances of their release are narrated in Our resolution dated January 26, 1985, as quoted in the Solicitor General's Manifestation as follows:

"G.R. Nos. 69848-50 (Sedfrey A. Ordoñez, Petitioner, vs. Col. Julian Arzaga, et al., Respondents). — Petitioner Sedfrey A. Ordoñez filed this petition for habeas corpus in behalf of Lino Brocka, Benjamin Cervantes, Cosme Garcia, Alexander Luzano, and Rodolfo Santos, who were all detained under a Preventive Detention Action (PDA) issued by then President Ferdinand E. Marcos on January 28, 1985. They were charged in three separate informations of the crime of illegal assembly under Art. 146, paragraph 3 of the Revised Penal Code, as amended by PD 1834. On February 7, 1985, the Honorable Miriam Defensor Santiago, Regional Trial Judge of Quezon City, issued a resolution in the above criminal cases, directing the release of the five accused on bail of P6,000.00 for each of them, and from which resolution the respondent fiscals took no appeal. Immediately thereafter, the accused filed their respective bail bonds. This notwithstanding, they continued to be held in detention by order of the respondent colonels; and

on February 11, 1985, these same accused were 'reinvestigated,' this time on charges of 'inciting to sedition' ** under Art. 142 of the Revised Penal Code, following which corresponding cases were filed. The respondents complied with Our resolution requiring them, inter alia, to make a RETURN of the writ of habeas corpus. In their RETURN, it appeared that all the accused had already been released, four of them on February 15, 1985 and one February 8, 1985. The petitioner, nevertheless, argued that the petition has not become moot and academic because the accused continue to be in the custody of the law under an invalid charge of inciting to sedition." (p. 395, Rollo).

Hence, this petition.

Brocka, et al. contend that respondents' manifest bad faith and/or harassment are sufficient bases for enjoining their criminal prosecution, aside from the fact that the second offense of inciting to sedition is illegal, since it is premised on one and the same act of attending and participating in the ACTO jeepney strike. They maintain that while there may be a complex crime from a single act (Art. 48, RTC), the law does not allow the splitting of a single act into two offenses and filing two informations therefor, further, that they will be placed in double jeopardy.

The primary issue here is the legality of enjoining the criminal prosecution of a case, since the two other issues raised by Brocka, et al. are matters of defense against the sedition charge.

We rule in favor of Brocka, et al. and enjoin their criminal prosecution for the second offense of inciting to sedition.

Indeed, the general rule is that criminal prosecution may not be restrained or stayed by injunction, preliminary or final. There are however exceptions, among which are:

"a. To afford adequate protection to the constitutional rights of the accused (Hernandez vs. Albano, et al., L-19272, January 25, 1967, 19 SCRA 95);

"b. When necessary for the orderly administration of justice or to avoid oppression or multiplicity of actions (Dimayuga, et al. vs. Fernandez, 43 Phil. 304; Hernandez vs. Albano, supra; Fortun vs. Labang, et al., L-38383, May 27, 1981, 104 SCRA 607);

"c. When there is a pre-judicial question which is sub judice (De Leon vs. Mabanag, 70 Phil. 202);

"d. When the acts of the officer are without or in excess of authority (Planas vs. Gil, 67 Phil. 62);

"e. Where the prosecution is under an invalid law, ordinance or regulation (Young vs. Rafferty, 33 Phil. 556; Yu Cong Eng vs. Trinidad, 47 Phil. 385, 389);

"f. When double jeopardy is clearly apparent (Sangalang vs. People and Avendia, 109 Phil. 1140);

"g. Where the court has no jurisdiction over the offense (Lopez vs. City Judge, L-25795, October 29, 1966, 18 SCRA 616);

"h. Where it is a case of persecution rather than prosecution (Rustia vs. Ocampo, CA-G.R. No. 4760, March 25, 1960);

"i. Where the charges are manifestly false and motivated by the lust for vengeance (Recto vs. Castelo, 18 L.J. [1953], cited in Rañoa vs. Alvendia, CA-G.R. No. 30720-R, October 8, 1962;

Cf, Guingona, et al vs. City Fiscal, L-60033, April 4, 1984, 128 SCRA 577); and

"j. When there is clearly no prima facie case against the accused and a motion to quash on that ground has been denied (Salonga vs. Paño, et al., L-59524, February 18, 1985, 134 SCRA 438).

"7. Preliminary injunction has been issued by the Supreme Court to prevent the threatened unlawful arrest of petitioners (Rodriguez vs. Castelo, L-6374, August 1, 1958)." (cited in Regalado, Remedial Law Compendium, p. 188, 1988 Ed.)

In the petition before Us, Brocka, et al. have cited the circumstances to show that the criminal proceedings had become a case of persecution, having been undertaken by state officials in bad faith.: nad

Respondents, on the other hand, had invoked a PDA in refusing Brocka, et al.'s release from detention (before their release on orders of then Pres. Marcos). This PDA was, however, issued on January 28, 1985, but was invoked only on February 9, 1985 (upon receipt of the trial court's order of release). Under the guidelines issued, PDAs shall be invoked within 24 hours (in Metro Manila) or 48 hours (outside Metro Manila). (Ilagan v. Enrile, G.R. No. 70748, October 28, 1985, 139 SCRA 349). Noteworthy also is Brocka, et al.'s claim that, despite subpoenas for its production, the prosecution merely presented a purported xerox copy of the invoked PDA (par. 4, Counter-Rejoinder, p. 367, Rollo).

The foregoing circumstances were not disputed by the Solicitor General's office. In fact they found petitioner's plight "deplorable" (par. 51, Manifestation, p. 396, Rollo).

The hasty filing of the second offense, premised on a spurious and inoperational PDA, certainly betrays respondent's bad faith and malicious intent to pursue criminal charges against Brocka, et al.

We have expressed Our view in the Ilagan case that "individuals against whom PDAs have been issued should be furnished with the original, and the duplicate original, and a certified true copy issued by the official having official custody of the PDA, at the time of the apprehension" (supra, p. 369).

We do not begrudge the zeal that may characterize a public official's prosecution of criminal offenders. We, however, believe that this should not be a license to run roughshod over a citizen's basic constitutional lights, such as due process, or manipulate the law to suit dictatorial tendencies.

We are impelled to point out a citizen's helplessness against the awesome powers of a dictatorship. Thus, while We agree with the Solicitor General's observation and/or manifestation that Brocka, et al. should have filed a motion to quash the information, We, however, believe that such a course of action would have been a futile move, considering the circumstances then prevailing. Thus, the tenacious invocation of a spurious and inoperational PDA and the sham and hasty preliminary investigation were clear signals that the prosecutors intended to keep Brocka, et al. in detention until the second offense of "Inciting to Sedition" could be facilitated and justified without need of issuing a warrant of arrest anew. As a matter of fact the corresponding informations for this second offense were hastily filed on February 11, 1985, or two days after Brocka, et al.'s release from detention was ordered by the trial judge on February 9, 1985.

Constitutional rights must be upheld at all costs, for this gesture is the true sign of democracy. These may not be set

aside to satisfy perceived illusory visions of national grandeur.: nad

In the case of J. Salonga v. Cruz Paño, We point out:

"Infinitely more important than conventional adherence to general rules of criminal procedure is respect for the citizen's right to be free not only from arbitrary arrest and punishment but also from unwarranted and vexatious prosecution . . ." (G.R. No. L-59524, February 18, 1985, 134 SCRA 438-at p. 448).

We, therefore, rule that where there is manifest bad faith that accompanies the filing of criminal charges, as in the instant case where Brocka, et al. were barred from enjoying provisional release until such time that charges were filed, and where a sham preliminary investigation was hastily conducted, charges that are filed as a result should lawfully be enjoined.

ACCORDINGLY, the petition is hereby GRANTED. The trial court is PERMANENTLY ENJOINED from proceeding in any manner with the cases subject of the petition. No costs.

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

I

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.

G.R. No. 140228 November 19, 2004FRANCISCO MEDINA, MARIA MEDINA, RAYMUNDO MEDINA, ENRIQUE MEDINA, EDGARDO MEDINA, EVELYN MEDINA, ERNIE MEDINA, ELPIDIO MEDINA, EDWIN MEDINA, ELEONOR MEDINA, TEOFILO MEDINA, JR., EUGENE MEDINA, ELVIRA MEDINA, ANATALIO MEDINA, MARIO MEDINA, CORNELIO MEDINA, ERNESTO MEDINA, IGNACIO CONSTANTINO, SANTOS CONSTANTINO, HERMOGENES CONSTANTINO, FLORENCIO CONSTANTINO, VIRGINIA CONSTANTINO, MARCELO GEREMILLO, ROSILA GEREMILLO, ERNESTO GEREMILLO, MERCEDES GEREMILLO, MELENCIO GEREMILLO, BALBINO MEDINA, CRISANTA MEDINA, YOLANDA MEDINA, LYDIA MEDINA, RENATO MEDINA, EUFEMIA MEDINA, VIRGILIO MEDINA, SONIA MEDINA, LUZVIMINDA MEDINA, CRISPIN MEDINA, REMIGIO M. RODOLFO, MILAGROS M. RODOLFO, NIDA M. RODOLFO, BELEN M. RODOLFO, MANUEL M. RODOLFO, ALFREDO M. RODOLFO, SALLY AREVALO, ELMER AREVALO, CELSO AREVALO, JR., VINCENT AREVALO, NENE AREVALO, THE HEIRS OF NAZARIA CRUZ and SANTOS AREVALO, petitioners, vs.GREENFIELD DEVELOPMENT CORPORATION, respondent.D E C I S I O NAUSTRIA-MARTINEZ, J.:

The propriety of the writ of preliminary injunction issued by the Regional Trial Court of Muntinlupa City (Branch 276) in Civil Case No. 98-233 is the sole issue in this petition for review on certiorari, assailing the decision of the Court of Appeals nullifying said writ.

Petitioners are the grandchildren of Pedro Medina from two marriages. In his first marriage to Isadora San Jose, Pedro sired three children: Rafael, Rita and Remegia; in his second marriage, this time to Natalia Mullet, Pedro had five: Cornelio, Brigida, Balbino, Crisanta and Rosila. Except for Balbino and Crisanta, all of Pedro's children likewise bore children, the petitioners in this case.1

On June 5, 1962, Pedro, his brother Alberto Medina and his niece Nazaria Cruz (Alberto's daughter) executed a notarized Contract to Sell in favor of respondent Greenfield Development Corporation over a parcel of land located in Muntinlupa City, then in the Province of Rizal, covered by Transfer Certificate of Title (TCT) No. 100177 (Lot 90-A) and measuring 17,121 square meters.2 A notarized Deed of Sale covering said property was subsequently entered into on June 27, 1962, in favor of respondent, and this time signed by Pedro, Cornelio, Brigida, Balbino, Gregoria, Crisanta, Rosila, and Alberto, all surnamed Medina, and Nazaria Cruz, as vendors.3

Thereafter, a notarized Deed of Absolute Sale with Mortgage was executed on September 4, 1964 in favor of respondent over Lot 90-B covered by TCT No. 100178, measuring 16,291 square meters. Signing as vendors were Pedro, Cornelio, Brigida, Balbino, Gregoria, Crisanta, Rosila, and Alberto, all surnamed Medina, and Nazaria Cruz.4

By virtue of these sales, respondent was able to register in its name the title to the two parcels of land with TCT No. 100578 covering Lot 90-A and TCT No. 133444 covering Lot 90-B. These properties were consolidated with other lots and were eventually registered on July 19, 1995, in the name of respondent under TCT Nos. 202295, 202296 and 202297.5

On November 6, 1998, petitioners instituted Civil Case No. 98-233, an action for annulment of titles and deeds, reconveyance, damages with preliminary injunction and restraining order, against respondent and the Register of Deeds of Makati.6 Included in the complaint are the heirs of Nazaria Cruz, as unwilling co-plaintiffs.7 Petitioners allege in their complaint that they are co-owners of these two parcels of land. While the titles were registered in the names of Pedro, Alberto, Cornelio, Brigida and Gregoria, all surnamed Medina, they alleged that they were recognized as co-owners thereof. In support of their case, petitioners maintain that the deeds of sale on these properties were simulated and fictitious, and the signatures of the vendors therein were fake. Despite the transfer of the title to respondent's name, they remained in possession thereof and in fact, their caretaker, a certain Santos Arevalo and his family still reside on a portion of the property. On July 13, 1998, petitioners caused an adverse claim to be annotated on the titles. After discovering the annotation, respondent constructed a fence on the property and posted security personnel, barring their ingress and egress. Thus, petitioners sought, among others, the issuance of a temporary restraining order and a writ of preliminary injunction enjoining respondent and its agents and representatives from preventing petitioners to exercise their rights over the properties.8

Respondent denied the allegations, stating that petitioners have no valid claim on the properties as it is already titled in its name by virtue of the public documents executed by their predecessors. As counterclaim, respondent alleged that Santos Arevalo is not petitioners' caretaker and it was them who employed him as caretaker.9

On January 18, 1999, the trial court issued its resolution granting petitioners' prayer for injunctive relief. The dispositive portion of the resolution reads:

Let therefore an injunction issue, enjoining and directing defendant GREENFIELD DEVELOPMENT CORPORATION, its security guards, agents, representatives, and all those claiming rights under it, from preventing plaintiffs and their caretaker Santos Arevalo, from entering and going out of the subject premises, and from preventing them to exercise their property rights, upon payment of a bond in the amount of P100,000.00.

It is SO ORDERED.10

Respondent filed a special civil action for certiorari and prohibition with the Court of Appeals, docketed as CA-G.R. SP No. 52015. On July 16, 1999, the Court of Appeals11 rendered its decision nullifying the trial court's resolution, the dispositive portion of which provides:

IN THE (sic) LIGHT OF ALL THE FOREGOING, the petition is hereby GRANTED. The assailed Resolution of the Public Respondent Judge, dated January 18, 1999, in Civil Case No. 98-233 is hereby NULLIFIED.

SO ORDERED.12

Petitioners now seek recourse with this Court, alleging the following grounds:

I

THE COURT OF APPEALS ERRED IN RELYING HEAVILY ON THE ANTECEDENT FACTS NARRATED IN THE PETITION OF THE RESPONDENT IN CA-G.R. SP NO. 52015 AND ADOPTED THE SAME AS ITS OWN WITHOUT EVIDENTIARY SUPPORT

II

THE COURT OF APPEALS COMMITTED A GRAVE ERROR IN UPHOLDING THE VALIDITY OF THE DEEDS OF SALE IN FAVOR OF THE RESPONDENT AND IN HOLDING THAT RESPONDENT'S TRANSFER CERTIFICATES OF TITLE ARE VALID DESPITE THE FACT THAT THE SAID ISSUES ARE YET TO BE TRIED

III

THE COURT OF APPEALS ERRED IN PRESUMING THAT NOTARIZED DOCUMENTS ARE VALID AND THAT RESPONDENT'S TORRENS TITLES ARE INDEFEASIBLE ON THE WRONG NOTION THAT THE RESPONDENT WAS PRESUMED INNOCENT PERSON

IV

THE COURT OF APPEALS COMMITTED A MISTAKE IN HOLDING THAT RESPONDENT WAS IN CONSTRUCTIVE POSSESSION OF THE SUBJECT PREMISES NOTWITHSTANDING THAT PETITIONERS ARE IN ACTUAL POSSESSION THEREOF

V

THE COURT OF APPEALS ERRED IN FINDING THAT PETITIONERS' RIGHT TO IMPUGN RESPONDENT'S TITLES HAVE (SIC) PRESCRIBED SINCE AN ACTION OR DEFENSE BASED ON THE INEXISTENCE OF A CONTRACT DOES NOT PRESCRIBE13

As stated at the outset, the sole issue in this case is whether or not the trial court erred in granting petitioners' prayer for injunctive relief. This Court's resolution will revolve only on the propriety of the injunction. Any reference to the validity or invalidity of the transfers and the titles is merely preliminary, as the matter should be resolved after trial on the merits.

It was the trial court's opinion that petitioners are entitled to the injunction for the following reasons:

The Court however holds suspect the acquisition by Greenfield Development Corporation of the two parcels. Lot 90-A covered by Transfer Certificate of Title No. 100177, was promised to be sold to defendant under a contract to sell but the other co-owners did not sign this Contract to Sell, who all denied knowledge of the same. No contract of Sale followed this Contract to Sell which cannot be the bases of the issuance of a new title. A Contract to Sell is only a promise to sell, and is not a deed of sale, specially as this Contact to Sell is not signed by all of the registered owners.

This Court cannot also understand how the document, denominated as DEED OF ABSOLUTE SALE WITH MORTGAGE can be the bases (sic) of a new title. The absoluteness of the sale, is contradicted by the mortgage it also provides. There is absoluteness of sale only when the buyer upon execution of the contract, pay (sic) in full the consideration and ownership passes to the Vendee. The registered owners of Lot 90-B covered by Transfer Certificate of Title No. 100178 even deny having executed this document of Deed of Absolute Sale with Mortgage.

Until these matters are threshed out at the trial on the merits, and after this is fully explained and determined, whether the properties were actually sold to Defendant Greenfield

Development Corporation, irreparable injury will visit the landowner if the claim of ownership by Greenfield Development Corporation is allowed and not enjoined.14

The Court of Appeals, however, disagreed with the trial court. It noted that the trial court relied mainly on petitioners' allegations in the complaint, which were not supported by substantial evidence, and ignored the presumption of validity ascribed to the duly notarized deeds of conveyances and the titles issued to respondent. The Court of Appeals also found that respondent is in constructive possession of the properties in dispute considering that it is already the registered owner thereof since 1962. Lastly, the Court of Appeals held that petitioners' right to impugn respondent's title to the property has already prescribed.15

Section 3, Rule 58 of the Rules of Court provides for the grounds justifying the issuance of a preliminary injunction, to wit:

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.

The purpose of a preliminary injunction is to prevent threatened or continuous irremediable injury to some of the parties before their claims can be thoroughly studied and adjudicated. Its sole aim is to preserve the status quo until the merits of the case can be heard fully.16 Thus, to be entitled to an injunctive writ, the petitioner has the burden to establish the following requisites:17

1) a right in esse or a clear and unmistakable right to be protected;

(2) a violation of that right;

(3) that there is an urgent and permanent act and urgent necessity for the writ to prevent serious damage.

Hence, petitioners' entitlement to the injunctive writ hinges on their prima facie legal right to the properties subject of the present dispute. The Court notes that the present dispute is based solely on the parties' allegations in their respective pleadings and the documents attached thereto. We have on one hand, petitioners' bare assertion or claim that they are co-owners of the properties sold by their predecessors to respondent, and on the other, respondent's claim of ownership supported by deeds of conveyances and torrens titles in their favor. From these alone, it is clear that petitioners failed to discharge the burden of clearly showing a clear and unmistakable right to be protected. Where the complainant's right or title 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.18

Petitioners contend that the Court of Appeals should not have relied on respondent's allegations regarding the circumstances surrounding the sales and the transfer of the titles. Petitioners point out that trial on the merits of the case is still ongoing and respondent is yet to adduce evidence in support of its contention. The same, however, applies to petitioners' cause of action. They only have their own allegations and are yet to prove their claim. And as stated earlier, the only bases from which the propriety of the injunction can be determined are their respective pleadings and documents. What tilt the balance in respondent's favor are the notarized documents and the titles to the properties. The well-settled rule is that a document acknowledged before a notary public enjoys the presumption of regularity. It is a prima facie evidence of the facts therein stated. To overcome this presumption, there must be presented evidence that is clear and convincing. Absent such evidence, the presumption must be upheld.19 In addition, the titles in the name of respondent, having been registered under the Torrens system, are generally a conclusive evidence of the ownership of the land referred to therein,20 and a strong presumption exists that the titles are regularly issued and valid.21 Therefore, until and unless petitioners show that the documents are indeed spurious and the titles invalid, then the presumptions must prevail at this juncture.

Petitioners, however, argue that the presumption of validity of the notarized documents and titles cannot be applied in respondent's case as it is not an innocent purchaser.22 According to petitioners, respondent is fully aware that at the time that the Contract to Sell was entered into in 1962, Leon Medina who is a co-owner of the property then covered by TCT No. 21314, was already dead. Suffice it to say that these arguments already involve the merits of the main case pending before the trial court, which should not even be preliminarily dealt with, as it would be premature.

Equally pertinent is the rule that courts should avoid issuing a writ of preliminary injunction, which in effect, would dispose of the main case without trial.23 The ground relied upon by the trial court in issuing the writ of preliminary injunction in this case is its doubt over the acquisition of the properties by respondent.24 Such basis would be virtually recognizing petitioners' claim that the deeds of conveyances and the titles are a nullity without further proof, to the detriment of the doctrine of presumption of validity in favor of these documents. There would, in effect, be a prejudgment of the main case and a reversal of the rule on the burden of proof since it would assume the proposition which the petitioners are inceptively duty bound to prove.25

Petitioners also claim that they are in actual possession of the property. As alleged in their complaint, they instituted Santos Arevalo, a co-petitioner, as caretaker.26 They also alleged in their petition filed before this Court that Balbino and Yolanda Medina and their respective families are still residing on a portion of the property.27 Respondent belies their claim, declaring that it employed Arevalo as caretaker. Respondent presented a notarized Receipt and Quitclaim dated April 26, 1994, signed by Arevalo, who attested that he was employed by respondent as caretaker and that his stay on the property was a mere privilege granted by respondent.

Possession and ownership are two different legal concepts. Just as possession is not a definite proof of ownership, neither is non-possession inconsistent with ownership. Even assuming that petitioners' allegations are true, it bears no legal consequence in the case at hand because the execution of the deeds of conveyances is already deemed equivalent to delivery of the property to respondent, and prior physical delivery or possession is not legally required.28 Under Article 1498 of the Civil Code, "when the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the object of the contract, if from the deed the contrary does not appear or cannot be inferred." Possession is

also transferred, along with ownership thereof, to respondent by virtue of the notarized deeds of conveyances.29

In sum, the trial court committed grave abuse of discretion in issuing the writ of preliminary injunction, and the Court of Appeals was correct in nullifying the same.

The Court, however, finds that it was precipitate for the Court of Appeals to rule that petitioners' action is barred by prescription. As previously stressed, the parties are yet to prove their respective allegations and the trial court is yet to receive the evidence. There is nothing on record that can conclusively support the conclusion that the action is barred by prescription. Hence, the Court of Appeals should not have made such ruling.

WHEREFORE, the petition is hereby DENIED for lack of merit. The Decision dated July 16, 1999 rendered by the Court of Appeals in CA-G.R. SP No. 52015 is AFFIRMED, except as to its view on prescription, as discussed in the body of the text.

Let the original records of this case be remanded to the Regional Trial Court of Muntinlupa City (Branch 276) with dispatch for further proceedings.

G.R. No. 121158 December 5, 1996CHINA BANKING CORPORATION, ATTYS. REYNALDO M. CABUSORA and RENATO C. TAGUIAM, petitioners, vs.COURT OF APPEALS, HON. PEDRO T. SANTIAGO, SPS. SO CHING and CRISTINA SO, and NATIVE WEST INTERNATIONAL TRADING CORP., respondents.FRANCISCO, J.:p

China Banking Corporation (China Bank) extended several loans to Native West International Trading Corporation (Native West) and to So Ching, Native West's president. Native West in turn executed promissory notes 1 in favor of China Bank. So Ching, with the marital consent of his wife, Cristina So, additionally executed two mortgages over their properties, viz., a real estate mortgage executed on July 27, 1989 covering a parcel of land situated in Cubao, Quezon City, under TCT No. 277797 2, and another executed on August 10, 1989 covering a parcel of land located in Mandaluyong, under TCT No. 5363. 3 The promissory notes matured and despite due demands by China Bank neither private respondents Native West nor So Ching paid. Pursuant to a provision embodied in the two mortgage contracts, China Bank filed

petitions for the extra-judicial foreclosure of the mortgaged properties before Notary Public Atty. Renato E. Taguiam for TCT No. 277797, 4 and Notary Public Atty. Reynaldo M. Cabusora for TCT No. 5363, 5 copies of which were given to the spouses So Ching and Cristina So. After due notice and publication, the notaries public scheduled the foreclosure sale of the spouses' real estate properties on April 13, 1993. Eight days before the foreclosure sale, however, private respondents filed a complaint 6 with the Regional Trial Court 7 for accounting with damages and with temporary restraining order against petitioners alleging the following causes of action:

A. Defendants failed to comply with the mandates of Administrative Order No. 3 of the Supreme Court dated October 19, 1984.

B. Defendants failed to comply with the mandates of Section 2 Presidential Decree No. 1079 dated January 28, 1977.

C. MORTGAGORS liability limited to P6,500,000.00 and P3,500,000.00 respectively in the Mortgages Annexes A and B respectively, but the same are not included in the notice of foreclosure.

D. Violation of Truth in Lending Act (RP Act No. 3765).

E. In all the loans granted by DEFENDANT-BANK to plaintiffs and Borrowers, the Bank charged interests in excess of the rate allowed by the Central Bank.

F. Violation of Article 1308 of the Civil Code. 8

On April 7, 1993, the trial court issued a temporary restraining order to enjoin the foreclosure sale. Thereafter counsels for the respective parties agreed to file their pleadings and to submit the case, without further hearing, for resolution. On April 28, 1993, the trial court, without passing upon the material averments of the complaint, issued an Order granting the private respondents' prayer for the issuance of preliminary injunction with the following proffered justification:

From the foregoing, it is quite apparent that a question of accounting poses a thorny issue as between the litigants. Variance in the amounts involved relating to the loan agreements must be judiciously passed upon by the Court and this is only possible if a trial on the merits could be had as the matters appurtenant thereto are evidentiary in nature.

Under the premises, the accounting issue being evidentiary in character calls for an issuance of a writ of preliminary injunction pending the adjudication of the case. The issuance thereof at this particular stage of the case is merely a preventive remedy designed to protect from irreparable injury to property or other rights plaintiff may suffer, which a court of equity may take cognizance of by commanding acts to be done or prohibiting their commission, as in the instant suit, to restrain notaries public Cabusora and Taguiam as well as defendant China Banking Corporation from continuing with the auction sale of the subject properties, until further orders from this Court.

Wherefore, premises considered, finding that the circumstances warrant the issuance of a preliminary injunction, plaintiff's prayer is hereby GRANTED. Consequent thereto, plaintiffs are hereby ordered to post a bond amounting to P1 (ONE) Million to answer for whatever damages defendant may suffer as a consequence of the writ. 9

Petitioners moved for reconsideration, but it was denied in an Order dated September 23, 1993. To annul the trial court's Orders of April 28, 1993 and September 23, 1993, petitioners elevated the case through certiorari and prohibition 10 before public respondent Court of Appeals. 11 In a decision dated January 17, 1995, respondent Court of Appeals held that Administrative Circular No. 3 is the governing rule in extra-judicial foreclosure of mortgage, which circular petitioners however failed to follow, and with respect to the publication of the notice of the auction sale, the provisions of P.D. No. 1079 is the applicable statute, 12 which decree petitioners similarly failed to obey. Respondent Court of Appeals did not pass upon the other issues and confined its additional lengthy discussion on the validity of the trial court's issuance of the preliminary injunction, finding the same neither capricious nor whimsical exercise of judgment that could amount to grave abuse of discretion. 13 The Court of Appeals accordingly dismissed the petition, as well as petitioners' subsequent motion for reconsideration. 14 Hence, the instant petition under Rule 45 of the Rules of Court reiterating the grounds raised before respondent court, to wit:

I. PETITIONER CBC'S PETITIONS TO EXTRAJUDICIALLY FORECLOSE THE REAL ESTATE MORTGAGES OF JULY 27, 1989 AND AUGUST 10, 1989 THRU PETITIONERS-NOTARIES PUBLIC, AND THE SCHEDULED FORECLOSURE SALE ARE VALID AND LAWFUL;

II. PRIVATE RESPONDENTS AND PETITIONER CBC HAD EXPRESSLY AGREED TO CONSIDER THE SAME MORTGAGES AS VALID SECURITIES FOR PROMPT AND FULL PAYMENT OF ALL AND ANY OBLIGATIONS OF THE FORMER FROM THE LATTER;

III. THE SUPPOSED VARIANCE IN THE TOTAL AMOUNT OF UNPAID LOANS IS NOT A VALID BASIS TO ENJOIN THE FORECLOSURE OF THE QUESTIONED MORTGAGES. THE MERE FAILURE TO PAY THE LOAN SECURED BY SAID MORTGAGES IS THE ONLY, SINGLE REASON FOR THEIR LAWFUL FORECLOSURE;.

IV. PETITIONER BANK HAD FURNISHED PRIVATE RESPONDENTS WITH COPIES OF DISCLOSURE STATEMENTS IN COMPLIANCE WITH THE TRUTH IN LENDING ACT, AND CHARGED THEM INTERESTS IN ACCORDANCE WITH LAW AND PURSUANT TO ITS EXPRESS AGREEMENT WITH THE LATTER;

V. THE P1.0 MILLION INJUNCTION BOND REQUIRED BY THE HONORABLE COURT A QUO ON PRIVATE RESPONDENTS IS GROSSLY AND PATENTLY INADEQUATE. 15

At the outset, the Court's attention is drawn to the fact that since the filing of this suit before the trial court, none of the substantial issues have been resolved. To avoid and gloss over the issues raised by the parties, as what the trial court and respondent Court of Appeals did, would unduly prolong this litigation involving a rather simple case of foreclosure of mortgage. Undoubtedly, this will run counter to the avowed purpose of the rules, i.e., to assist the parties in obtaining just, speedy and inexpensive determination of every action or proceeding. 16 The Court, therefore, feels that the central issues of the case, albeit unresolved by the courts below, should now be settled specially as they involved pure questions of law. Furthermore, the pleadings of the respective parties on file have amply ventilated their various positions and arguments on the matter necessitating prompt adjudication.

Now to the core issues.

As the Court sees it, the crucial issues are: (1) whether or not the loans in excess of the amounts expressly stated in the

mortgage contracts can be included as part of the loans secured by the real estate mortgages, (2) whether or not petitioners can extra-judicially foreclose the properties subject of the mortgages, (3) whether or not Administrative Order No. 3 should govern the extra-judicial foreclosure of the properties, and (4) whether or not the writ of preliminary injunction issued by the trial court is valid.

Petitioners aver that the additional loans extended in favor of private respondents in excess of P6,500,000.00 and P3,500,000.00 — amounts respectively stipulated in the July 27, 1989 and August 10, 1989 mortgage contracts — are also secured by the same collaterals or real estate properties, citing as bases the introductory paragraph ("whereas clause") of the mortgage contracts, as well as the stipulations stated therein under the first and second paragraphs. Private respondents for their part argue that the additional loans are clean loans, relying on some isolated parts of the same introductory paragraph and first paragraph of the contracts, and also of the third paragraph.

As both parties offered a conflicting interpretation of the contract, then judicial determination of the parties' intention is thus, inevitable. 17 Hereunder are the pertinent identical introductory paragraphs and paragraphs 1 to 3 of the July 27, 1989 and August 10, 1989 mortgage contracts:

WHEREAS, the MORTGAGEE has granted, and may from time to time hereafter grant to the MORTGAGOR(S)/either of them/and/or NATIVE WEST INTERNATIONAL TRADING CORP. — hereinafter called the DEBTOR(S) credit facilities not exceeding SIX MILLION FIVE HUNDRED THOUSAND PESOS ONLY (P6,500,000.00)* Philippine currency, and the MORTGAGEE had required the MORTGAGOR(S) to give collateral security for the payment of any and all obligations heretofore contracted/incurred and which may thereafter be contracted/incurred by the MORTGAGOR(S) and/or DEBTOR(S), or any one of them, in favor of the MORTGAGEE;

NOW, THEREFORE, as collateral security for the payment of the principal and interest of the indebtedness/obligations herein referred to and the faithful performance by the MORTGAGOR(S) of his (her, its) obligations hereunder, the MORTGAGOR(S) hereby execute(s) a FIRST MORTGAGE, in favor of the MORTGAGEE, free from all liens and encumbrances of any kind, that (those) certain parcel(s) of land, together with all the buildings/machineries/equipment improvements now existing thereon, and which may hereafter be placed thereon, described in the Schedule of mortgaged properties described hereunder and/or which is hereto attached, marked Exhibit "A" and made a part thereof.

1. It is agreed that this mortgage shall respond for all the obligations contracted/incurred by the MORTGAGOR(S) and/or DEBTOR(S) or any one of them, in favor of the MORTGAGEE up to the said sum of SIX MILLION FIVE HUNDRED THOUSAND PESOS ONLY (P6,500,000.00)* regardless of the manner in which the said obligations may have been contracted/incurred by the MORTGAGOR(S) and/or DEBTOR(S) — whether by advances or loans made to him (her, it) by the MORTGAGEE, by the negotiation of mercantile documents, including trust receipts, by the execution by the MORTGAGOR(S) and/or DEBTOR(S) of money market instruments/commercial papers, undertakings of guaranty of suretyship, or by endorsement of negotiable instruments, or otherwise, the idea being to make this deed a comprehensive and all embracing security that it is.

2. Payments on account of the principal and interest of the credit granted by the MORTGAGEE to the MORTGAGOR(S) and/or DEBTOR(S) may be made from time to time, and as often as the MORTGAGOR(S) may elect; provided, however, that in the event of such payments being so made that the indebtedness to the MORTGAGEE may from time to time be

reduced the MORTGAGEE may make further advances and all sums whatsoever advanced by the MORTGAGEE shall be secured by this mortgage, and partial payments of said indebtedness from time to time shall not thereby be taken to reduce by the amount of such payments the credit hereby secured. The said credit shall extend to any account which shall, within the said limit of P6,500,000.00* exclusive of interest, be fluctuating and subject to increase or decrease from time to time as the MORTGAGEE may approve, and this mortgage shall stand as security for all indebtedness of the MORTGAGOR(S) and/or DEBTOR(S), or any one of them, at any and all times outstanding, regardless of partial or full payments at any time or times made by the MORTGAGOR(S) and/or DEBTOR(S).

3. It is hereby agreed that the MORTGAGEE may from time to time grant the MORTGAGOR(S)/DEBTOR(S) credit facilities exceeding the amount secured by this mortgage, without affecting the liability of the MORTGAGOR(S) under this mortgage up to the amount stipulated. 18

An important task in contract interpretation is the ascertainment of the intention of the contracting parties which is accomplished by looking at the words they used to project that intention in their contract, i.e., all the words, not just a particular word or two, and words in context, not words standing alone. 19 Indeed, Article 1374 of the Civil Code, states that "the various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly." Applying the rule, we find that the parties intent is to constitute the real estate properties as continuing securities liable for future obligations beyond the amounts of P6.5 million and P3.5 million respectively stipulated in the July 27, 1989 and August 10, 1989 mortgage contracts. Thus, while the "whereas" clause initially provides that "the mortgagee has granted, and may from time to time hereafter grant to the mortgagors . . . credit facilities not exceeding six million five hundred thousand pesos only (P6,500,000.00)**" yet in the same clause it provides that "the mortgagee had required the mortgagor(s) to give collateral security for the payment of any and all obligations heretofore contracted/incurred and which may thereafter be contracted/incurred by the mortgagor(s) and/or debtor(s), or any one of them, in favor of the mortgagee" which qualifies the initial part and shows that the collaterals or real estate properties serve as securities for future obligations. The first paragraph which ends with the clause, "the idea being to make this deed a comprehensive and all embracing security that it is" supports this qualification.

Similarly, the second paragraph provides that "the mortgagee may take further advances and all sums whatsoever advanced by the mortgagee shall be secured by this mortgagee . . ." And although it was stated that "[t]he said credit shall extend to any account which shall, within the said limit of P6,500,000.00 exclusive of interest", this part of the second sentence is again qualified by its succeeding portion which provides that "this mortgage shall stand as security for all indebtedness of the mortgagor(s) and/or debtor(s), or any one of them, at any and all times outstanding . . ." Again, under the third paragraph, it is provided that "the mortgagee may from time to time grant the mortgagor(s)/debtor(s) credit facilities exceeding the amount secured by this mortgage . . ." The fourth paragraph, 20 in addition, states that ". . . all such withdrawals, and payments, whether evidenced by promissory notes or otherwise, shall be secured by this mortgage" which manifestly shows that the parties principally intended to constitute the real estate properties as continuing securities for additional advancements which the mortgagee may, upon application, extend. It is well settled that mortgages given to secure future advancements or loans are valid and legal contracts, and that the amounts named as consideration in said contracts do not limit the amount for which the mortgage may stand as security if from the four corners of the

instrument the intent to secure future and other indebtedness can be gathered. 21

Anent the second issue, we find that petitioners are entitled to foreclose the mortgages. In their complaint for accounting with damages pending with the trial court, private respondents averred that:

8. Up to and until February, 1993, PLAINTIFF-CORPORATION had paid to the DEFENDANT-BANK, the amount of THREE HUNDRED FIFTY THOUSAND (P350,000.00) Pesos, Philippine Currency, and was willing to pay the balance in installments of FOUR HUNDRED THOUSAND (P400,000.00) Pesos, Philippine Currency, every month, in the meantime, but the DEFENDANT-BANK refused to accept, demanding instead SEVEN HUNDRED MILLION (P700,000,000.00) Pesos, Philippine Currency, a month.

9. Inspite of the expressed willingness and commitment of plaintiffs to pay their obligation in a manner which they could afford, on March 11, 1993, MORTGAGORS and DEFENDANT-CORPORATION, each received a Letter of Demand from DEFENDANT-BANK, for the payment of P28,775,615.14 exclusive of interest and penalty evidenced by 11 promissory notes enclosed therein . . . .

10. Upon receipt of the letter, PLAINTIFF-CORPORATION through its President pleaded with the Chairman of the Board of the DEFENDANT-BANK, through whom Defendant-Corporation was transacting business with, to accept its offer of payment of FOUR HUNDRED THOUSAND (P400,000.00) Pesos, Philippine Currency, a month, in the meantime, which was again refused by the said Chairman. 22

which allegations are a clear admission that they were unable to settle to the fullest their obligation. Foreclosure is valid where the debtors, as in this case, are in default in the payment of their obligation. 23 The essence of a contract of mortgage indebtedness is that a property has been identified or set apart from the mass of the property of the debtor-mortgagor as security for the payment of money or the fulfillment of an obligation to answer the amount of indebtedness, in case of default of payment. 24 It is a settled rule that in a real estate mortgage when the obligation is not paid when due, the mortgagee has the right to foreclose the mortgage and to have the property seized and sold in view of applying the proceeds to the payment of the obligation. 25 In fact, aside from the mortgage contracts, the promissory notes executed to evidence the loans also authorize the mortgagee to foreclose on the mortgages. Thus:

. . . CHINA BANKING CORPORATION is hereby authorized to sell at public or private sales such securities or things of value for the purpose of applying their proceeds to such payments. 26

And while private respondents aver that they have already paid ten million pesos, an allegation which has still to be settled before the trial court, the same cannot be utilized as a shield to enjoin the foreclosure sale. A mortgage given to secure advancements, we repeat, is a continuing security and is not discharged by repayment of the amount named in the mortgage, until the full amount of the advancements are paid. 27

With respect to the third issue, we find private respondents' contention that Administrative Order No. 3 is the governing rule in foreclosure of mortgages misplaced. The parties, we note, have stipulated that the provisions of Act No. 3135 is the controlling law in case of foreclosure. Thus:

17. The MORTGAGOR(S) hereby grant(s) unto the MORTGAGEE full and irrevocable power of attorney coupled with interest, in the event of breach of any of the conditions of this mortgage, to sell, in its discretion, the mortgaged properties at public auction, for cash and to the highest bidder, in the Province or City where the mortgaged properties are located, before the Sheriff, or a Notary Public, without court proceedings, after posting notices of sale for a period of twenty days in three public places in said place; and after publication of such notice in a newspaper of general circulation in the said place once a week, for three consecutive weeks, and the MORTGAGEE is hereby authorized to execute the deed of sale and all such other documents as may be necessary in the premises all in accordance with the provisions of Act No. 3135 of the Philippine Legislature, as amended, and Section 78 of Republic Act No. 337: . . . 28 (Emphasis supplied.)

By invoking the said Act, there is no doubt that it must "govern the manner in which the sale and redemption shall be effected." 29 Clearly, the fundamental principle that contracts are respected as the law between the contracting parties finds application in the present case, 30 specially where they are not contrary to law, morals, good customs and public policy.

Moreover, Administrative Order No. 3 is a directive for executive judges and clerks of courts which, under its preliminary paragraph, is "[i]n line with the responsibility of an Executive Judge, under Administrative Order No. 6, dated June 30, 1975, for the management of courts within his administrative area, included in which is the task of supervising directly the work of the Clerk of Court, who is also the Ex-Oficio Sheriff, and his staff, . . . ." Surely, a petition for foreclosure with the notary public is not within the contemplation of the aforesaid directive as the same is not filed with the court. At any rate, Administrative Order No. 3 cannot prevail over Act No. 3135, as amended. It is an elementary principle in statutory construction that a statute is superior to an administrative directive and the former cannot be repealed or amended by the latter.

On the last issue, we find that the issuance of the writ of injunction by the trial court unjustified. A writ of preliminary injunction, as an ancillary or preventive remedy, 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. 31 But before a writ of preliminary injunction may be issued, there must be a clear showing by the complaint that there exists a right to be protected and that the acts against which the writ is to be directed are violative of the said right. 32 In the case at bench, we fail to see any reason why the foreclosure of the mortgages should be enjoined. On the face of the clear admission by private respondents that they were unable to settle their obligations which were secured by the mortgages, petitioners have a clear right to foreclose the mortgages which is a remedy provided by law. Thus, in Caltex Philippines, Inc. v. Intermediate Appellate Court, 33 we reiterated the rule that:

. . . where a debt is secured by a mortgage and there is a default in payment on the part of the mortgagor, the mortgagee has a choice of one (1) or two (2) remedies, but he cannot have both. The mortgagee may:

1) foreclosure the mortgage; or

2) file an ordinary action to collect the debt.

When the mortgagee chooses the foreclosure of the mortgage as a remedy, he enforces his lien by the sale on foreclosure of the mortgaged property. The proceeds of the sale will be applied to the satisfaction of the debt. With this remedy, he

has a prior lien on the property. In case of a deficiency, the mortgagee has the right to claim for the deficiency resulting from the price obtained in the sale of the real property at public auction and the outstanding obligation at the time of the foreclosure proceedings (Soriano v. Enriquez, 24 Phil 584; Banco de Islas Filipinas v. Concepcion Hijos, 53 Phil 86; Banco Nacional v. Barreto, 53 Phil 101).

On the other hand, if the mortgagee resorts to an action to collect the debt, he thereby waives his mortgage lien. He will have no more priority over the mortgaged property. If the judgment in the action to collect is favorable to him, and it becomes final and executory, he can enforce said judgment by execution. He can even levy execution on the same mortgaged property, but he will not have priority over the latter and there may be other creditors who have better lien on the properties of the mortgagor. 34

WHEREFORE, the instant petition is hereby GRANTED. The assailed Decision, as well as the Resolution, of the Court of Appeals dated January 17, 1995 and July 7, 1995, respectively, are hereby REVERSED and SET ASIDE. The preliminary writ of injunction issued by the trial court is hereby NULLIFIED. This case is REMANDED to the court of origin for further proceedings in conformity with this decision.

G.R. No. 167434 February 19, 2007 SPOUSES RAMON M. NISCE and A. NATIVIDAD PARAS-NISCE, Petitioners,  vs. EQUITABLE PCI BANK, INC., Respondent.D E C I S I O NCALLEJO, SR., J.:

On November 26, 2002, Equitable PCI Bank1 (Bank) as creditor-mortgagee filed a petition for extrajudicial foreclosure before the Office of the Clerk of Court as Ex-Officio Sheriff of the Regional Trial Court (RTC) of Makati City. It sought to foreclose the following real estate mortgage contracts executed by the spouses Ramon and Natividad Nisce over two parcels of land covered by Transfer Certificate of Title (TCT) Nos. S-83466 and S-83467 of the Registry of Deeds of Rizal: one dated February 26, 1974; two (2) sets of "Additional Real Estate Mortgage" dated September 27, 1978 and June 3, 1996; and an "Amendment to Real Estate Mortgage" dated February 28, 2000. The mortgage contracts were executed by the spouses Nisce to secure their obligation under Promissory Note Nos. 1042793 and BD-150369, including a Suretyship Agreement executed by Natividad. The obligation of the Nisce spouses totaled P34,087,725.76 broken down as follows:

Spouses Ramon & Natividad Nisce - - - - - P17,422,285.99

Natividad P. Nisce (surety) - - - - - - - - - - US$57,306.59

and - - - - - - - - - - - - P16,665,439.772

On December 2, 2002, the Ex-Officio Sheriff set the sale at public auction at 10:00 a.m. on January 14, 2003,3 or on January 30, 2003 in the event the public auction would not take place on the earlier setting.

On January 28, 2003, the Nisce spouses filed before the RTC of Makati City a complaint for "nullity of the Suretyship Agreement, damages and legal compensation" with prayer for injunctive relief against the Bank and the Ex-Officio Sheriff. They alleged the following: in a letter4 dated December 7, 2000 they had requested the bank (through their lawyer-son Atty. Rosanno P. Nisce) to setoff the peso equivalent of their obligation against their US dollar account with PCI Capital Asia Limited (Hong Kong), a subsidiary of the Bank, under Certificate Deposit No. 016125 and Account No. 090-0104 (Passbook No. 83-3041);6 the Bank accepted their offer and requested for an estimate of the balance of their account; they complied with the Bank’s request and in a letter dated February 11, 2002, informed it that the estimated balance of their account as of December 1991 (including the 11.875% per annum interest) was US$51,000.42,7 and that as of December 2002, Natividad’s US dollar deposit with it amounted to at least P9,000,000.00; they were surprised when they received a letter from the Bank demanding payment of their loan account, and later a petition for extrajudicial foreclosure.

The spouses Nisce also pointed out that the petition for foreclosure filed by the Bank included the alleged obligation of Natividad as surety for the loan of Vista Norte Trading Corporation, a company owned and managed by their son Dino Giovanni P. Nisce (P16,665,439.77 and US$57,306.59). They insisted, however, that the suretyship agreement was null and void for the following reasons:

(a) x x x [I]t was executed without the knowledge and consent of plaintiff Ramon M. Nisce, who is by law the administrator of the conjugal partnership;

(b) The suretyship agreement did not redound to the benefit of the conjugal partnership and therefore did not bind the same;

(c) Assuming, arguendo, that the suretyship contract was valid and binding, any obligation arising therefrom is not covered by plaintiffs’ real estate mortgages which were constituted to secure the payment of certain specific obligations only.8

The spouses Nisce likewise alleged that since they and the Bank were creditors and debtors with respect to each other, their obligations should have been offset by legal compensation to the extent of their account with the Bank.

To support their plea for a writ of preliminary and prohibitory injunction, the spouses Nisce alleged that the amount for which their property was being sold at public auction (P34,087,725.76) was grossly excessive; the US dollar deposit of Natividad with PCI Capital Asia Ltd. (Hong Kong), and the obligation covered by the suretyship agreement had not been deducted. They insisted that their property rights would be violated if the sale at public auction would push through. Thus, the spouses Nisce prayed that they be granted the following reliefs:

(1) that upon the filing of this Complaint and/or after due notice and summary hearing, the Honorable Court immediately issue a temporary restraining order (TRO) restraining defendants, their representatives and/or deputies, and other persons acting for and on their behalf from proceeding with the extrajudicial foreclosure sale of plaintiffs’ mortgaged properties on 30 January 2003 or on any other dates subsequent thereto;

(2) that after due notice and hearing and posting of the appropriate bond, the Honorable Court convert the TRO to a writ of preliminary prohibitory injunction;

(3) that after trial on the merits, the Honorable Court render judgment –

(a) making the preliminary injunction final and permanent;

(b) ordering defendant Bank to set off the present peso value of Mrs. Nisce’s US dollar time deposit, inclusive of stipulated interest, against plaintiffs’ loan obligations with defendant Bank;

(c) declaring the Deed of Suretyship dated 25 May 1998 null and valid and without any binding effect as to plaintiff spouses, and ordering defendant Bank to exclude the amounts covered by said suretyship contract from plaintiffs’ obligations with defendant Bank;

(d) ordering defendant Bank to pay plaintiffs the following sums:

(i) at least P3,000,000.00 as moral damages;

(ii) at least P1,500,000.00 as exemplary damages; and

(iii) at least P500,000.00 as attorney’s fees and for other expenses of litigation.

Plaintiffs further pray for costs of suit and such other reliefs as may be deemed just and equitable.9

On same day, the Bank filed an "Amended Petition" with the Office of the Executive Judge for extrajudicial foreclosure of the Real Estate Mortgage to satisfy the spouses’ loan account of P30,533,552.24, exclusive of interests, penalties and other charges; and the amounts of P16,665,439.77 and US$57,306.59 covered by the suretyship agreement executed by Natividad Nisce.10

In the meantime, the parties agreed to have the sale at public auction reset to January 30, 2003.

In its Answer to the complaint, the Bank alleged that the spouses had no cause of action for legal compensation since PCI Capital was a different corporation with a separate and distinct personality; if at all, offsetting may occur only with respect to the spouses’ US$500.00 deposit account in its Paseo de Roxas branch.

In the meantime, the Ex-Officio Sheriff set the sale at public auction at 10:00 a.m. on March 5 and 27, 2003.11 The spouses Nisce then filed a Supplemental Complaint with plea for a temporary restraining order to enjoin the sale at public auction.12 Thereafter, the RTC conducted hearings on the plaintiffs’ plea for a temporary restraining order, and the parties adduced testimonial and documentary evidence on their respective arguments.

The Case for the Spouses Nisce

Natividad frequently traveled abroad and needed a facility with easy access to foreign exchange. She inquired from E.P. Nery, the Bank Manager for PCI Bank Paseo de Roxas Branch, about opening an account. He assured her that she would be able to access it from anywhere in the world. She and Nery also agreed that any balance of account remaining at maturity date would be rolled over until further instructions, or until she terminated the facility.13 Convinced, Natividad deposited US$20,500.00 on July 19, 1984, and was issued Passbook No. 83-3041.14 Upon her request, the bank transferred the US$20,000.00 to PCI Capital Asia Ltd. in Hong Kong via cable order.15

On July 11, 1996, the spouses Nisce secured a P20,000,000.00 loan from the Bank under Promissory Note No. BD-150369.16 The maturity date of the loan was July 11, 2001, payable in monthly installments at 16.731% interest per annum. To secure the payment of the loan account, they executed an Amendment to the Real Estate Mortgage over the properties17 located in Makati City covered by TCT Nos. S-83466 and S-83467.18 They later secured another loan of P13,089,936.90 on March 1, 2000 (to mature on March 1, 2005) payable quarterly at 13.9869% interest per annum; this loan agreement is evidenced by Promissory Note (PN) No. 104279319 and covered by a Real Estate Mortgage20 executed on February 28, 2000. They made a partial payment ofP13,866,666.50 on the principal of their loan account covered by PN No. BD-150369, and P5,348,239.82 on the interests.21 These payments are evidenced by receipts and checks.22 However, there were payments totalingP4,600,000.00 received by the Bank but were not covered by checks or receipts.23 As of September 2000, the balance of their loan account under PN No. BD-150369 was only P4,333,333.46.24 They also made partial payment on their loan account under PN No. 1042793 which, as of May 30, 2001, amounted to P2,218,793.61.25

On July 20, 1984, PCI Capital issued Certificate of Deposit No. CD-01612;26 proof of receipt of the US$20,000.00 transferred to it by PCI Bank Paseo de Roxas Branch as requested by Natividad. The deposit account was to earn interest at the rate of 11.875% per annum, and would mature on October 22, 1984, thereafter to be payable at the office of the depositary in Hong Kong upon presentation of the Certificate of Deposit.

In June 1991, two sons of the Nisce spouses were stranded in Hong Kong. Natividad called the Bank and requested for a partial release of her dollar deposit to her sons. However, she was informed that according to its computer records, no such dollar account existed. Sometime in November 1991, she submitted her US dollar passbook with a xerox copy of the Certificate of Deposit for the PCIB to determine the whereabouts of the account.27 She reiterated her request to the Bank on January 27, 199228 and September 11, 2000.29

In the meantime, in 1994, the Equitable Banking Corporation and the PCIB were merged under the corporate name Equitable PCI Bank.

In a letter dated December 7, 2000, Natividad confirmed to the Bank, through Ms. Shellane R. Casaysayan, her offer to settle their loan account by offsetting the peso equivalent of

her dollar account with PCI Capital under Account No. 090-0104.30 Their son, Atty. Rosanno Nisce, later wrote the Bank, declaring that the estimated balance of the US dollar account with PCI Capital as of December 1991 was US$51,000.42.31 Atty. Nisce corroborated this in his testimony, and stated that Ms. Casaysayan had declared that she would refer the matter to her superiors.32 A certain Rene Esteven also told him that another offer to setoff his parents’ account had been accepted, and he was assured that its implementation was being processed.33 On cross examination, Atty. Nisce declared that there was no response to his request for setoff,34 and that Esteven assured him that the Bank would look for the records of his mother’s US dollar savings deposit.35 He was later told that the Bank had accepted the offer to setoff the account.36

The Case for the Bank

The Bank adduced evidence that, as of January 31, 2003, the balance of the spouses’ account under the two promissory notes, including interest and penalties, was P30,533,552.24.37 It had agreed to restructure their loans on March 31, 1998, but they nevertheless failed to pay despite repeated demands.38 The spouses had also been furnished with a statement of their account as of June 2001. Thus, under the terms of the Real Estate Mortgage and Promissory Notes, it had the right to the remedy of foreclosure. It insisted that there is no showing in its records that the spouses had delivered checks amounting to P4,600,000.00.39

According to the Bank, Natividad’s US$20,000.00 deposit with the PCIB Paseo de Roxas branch was transferred to PCI Capital via cable order,40 and that it later issued Certificate of Deposit No. 01612 (Non-transferrable).41 In a letter dated May 9, 2001, it informed Natividad that it had acted merely as a conduit in facilitating the transfer of the funds, and that her deposit was made with PCI Capital and not with PCIB. PCI Capital had a separate and distinct personality from the PCIB, and a claim against the former cannot be made against the latter. It was later advised that PCI Capital had already ceased operations.42

The spouses Nisce presented rebuttal documentary evidence to show that PCI Capital was registered in Hong Kong as a corporation under Registration No. 84555 on February 27, 198943 with an authorized capital stock of 50,000,000 (with par value of HKD1.00); the PCIB subscribed to 29,039,993 issued shares at the par value of HKD1.00 per share;44 on October 25, 2004, the corporate name of PCI Capital was changed to PCI Express Padala (HK) Ltd.;45 and the stockholdings of PCIB remained at 29,039,999 shares.46

On March 24, 2003, the RTC issued an Order47 granting the spouses Nisce’s plea for a writ of preliminary injunction on a bond of P10,000,000.00. The dispositive portion of the Order reads:

WHEREFORE, in order not to render the judgment ineffectual, upon filing by the plaintiffs and the approval thereof by the court of a bond in the amount of Php10,000,000.00, which shall answer for any damage should the court finally decide that plaintiffs are not entitled thereto, let a writ of preliminary injunction issue enjoining defendants Equitable-PCI Bank, Atty. Engracio M. Escasinas, Jr., and any person or entity acting for and in their behalf from proceeding with the extrajudicial foreclosure sale of TCT Nos. 437678 and 437679 registered in the names of the plaintiffs.48

After weighing the parties’ arguments along with their documentary evidence, the RTC declared that justice would be best served if a writ of preliminary injunction would be issued to preserve the status quo. It had yet to resolve the issue of setoff since only Natividad dealt with the Bank

regarding her dollar account. It also had to resolve the issue of whether the Bank had failed to credit the amount of P4,600,000.00 to the spouses Nisce’s account under PN No. BD-150369, and their claim that the Bank had effectively accelerated the respective maturity dates of their loan.49 The spouses Nisce posted the requisite bond which was approved by the RTC.1awphi1.net

The Bank opted not to file a motion for reconsideration of the order, and instead assailed the trial court’s order before the CA via petition for certiorari under Rule 65 of the Rules of Court. The Bank alleged that the RTC had acted without or in excess of its jurisdiction, or with grave abuse of its discretion amounting to lack or excess of jurisdiction when it issued the assailed order;50 the spouses Nisce had failed to prove the requisites for the issuance of a writ of preliminary injunction; respondents’ claim that their account with petitioner had been extinguished by legal compensation has no factual and legal basis. It further asserted that according to the evidence, Natividad made the US$20,000.00 deposit with PCI Capital before it merged with Equitable Bank – hence, the Bank was not the debtor of Natividad relative to the dollar account. The Bank cited the ruling of this Court in Escaño v. Heirs of Escaño and Navarro51 to support its arguments. It insisted that the spouses Nisce had failed to establish "irreparable injury" in case of denial of their plea for injunctive relief.

The spouses, for their part, pointed out that the Bank failed to file a motion for reconsideration of the trial court’s order, a condition sine qua non to the filing of a petition for certiorari under Rule 65 of the Rules of Court. Moreover, the error committed by the trial court is a mere error of judgment not correctible by certiorari; hence, the petition should have been dismissed outright by the CA. They reiterated their claim that they had made a partial payment of P4,600,000.00 on their loan account which petitioner failed to credit in their favor. The Bank had agreed to debit their US dollar savings deposit in the PCI Capital as payment of their loan account. They insisted that they had never deposited their US dollar account with PCI Capital but with the Bank, and that they had never defaulted on their loan account. Contrary to the Bank’s claim, they would have suffered irreparable injury had the trial court not enjoined the extrajudicial foreclosure of the real estate mortgage.

On December 22, 2004, the CA rendered judgment granting the petition and nullifying the assailed Order of the RTC.52 The appellate court declared that a petition for certiorari under Rule 65 of the Rules of Court may be filed despite the failure to file a motion for reconsideration, particularly in instances where the issue raised is one of law; where the error is patent; the assailed order is void, or the questions raised are the same as those already ruled upon by the lower court. According to the appellate court, the issue raised before it was purely one of law: whether the loan account of the spouses was extinguished by legal compensation. Thus, a motion for the reconsideration of the assailed order was not a prerequisite to a petition for certiorari under Rule 65.

The appellate court further declared that the trial court committed grave abuse of its discretion in issuing the assailed order, since no plausible reason was given by the spouses Nisce to justify the injunction of the extrajudicial foreclosure of the real estate mortgage. Given their admission that they had not settled the obligations secured by the mortgage, the Bank had a clear right to seek the remedy of foreclosure.

The CA further declared as devoid of factual basis the spouses Nisce’s argument that the Bank should have applied, by way of legal compensation, the peso equivalent of their time deposit with PCI Capital as partial settlement of their obligations. It held that for compensation to take place, the requirements set forth in Articles 1278 and 1279 of the Civil Code of the Philippines must be present; in this case, the

parties are not mutually creditors and debtors of each other. It pointed out that the time deposit which the spouses Nisce sought to offset against their obligations to the Bank is maintained with PCI Capital. Even if PCI Capital is a subsidiary of the Bank, compensation cannot validly take place because the Bank and PCI Capital are two separate and distinct corporations. It pointed out the settled principle "that a corporation has a personality separate and distinct from its stockholders and from other corporations to which it may be connected."

The CA further declared that the alleged P4,600,000.00 payment on PN No. BD-150369 was not pleaded in the spouses’ complaint and supplemental complaint before the court a quo. What they alleged, aside from legal compensation, was that the mortgage is not liable for the obligation of Natividad Nisce as surety for the loans obtained by a trading firm owned and managed by their son. The CA further pointed out that the Bank precisely amended the petition for foreclosure sale by deleting the claim for Natividad’s obligation as surety. The appellate court concluded that the injunctive writ was issued by the RTC without factual and legal basis.53

The spouses Nisce moved to have the decision reconsidered, but the appellate court denied the motion. They thus filed the instant petition for review on the following grounds:

5.1. THE HONORABLE COURT OF APPEALS ERRED IN TAKING COGNIZANCE OF THE PETITION FOR CERTIORARI DESPITE THE BANK’S FAILURE TO FILE A MOTION FOR RECONSIDERATION WITH THE TRIAL COURT.

5.2. THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT PREMATURELY RULED ON THE MERITS OF THE MAIN CASE.

5.3. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT JUDGE HAD COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN ISSUING A TEMPORARY RESTRAINING ORDER AND A WRIT OF PRELIMINARY INJUNCTION IN FAVOR OF THE SPOUSES NISCE.54

Petitioners aver that the CA erred in not dismissing respondent Bank’s petition for certiorari outright because of the absence of a condition precedent: the filing of a motion for reconsideration of the assailed Order of the RTC before filing the petition for certiorari in the CA. They insist that respondent bank’s failure to file a motion for reconsideration of the assailed Order deprived the RTC of its option to resolve the issue of whether it erred in issuing the writ of preliminary injunction in their favor.

Petitioners insist that in resolving whether a petition for a writ of preliminary injunction should be granted, the trial court and the appellate court are not to resolve the merits of the main case. In this case, however, the CA resolved the bone of contention of the parties in the trial court: whether the loan account of petitioners with respondent bank had been extinguished by legal compensation against petitioner Natividad Nisce’s US dollar savings account with PCI Capital in Hong Kong. The CA reversed the assailed order of the trial court by resolving the main issue in the trial court on its merits, and declaring that the US dollar savings deposit of the petitioner Natividad Nisce with the PCI Capital cannot be used to offset the loan account of petitioners with respondent bank. In fine, according to petitioners, the CA preempted the ruling of the RTC on the main issue even before the parties could be given an opportunity to complete the presentation of their

respective evidences. Petitioners point out that in the assailed Order, the RTC declared that to determine whether respondent had credited petitioners for the amount ofP4,600,000.00 under PN No. BD-150369 and whether respondent as mortgagee-creditor accelerated the maturities of the two (2) promissory notes executed by petitioner, there was a need for a full-blown trial and an exhaustive consideration of the evidence of the parties.

Petitioners further insist that a petition for a writ of certiorari is designed solely to correct errors of jurisdiction and not errors of judgment, such as errors in the findings and conclusions of the trial court. Petitioners maintain that the trial court’s erroneous findings and conclusions (according to respondent bank) are not the proper subjects for a petition for certiorari. Contrary to the findings of the CA, they did not admit in the trial court that they were in default in the payment of their loan obligations. They had always maintained that they had no outstanding obligation to respondent bank precisely because their loan account had been offset by the US dollar deposit of petitioner Natividad Nisce, and that they had made check payments of P4,600,000.00 which respondent bank had not credited in their favor. Likewise erroneous is the CA ruling that they would not suffer irreparable damage or injury if their properties would be sold at public auction following the extrajudicial foreclosure of the mortgage. Petitioners point out that their conjugal home stands on the subject properties and would be lost if sold at public auction. Besides, petitioners aver, the injury to respondent bank resulting from the issuance of a writ of preliminary injunction is amply secured by the P10,000,000.00 injunction bond which they had posted.

For its part, respondent avers that, as held by the CA, the requirement of the filing of a motion for reconsideration of the assailed Order admits of exceptions, such as where the issue presented in the appellate court is the same issue presented and resolved by the trial court. It insists that petitioners failed to prove a clear legal right to injunctive relief; hence, the trial court committed grave abuse of discretion in issuing a writ of preliminary injunction.

Respondent maintains that the sole issue involved in the petition for certiorari of respondent in the CA was whether or not the trial court committed grave abuse of its discretion in issuing the writ of preliminary injunction. Necessarily, the CA would have to delve into the circumstances behind such issuance. In so doing, the CA had to consider and calibrate the testimonial and documentary evidence adduced by the parties. However, the RTC and the CA did not resolve with finality the threshold factual and legal issue of whether the loan account of petitioners had been paid in full before it filed its petition for extrajudicial foreclosure of the real estate mortgage.

The Ruling of the Court

The Petition in theCourt of AppealsNot Premature

The general rule is that before filing a petition for certiorari under Rule 65 of the Rules of Court, the petitioner is mandated to comply with a condition precedent: the filing of a motion for reconsideration of the assailed order, and the subsequent denial of the court a quo. It must be stressed that a petition for certiorari is an extraordinary remedy and should be filed only as a last resort. The filing of a motion for reconsideration is intended to afford the public respondent an opportunity to correct any actual error attributed to it by way of re-examination of the legal and factual issues.55 However, the rule is subject to the following recognized exceptions:

(a) where the order is a patent nullity, as where the court a quo has no jurisdiction; (b) where the questions raised in the certiorari proceeding have been duly raised and passed upon by the lower court, or are the same as those raised and passed upon in the lower court; (c) where there is an urgent necessity for the resolution of the question and any further delay would prejudice the interests of the Government or of the petitioner or the subject matter of the action is perishable; (d) where, under the circumstances, a motion for reconsideration would be useless; (e) where petitioner was deprived of due process and there is extreme urgency for relief; (f) where, in a criminal case, relief from an order of arrest is urgent and the granting of such relief by the trial court is improbable; (g) where the proceedings in the lower court are a nullity for lack of due process; (h) where the proceedings was ex parte or in which the petitioner had no opportunity to object; and (i) where the issue raised is one purely of law or public interest is involved.56

As will be shown later, the March 24, 2003 Order of the trial court granting petitioner’s plea for a writ of preliminary injunction was issued with grave abuse of discretion amounting to excess or lack of jurisdiction and thus a nullity. If the trial court issues a writ of preliminary injunction despite the absence of proof of a legal right and the injury sustained by the plaintiff, the writ is a nullity.57

Petitioners Are NotEntitled to a Writ ofPreliminary ProhibitoryInjunction

Section 3, Rule 58 of the Rules of Court provides that a preliminary injunction may be granted when the following have been 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 tendering to render the judgment ineffectual.

The grant of a preliminary injunction in a case rests on the sound discretion of the court with the caveat that it should be made with great caution. The exercise of sound judicial discretion by the lower court should not be interfered with except in cases of manifest abuse. Injunction is a preservative remedy for the protection of the parties’ substantive rights and interests. The sole aim of a preliminary injunction is to preserve the status quo within the last actual status that preceded the pending controversy until the merits of the case can be heard fully. Moreover, a petition for a preliminary injunction is an equitable remedy, and one who comes to claim for equity must do so with clean hands. It is to be resorted to by a litigant to prevent or preserve a right or interest where there is a pressing necessity to avoid injurious consequences which cannot be remedied under any standard of compensation. A petition for a writ of preliminary injunction rests upon an alleged existence of an emergency or of a special reason for such a writ before the case can be regularly

tried. By issuing a writ of preliminary injunction, the court can thereby prevent a threatened or continued irreparable injury to the plaintiff before a judgment can be rendered on the claim.58

The plaintiff praying for a writ of preliminary injunction must further establish that he or she has a present and unmistakable right to be protected; that the facts against which injunction is directed violate such right;59 and there is a special and paramount necessity for the writ to prevent serious damages. In the absence of proof of a legal right and the injury sustained by the plaintiff, an order for the issuance of a writ of preliminary injunction will be nullified. Thus, where the plaintiff’s right is doubtful or disputed, a preliminary injunction is not proper. The possibility of irreparable damage without proof of an actual existing right is not a ground for a preliminary injunction.60

However, to establish the essential requisites for a preliminary injunction, the evidence to be submitted by the plaintiff need not be conclusive and complete.61 The plaintiffs are only required to show that they have an ostensible right to the final relief prayed for in their complaint.62 A writ of preliminary injunction is generally based solely on initial or incomplete evidence.63 Such evidence need only be a sampling intended merely to give the court an evidence of justification for a preliminary injunction pending the decision on the merits of the case, and is not conclusive of the principal action which has yet to be decided.64

It bears stressing that findings of the trial court granting or denying a petition for a writ of preliminary injunction based on the evidence on record are merely provisional until after the trial on the merits of the case shall have been concluded.65

The trial court, in granting or dismissing an application for a writ of preliminary injunction based on the pleadings of the parties and their respective evidence must state in its order the findings and conclusions based on the evidence and the law. This is to enable the appellate court to determine whether the trial court committed grave abuse of its discretion amounting to excess or lack of jurisdiction in resolving, one way or the other, the plea for injunctive relief. The trial court’s exercise of its judicial discretion whether to grant or deny an application for a writ of preliminary injunction involves the assessment and evaluation of the evidence, and its findings of facts are ordinarily binding and conclusive on the appellate court and this Court.66

We agree with respondent’s contention that as creditor-mortgagee, it has the right under the real estate mortgage contract and the amendment thereto to foreclose extrajudicially, the real estate mortgage and sell the property at public auction, considering that petitioners had failed to pay their loans, plus interests and other incremental amounts as provided for in the deeds. Petitioners contend, however, that if respondent bank extrajudicially forecloses the real estate mortgage and has petitioners’ property sold at public auction for an amount in excess of the balance of their loan account, petitioner’s contractual and substantive rights under the real estate mortgage would be violated; in such a case, the extrajudicial foreclosure sale may be enjoined by a writ of preliminary injunction.

Respondent bank sought the extrajudicial foreclosure of the real estate mortgage and was to sell the property at public auction for P30,533,552.24. The amount is based on Promissory Notes No. 1042793 and BD-150369, interests, penalty charges, and attorney’s fees, as of January 31, 2003, exclusive of all interests, penalties, other charges, and foreclosure costs accruing thereafter.67 Petitioners asserted before the trial court that respondents sought the extrajudicial foreclosure of the mortgaged deed for an amount far in excess of what they owed, because the latter failed to

credit P4,600,000.00 paid in checks but without any receipts having been issued therefor; and the P9,000,000.00 peso equivalent of the US$20,000.00 deposit of petitioner Natividad Nisce with PCIB under Passbook No. 83-3041 and Certificate of Deposit No. CD-01612 issued by PCI Capital on July 23, 1984. Petitioners maintain that the US$20,000.00 dollar deposit should be setoff against their account with respondent against their loan account, on their claim that respondent is their debtor insofar as said deposit is concerned.

It was the burden of petitioners, as plaintiffs below, to adduce preponderant evidence to prove their claim that respondent bank was the debtor of petitioner Natividad Nisce relative to her dollar deposit with PCIB, and later transferred to PCI Capital in Hong Kong, a subsidiary of respondent Bank. Petitioners, however, failed to discharge their burden.

Under Article 1278 of the New Civil Code, compensation shall take place when two persons, in their own right, are creditors and debtors of each other. In order that compensation may be proper, petitioners were burdened to establish the following:

(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;

(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated;

(3) That the two debts be due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor.68

Compensation takes effect by operation of law when all the requisites mentioned in Article 1279 of the New Civil Code are present and extinguishes both debts to the concurrent amount even though the creditors and debtors are not aware of the compensation. Legal compensation operates even against the will of the interested parties and even without their consent.69 Such compensation takes place ipso jure; its effects arise on the very day on which all requisites concur.70

As its minimum, compensation presupposes two persons who, in their own right and as principals, are mutually indebted to each other respecting equally demandable and liquidated obligations over any of which no retention or controversy commenced and communicated in due time to the debtor exists. Compensation, be it legal or conventional, requires confluence in the parties of the characters of mutual debtors and creditors, although their rights as such creditors or their obligations as such debtors need not spring from one and the same contract or transaction.71

Article 1980 of the New Civil Code provides that fixed, savings and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loans. Under Article 1953, of the same Code, a person who secures a loan of money or any other fungible thing acquires the ownership thereof, and is bound to pay the creditor an equal amount of the same kind and quality. The relationship of the depositors and the Bank or similar institution is that of creditor-debtor. Such deposit may be setoff against the obligation of the depositor with the bank or similar institution.

When petitioner Natividad Nisce deposited her US$20,500.00 with the PCIB on July 19, 1984, PCIB became the debtor of petitioner. However, when upon petitioner’s request, the amount of US$20,000.00 was transferred to PCI Capital (which forthwith issued Certificate of Deposit No. 01612), PCI Capital, in turn, became the debtor of Natividad Nisce. Indeed, a certificate of deposit is a written acknowledgment by a bank or borrower of the receipt of a sum of money or deposit which the Bank or borrower promises to pay to the depositor, to the order of the depositor; or to some other person; or to his order whereby the relation of debtor and creditor between the bank and the depositor is created.72 The issuance of a certificate of deposit in exchange for currency creates a debtor-creditor relationship.73

Admittedly, PCI Capital is a subsidiary of respondent Bank. Even then, PCI Capital [PCI Express Padala (HK) Ltd.] has an independent and separate juridical personality from that of the respondent Bank, its parent company; hence, any claim against the subsidiary is not a claim against the parent company and vice versa.74 The evidence on record shows that PCIB, which had been merged with Equitable Bank, owns almost all of the stocks of PCI Capital. However, the 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 shall be respected, and the liability of the parent corporation, as well as the subsidiary shall be confined to those arising in their respective business.75 A corporation has a separate personality distinct from its stockholders and from other corporations to which it may be conducted. This separate and distinct personality of a corporation is a fiction created by law for convenience and to prevent injustice.

This Court, in Martinez v. Court of Appeals76 held that, being a mere fiction of law, peculiar situations or valid grounds can exist to warrant, albeit sparingly, the disregard of its independent being and the piercing of the corporate veil. The veil of separate corporate personality may be lifted when, inter alia, the corporation is merely an adjunct, a business conduit or an alter ego of another corporation 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; or when the corporation is used as a cloak or cover for fraud or illegality; or to work injustice; or where necessary to achieve equity or for the protection of the creditors. In those cases where valid grounds exist for piercing the veil of corporate entity, the corporation will be considered as a mere association of persons. The liability will directly attach to them.77

The Court likewise declared in the same case that the test in determining the application of the instrumentality or alter ego doctrine is as follows:

1. Control, not mere majority or complete stock control, but complete dominion, 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 plaintiff’s legal rights; and

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

The Court emphasized that 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 that operation.78

Petitioners failed to adduce sufficient evidence to justify the piercing of the veil of corporate entity and render respondent Bank liable for the US$20,000.00 deposit of petitioner Natividad Nisce as debtor.

On hindsight, petitioners could have spared themselves the expenses and tribulation of a litigation had they just withdrawn their deposit from the PCI Capital and remitted the same to respondent. However, petitioner insisted on their contention of setoff.

On the P4,600,000.00 paid in checks allegedly remitted by petitioners to respondent in partial payment of their loan account, petitioners failed to adduce in evidence the checks to show that, indeed, the checks were drawn by petitioners and delivered to respondent, and that respondent was able to cash the checks. The only evidence adduced by petitioners is a piece of paper listing the serial numbers of the checks and the amount of each check:

PAYMENTS MADE & RECEIVED BY EBC BUT W/O RECEIPTS

1. Dec. 29, 1997 - EBC-0000039462 -

P2,000,000.00

2. Jan. 22, 1998 - EBC-213016118C -

1,000,000.00

3. Feb. 24, 1998 - UB -0000074619 -

800,000.00

4. Mar. 23, 1998 - EBC-213016121C -

800,000.00

P4,600,000.00

79

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The Decision of the Court of Appeals is AFFIRMED. Costs against petitioners.

SUPREME COURT EN BANC

ASSET PRIVATIZATION TRUST, as Trustee of the Government of the Republic of the Philippines, Petitioner, -versus- G.R. No. 101344

October 1, 1992 COURT OF APPEALS, JOB C. MADAYAG Presiding Judge of the Regional Trial Court of Makati, Br. 145, and JOHANNESBURG PACKAGING CORP, Respondents. x----------------------------------------------------x

D E C I S I O N BELLOSILLO, J.:

This is a petition for review on certiorari of the Decision[1] of the Court of Appeals in CA-G.R. No. 24632, promulgated 11 July 1991, dismissing the Petition for Certiorari and Prohibition which assailed the Order[2] of April 1991 of the Regional Trial Court of Makati, Br. 145, in Civil Case No. 16960, and its Resolution of 20 August 1991 denying petitioner’s motion for reconsideration. chanroblespublishingcompany

The Order of 1 April 1991 of the trial court states: “Finding the grounds stated in plaintiffs’ URGENT MOTION FOR ISSUANCE OF RESTRAINING ORDER (AND LATER WRIT OF INJUNCTION AGAINST DEFENDANT ASSET PRIVATIZATION TRUST [APT], dated March 29, 1991 . . . to be meritorious, the same is hereby granted. Therefore the Court resolved to issue this Temporary Restraining Order restraining and prohibiting (a) defendant APT from repossessing from the plaintiff JPC of Paragon Paper Mills, its facilities and plant site at Orani, Bataan, either through a physical takeover and/or enforcement of the Summary decision in Civil Case No. 585 for unlawful detainer . . . or through the military assistance; and (b) defendant APT from pursuing/or continuing Civil Case No. 585 on appeal

or at any stage before any court until (1) Civil Case No. 16960 of this Court, (2) CA-G.R. SP No. 20042 before the Court of Appeals, and (c) G.R. No. 95509 before the Supreme Court, are finally decided. chanroblespublishingcompany

x x x “This temporary restraining order is valid for a period of twenty (20) days from receipt of this order by the parties.”

In dismissing the petition for certiorari and prohibition, respondent Court of Appeals explained —

“Indeed, a cursory reading of the questioned order shows that it was issued merely to restrain the defendants in Civil Case No. 16960 from doing the acts complained of in the motion until after hearing on the incident for issuance of writ of preliminary injunction which was set for April 12, 1991. In no way did it determine the issues raised in the respondent’s motion. And by this time, the twenty-day lifespan of the temporary restraining order has already expired, to be precise, since April 21, 1991. The respondent Court, therefore, should be allowed to hear the incident for issuance of writ of preliminary injunction and thereafter resolve it.”[3] chanroblespublishingcompany

Petitioner APT now comes to Us on a petition for review of the Order of 1 April 1991 on the ground that the respondent court (1) committed a reversible error of law in upholding the validity of the restraining order of 1 April 1991; (2) gravely abused its discretion in dismissing the petition for certiorari and allowing the trial court to hear the pending incident for injunction and thereafter resolving it; and, (3) erred in remanding the contempt charge against the APT lawyers to the lower court for rendition of judgment despite the protestations of petitioner that the trial court was devoid of jurisdiction to hear and decide it.

A word on the background of the case: On 1 August 1986, the Paragon Paper Plant was put up for cash sale in a public auction as a consequence of the foreclosure by the Development Bank of the Philippines (DBP) of the mortgage constituted in its favor by the Paragon Paper Industries, Inc., over the latter’s parcels of land situated in Orani, Bataan, including the improvements, machinery and equipment thereon.[4] Private respondent Johannesburg Packaging Corporation (JPC) with its cash bid of P120,579,000.00 won in the bidding, subject to the terms and conditions set forth in DBP Resolution No. 1319 of 20 August 1986.[5] While awaiting Presidential approval of the sale, private respondent was allowed to enter the premises of the Paragon, Paper Plant to “clean, repair and test-run the mill and equipment.” Eventually the sale was approved by the President as attested by the Notice of Approval sent to private respondent.[6] chanroblespublishingcompany

On 22 May 1987, by reason of the failure of private respondent to pay the full amount of its cash bid within the stipulated period, including the extensions it obtained, DBP rescinded the sale.[7] To avoid the rescission, private respondent filed an action before the Regional Trial Court of Makati, docketed as Civil Case No. 16960, captioned “Johannesburg, Packaging Corporation and Romeo Cabalinan vs. Development Bank of the Philippines, et al.”[8] chanroblespublishingcompany

On 10 June 1987, the trial court issued a restraining order directing defendants therein and all persons acting under them to desist from implementing the Order of 22 May 1987 rescinding the Award of Sale in favor of plaintiffs therein and the repossession/take-over from plaintiffs of the Paragon Paper Mill/Plant and facilities at Orani, Bataan, scheduled on 15 June 1987.[9]

On 29 June 1987, private respondent filed an amended complaint 10 impleading petitioner to whom Paragon Paper Industries, Inc., and Paragon Paper Plant have been conveyed on 27 February 1987 pursuant to Proclamation No. 50.

On 11 August 1987, the trial court directed defendants therein to maintain the status quo ante litem until further orders.[11]

On 21 November 1988, petitioner prayed for the lifting of the status quo litem order on the ground that private respondent failed to make good its offer to pay its outstanding balance to petitioner despite the extended period. Petitioner also prayed for leave to file answer.[12]

On 15 September 1989, the trial court through respondent Judge issued an order —

“WHEREFORE, the Court hereby resolves: (1) To deny defendant APT’s motion to set aside status quo order and for reconsideration, respectively dated November 21, 1988 and April 19, 1989; (2) To dismiss or drop defendant APT from this action for not being a real party in interest; and (3) To order plaintiffs to pay their obligation with defendant DBP, subject to whatever compromise agreement they may arrive at with respect to the payment of the unpaid principal, interests and/or extension fees.”[13]

The Order of 15 September 1989 was elevated by DBP on certiorari to the Court of Appeals, docketed as CA-G.R. SP No. 20042. On 27 July 1990, respondent Court of Appeals (First Division) rendered a decision the dispositive portion of which reads — chanroblespublishingcompany

“Premises considered, judgment is hereby rendered granting the Petition. (1) The orders dated September 15, 1989 and December 28, 1989 are hereby declared null and void; (2) The APT is reinstated as a party defendant; (3) The orders dated August 11, 1987 . . . suspending the period within which to maintain the status quo, are ordered lifted and net aside. The petitioner and the other defendants in Civil Case No. 16960 may file their responsive pleadings within fifteen (15) days from notice hereof.”[14]

This decision of the Court of Appeals in CA-G.R. SP No. 20042 is now the subject of G.R. No. 95509 pending before the Court. chanroblespublishingcompany

On 14 December 1990, petitioner sent a letter to private respondent with a demand to vacate the premises of the Paragon Paper Plant in Orani, Bataan, within fifteen (15) days from receipt thereof. The demand unheeded, petitioner filed an action for unlawful detainer with the Municipal Circuit Trial Court of Orani-Samal, Bataan, which rendered judgment in favor of petitioner.[15] The decision was affirmed on appeal by the RTC of Bataan. Private respondent then appealed to the Court of Appeals, docketed as CA-G.R. SP No. 25013, which reversed the appealed judgment; consequently, the complaint for unlawful detainer was dismissed, the writ of preliminary mandatory injunction was annulled and set aside, and the possession of the questioned premises was restored to private respondent.[16] This is now the subject of the petition in G.R. No. 103277.[17]

On 1 April 1991, the trial court issued the questioned Order directing the issuance of a restraining order and setting the hearing of the motion for a writ of preliminary injunction on 12 April 1991. To stop the issuance of the writ, petitioner went on certiorari to the Court of Appeals, docketed as CA-G.R. SP No. 24632, assailing the validity of the Order of the April 1991.

On 11 July 1991, the Court of Appeals dismissed the petition. Hence, the instant recourse.

The three (3) points raised by petitioner may be simplified into whether the trial court has the authority to issue a restraining order or a writ of injunction against APT in Civil Case No. 16960.

The law authorizing the issuance of a restraining order is Sec. 5, Rule 85, of the Rules of Court, as amended by B.P. 224 on 16 April 1982, which states — chanroblespublishingcompany “SECTION 5. 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 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 the said twenty-day period, the judge 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 determine within the same period whether or not preliminary injunction should 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.” Apparently, the basic purpose of a restraining order is to preserve the status quo until the hearing of the application for preliminary injunction, and that insofar as lower courts are concerned, its 20-day effectivity period is non-extendible. It automatically terminates at the end of such period without the need of any judicial declaration to that effect and the lower courts, including the Court of Appeals, have no discretion to extend the same.[18] Only this Court can. It is settled that, generally, the exercise of sound discretion in issuing a restraining order by the lower court will not be interfered with.[19]

In the case before Us, however, We agree with petitioner that no restraining order lies against it in view of Sec. 31 of Proclamation No 50-A dated 15 December 1986 which provides — chanroblespublishingcompany

“No court or administrative agency shall issue any restraining order or injunction against the Trust in connection with the acquisition, sale or disposition of assets transferred to it . . . Nor shall such order or injunction be issued against any purchaser of assets sold by the Trust to prevent such purchaser from taking possession of any assets purchased by him.”

The respondent Court of Appeals after noting that the restraining order had already expired, went on to hold that the trial court should be allowed to hear the incident on the issuance of a writ of preliminary injunction. chanroblespublishingcompany

Indeed, this is not the first time that the propriety of the issuance of the writ by the lower court against APT was raised. In Mantruste Systems, Inc. vs. Court of Appeals,[20] this Court through Mme. Justice Carolina Griño-Aquino, ruled that —

“Courts may not substitute their judgment for that of APT, nor block, by an injunction the discharge of its functions and the implementation of its decision in connection with the acquisition, sale or disposition of assets transferred to it.”

We have expressly ruled therein, in addition, that Proclamation No. 50-A does not infringe any provision of the Constitution. Thus —

“The President, in the exercise of her legislative power under the Freedom Constitution, issued Proclamation No. 50-A prohibiting the courts from issuing restraining orders and writs of injunction against the APT and the purchasers of any assets sold by it, to prevent courts from interfering in the

discharge, by this instrumentality of the executive branch of the Government, of its task of carrying out the expeditious disposition and privatization of certain government corporations and/or the assets thereof (Proc. No. 50), absent any grave abuse of discretion amounting to excess or lack of jurisdiction on its part. This proclamation, not being inconsistent with the Constitution and not having been repealed or revoked by Congress, has remained operative (Sec. 3, Art. XVIII, 1987 Constitution).”[21] chanroblespublishingcompany

Quite significantly, the records do not disclose any grave abuse of discretion committed by petitioner amounting to excess or lack of jurisdiction in its effort to take possession of the assets transferred to it by DBP. As We view it, petitioner simply availed of judicial processes to recover the transferred assets formerly owned by private respondent. Private respondent also argues that petitioner has never questioned the “no-injunction” rule in its original petition for certiorari before respondent Court of Appeals and that this is the first time that petitioner invokes Proclamation No. 50-A. Private respondent further states that it acquired the property through public auction as early as 1 August 1986 while the transfer of assets of DBP to petitioner was made on 27 February 1989. chanroblespublishingcompany

We have opted to consider the “no-injunction” rule even if the issue is raised only for the first time in this appeal because the acts of APT are vested with public interest and that under Proclamation No. 50 it is mandated to carry out “the expeditious disposition and/or privatization of certain government corporations and/or assets thereof.” Besides, this Court is invested with authority to review such matters as may be necessary to serve best the interest of justice, even if they are not assigned as errors in the appeal.[22] chanroblespublishingcompany

As regards the contention of private respondent that its transaction over the subject property antedated the creation of petitioner on 8 December 1986 and that the transfer of the property from DBP to petitioner was made on 27 February 1987, We quote with approval the observations of petitioner —

“While the statistical dates cited by private respondent vis-a-vis the petitioner APT’s creation and the execution of the Deed of Transfer between DBP and APT may be accurate, the private respondent conveniently ignored the fact that the DBP rescinded and cancelled the award of sale made in its favor on May 22, 1987 for repeated violation of the terms thereof which consisted in its failure to pay in cash the balance of its bid price in the amount of P110,579.00. Moreover, the effective date of transfer of DBP’s claims, securities, and assets was made retroactive to June 30, 1986 as provided in said Deed of Transfer. Consequently, the DBP made a valid transfer of its financial claims and assets to the petitioner under Proclamation No. 50 dated December 8, 1986.”[23]

It may be worth emphasizing, as correctly observed by respondent Court of Appeals, that the temporary restraining order issued by the trial court already expired on 21 April 1991. There is therefore no more temporary restraining order to be struck down. Nonetheless, this Court resolves this petition consistent with its function of formulating guiding precepts, doctrines or rules for the proper guidance of bench and bar, especially as the matter at issue concerns public interest.[24]

In fine, We hold that respondent Judge Job B. Madayag, or any court of administrative agency for that matter, is devoid of authority to issue any restraining order or injunction against petitioner as regards the acquisition, sale or disposition of assets transferred to it nor against any purchaser of assets

sold by petitioner to prevent such purchaser of assets sold by petitioner to prevent such purchaser from taking possession thereof, pursuant to Proclamation No. 50-A, absent any grave abuse of discretion on the part of petitioner amounting to excess or lack of jurisdiction. chanroblespublishingcompany

As regards the contempt charge against the APT lawyers, considering that it was not touched upon in the questioned order of the trial court, We prefer to refrain from treating the matter. As correctly noted by respondent court, “even if there is such charge of contempt against the petitioner, the matter must, perforce, be heard by the respondent [trial] Court and the petitioner has the remedy of appeal available to it in the rules, in case of an adverse decision.”[25] chanroblespublishingcompany

PREMISES CONSIDERED, the judgment under review is MODIFIED by sustaining the respondent Court of Appeals to the extent that it dismissed the petition in CA-G.R. No. 24632 on the ground that anyway the temporary restraining order in question had already expired, and in refraining from resolving the contempt charge against the lawyers of petitioner; however, its ruling allowing the trial court to proceed with the hearing on the preliminary injunction is REVERSED and SET ASIDE, consistent with the mandate of Proclamation No. 50-A. No costs

G.R. No. 84324 April 5, 1990 SANTIAGO AQUINO, TERENCIO YUMANG, JR. and FULGENCIO ICARO, petitioners, vs. HON. GUILLERMO R. LUNTOK, Presiding Judge, Regional Trial Court, Branch XXIX, Libmanan, Camarines Sur and LUDOVICO B.

PERALTA, respondents. Estanislao L. Cesa, Jr. for private respondents. REGALADO, J.:

In this special civil action for certiorari, with an application for preliminary injunction and/or restraining order, petitioners seek the annulment of the following orders of respondent judge in Civil Case No. L-361 of the Regional Trial Court of Camarines Sur, entitled "Ludovico B. Peralta vs. Henry B. Rañola et al.," to wit: (1) Temporary restraining order (TRO, for brevity), dated August 27, 1987, enjoining petitioners herein for a period of twenty (20) days from proceeding or taking action against herein private respondent; (2) Order, dated September 16, 1987, extending the efficacy of said TRO for another period of twenty (20) days; (3) Order, dated October 6, 1987, indirectly extending the efficacy of the TRO for an uncertain period; (4) Order, dated November 4, 1987, granting the application for a writ of preliminary injunction; and (5) Order, dated November 5, 1987, approving the bond filed by private respondent which led to the eventual issuance of the writ of November 11, 1987.

It is of record, however, that the Court of Appeals had previously rendered judgment on May 11, 1988, in CA-G.R. SP No. 13186, 1 likewise an original action for certiorari for the annulment of the aforesaid orders of August 27, 1987, September 16, 1987 and October 6, 1987, wherein it dismissed the petition for being moot since a writ of preliminary injunction had already been issued by respondent judge. We take cognizance of the finality and entry of such judgment, 2 for which reason this Court shall primarily consider only the prayer for the annulment of the orders, dated November 4, 1987 and November 5, 1987, and the writ of November 11, 1987 in the present petition.

Reduced to its essential terms, the present petition raises a question, apparently of first impression, concerning the validity of a writ of preliminary injunction issued beyond the 20-day period of the effectivity of a restraining order and during the extended efficacy of such order. Indeed, in the cases treating on the matter of TROs, it appears that only the propriety of orders extending the efficacy of the initial TRO, or the issuance of another TRO after the first had automatically expired after the twentieth day of its issuance, have been squarely ruled upon, but not the question of the validity of a writ of preliminary injunction issued to restrain the same act complained of after the lapse of the 20-day period of the TRO.

The records show that petitioners, in their capacity as Provincial Auditor of Camarines Sur, State Auditor I of the Provincial Auditor's Office and State Examiner of the Provincial Auditor's Office, respectively, conducted an audit of private respondent's accounts as Municipal Treasurer of Libmanan, Camarines Sur and found a cash shortage of P274,011.17 under his accountability. 3

Allegedly pursuant to Section 157, Batas Pambansa Blg. 337, petitioners seized private respondent's cash, books, papers and accounts and the latter was suspended from office. As a consequence, private respondent requested reinvestigation by the Commission on Audit. 4 Pending action on the request, private respondent filed a petition dated August 26, 1987 with the trial court, presided over by respondent judge, for prohibition with injunction and with a prayer for a restraining order and damages. 5

Forthwith, respondent judge issued the TRO of August 27, 1987, enjoining all respondents therein, their agents and/or representatives, for a period of twenty (20) days from date thereof, to desist from proceeding or taking action against private respondent based on petitioner Yumang's report and from exercising such derivative powers and functions. 6

On September 16, 1987, which was the last day of effectivity of the TRO, respondent judge, on motion filed by private respondent, issued an order extending the efficacy of the TRO for another period of twenty (20) days, or until October 6, 1987. 7

On September 24, 1987, likewise upon motion of private respondent, respondent judge issued an order directing petitioners to return to private respondent the cash, books and other papers they had seized. Thereupon, petitioner Aquino filed a motion for the reconsideration of said order, to which private respondent filed his opposition. Under date of October 5, 1987, petitioners also filed their answer to the petition, with an opposition to the application for preliminary injunction. 8

On October 6, 1987, the last day of the extended effectivity of the TRO, private respondent filed another motion for extension of the efficacy of the restraining order. On the same date, respondent judge issued an order directing petitioners to refrain from taking any action against private respondent until the motion is resolved. 9

In a petition dated October 27, 1987, petitioners instituted in the Court of Appeals an original action for certiorari, with an application for preliminary injunction and/or restraining order, docketed therein as CA-G.R. SP No. 13186 and entitled "Santiago Aquino, et al. vs. Hon. Guillermo Luntok, et al.," precisely putting in issue and assailing the validity of the aforesaid multiple restraining orders dated August 27, 1987, September 16, 1987 and October 6, 1987. 10

While said petition was pending, respondent judge issued an order, dated November 4, 1987, granting the application of private respondent for a writ of preliminary injunction. 11 A day later, respondent judge issued another order, dated November 5, 1987, approving the bond filed by private respondent. 12 On November 11, 1987, respondent judge issued the corresponding writ of preliminary injunction. 13

As an offshoot thereof and as hereinbefore noted, the Court of Appeals rendered a decision on May 11, 1988 dismissing the petition for certiorari in CA-G.R. SP No. 13186 on the ground of mootness, since respondent judge had already granted the writ of preliminary injunction, thus:

Under the factual milieu of this case, no practical effect could be had since the respondent court had already granted a writ of preliminary injunction on November 4, 1987. 14

As earlier explained, the other orders of respondent judge, dated November 4, 1987 and November 5, 1987, and the validity of the writ issued on November 11, 1987, are now before us for resolution in the present action.

Petitioners asseverate that the questioned writ of preliminary injunction is null and void, it being in reality a fourth restraining order issued beyond the 20-day effectivity of the preceeding TRO. 15 Further, petitioners claim that the injunction was issued in utter disregard of the doctrine of exhaustion of administrative remedies, private respondent having brought the action below pending his request for reinvestigation with the Commission on Audit. 16

On the charge of non-exhaustion of administrative remedies, although it is well-settled in our jurisdiction that, unless otherwise provided by law or required by public interest, before bringing an action in or resorting to the courts of justice all remedies of administrative character affecting or determinative of the controversy at that level should first be exhausted by the aggrieved party, 17 this doctrine is not a hard and fast rule. In the present case, we are inclined to subscribe to private respondent's invocation of the urgency of judicial intervention, as one of the admitted exceptions to the rule, 18 which likewise would be in keeping with the court's broad discretion in granting injunctions. Whatever circumstances warranted the grant of injunction in the court below would be no different than the circumstances which created the urgency, and there can ordinarily be no better judge to determine the existence thereof than the trial court itself.

Thus, it has been said that the court which is to exercise the discretion of granting an injunction is the court of original jurisdiction and not the appellate court; 19 and a preliminary injunction will usually be granted when it is made to appear that there is a substantial controversy between the parties and one of them is committing an act or threatening the immediate commission of an act that will cause irreparable injury or destroy the status quo of the controversy before a full hearing can be had on the merits of the case. The only limitations to such discretion would be that it must have been exercised upon the grounds and in the manner provided by law, 20 an inquiry into which is precisely part of the subject of our immediately succeeding discussion on the matter of the status of the injunction in controversy.

Contrary to petitioners' position, we are disposed to sustain the validity of the writ of preliminary injunction in question. A temporary restraining order, while being in effect a species of injunction, is in some respects to be distinguished therefrom. It is an interlocutory order or writ issued by the court as a restraint on the defendant until the propriety of granting a preliminary injunction can be determined, thus going no further in its operation than to preserve the status quo until that determination. When such determination is made, the whole force of the order ceases by its own limitations and become functus officio, having by then served its purpose. 21

On this basis lies the mootness of the issue on the propriety of the issuance of successive restraining orders upon the approval of the application for a writ of preliminary injunction, as ruled by the Court of Appeals. With the grant of the writ, hearing the petition which sought the annulment of the three antecedent TROs would be inutile as the writ has been substituted for and subserves the purpose of the prior restraining orders.

It is worth noting, nonetheless, that Section 5, Rule 58 of the Rules of Court, as amended by Batas Pambansa Blg. 224 effective April 16, 1982, sets a specific period for the juridical life span of a TRO, thus:

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 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 judge 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 determine within the same period whether or not the preliminary injunction shall 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. . . .

The 20-day period of effectivity of a TRO is non-extendible; the restraining order automatically terminates at the end of such period without the need of any judicial declaration to that effect. 22 Any extension would, therefore, ordinarily, be disallowed. But, when injunction is subsequently granted, as in the case at bar, any defect in the order brought about by the extension of its enforceability is deemed cured. 23

The status or validity of the writ of preliminary injunction itself, however, remains in question. From a reading of the above-cited provision, it may appear that the order granting the injunction must issue within the same 20-day period. Be that as it may, we are constrained to enunciate, since the contrary is not expressed or otherwise indicated therein, that the mandatory tenor of the aforecited provision should not be taken to mean that a writ issued beyond the time frame is an absolute nullity, provided that, aside from the existence of any of the grounds for its issuance the determination of which is largely addressed to the trial court, the other requirements

prescribed by the rules are present, namely, healing and posting of a bond. Instead, the obligatory import of the rule should be considered as a directive for the judge to act with corresponding dispatch on the application for preliminary injunction within the 20-day period if a TRO has been issued, with a proscription against an ex parte proceeding on such application since it would deprive the affected parties of the opportunity to be heard.

Indeed, a look at the history of the provision would reveal that Batas Pambansa Blg. 224 was adopted precisely as a reaction against the indiscriminate issuance of writs of preliminary injunction which, not infrequently, converted the writ from an instrument in furtherance of justice to a shield for injustice. 24 This was made possible not only by unscrupulous lawyers and adventurous litigants but also by idle and corrupt judges who tolerated the improvident and ex parte issuance thereof and, in the case of TRO's apparently oblivious of or insensitive to the fact that these were not conditioned on the posting of bonds to indemnify the parties against whom they were issued.

In the instant case, we note that the protection of such bond has been required. Also, it is of record that herein petitioners and private respondent were given an opportunity to be heard and, in fact, a hearing was conducted by the trial court before the issuance of the writ of preliminary injunction to determine the existence of a valid ground therefor. 25

We are constrained to sustain such action of the trial court since, except for the delay in the resolution of the application for and the subsequent issuance of the writ, the other requisites provided by the rules for the grant thereof have been observed. These considerations notwithstanding, we are aware that under the present state of the law which does not nullify a writ of preliminary injunction issued beyond the 20-day period where a TRO has been granted, the courts may thereby be allowed to do by indirection that which should not be done directly. This is a matter, however, which should be remedied by the corresponding amendment of the rule if the intent is to nullify a writ of preliminary injunction thus belatedly issued.

Consequently, there being no other sufficient ground 26 to dissolve the injunction in controversy, the grant of the writ must sequences of the be upheld but without prejudice to the consequences of the conduct of respondent judge. The circumstances under which the writ was granted after a protracted delay, punctuated by dubious orders issued in the interim, certainly cannot be countenanced lest such conduct be replicated in circumvention of the rules. Specifically, respondent judge failed to observe Rule 3.01 of Canon 3 of the Code of Judicial Conduct, which calls for a judge to be faithful to the law and maintain professional competence, and Rule 3.05 which admonishes all judges to dispose of the court's business promptly and decide cases within the required periods. Definitely, this Court cannot gloss over the challenged actuations of respondent judge which are amply reflected in the records of this case.

IN VIEW OF ALL THE FOREGOING, the present petition is hereby DISMISSED. The grant of the writ of preliminary injunction by respondent judge is hereby SUSTAINED and the Regional Trial Court at Libmanan, Camarines Sur or to which Civil Case No. L-361 is presently assigned is hereby DIRECTED to expediently hear and decide the same on the merits within a mandatory period of thirty (30) days from the finality of this judgment. Respondent judge is hereby REPRIMANDED with a stern warning that a repetition of the same or any similar action shall be more severely dealt with by the Court. The temporary restraining order issued pursuant to our resolution of August 22, 1988 is hereby LIFTED.

G.R. No. L-31135 May 29, 1970 THE DIRECTOR OR OFFICER-IN-CHARGE OF THE BUREAU OF TELECOMMUNICATIONS, LEON CERVANTES, in his capacity as Regional Superintendent of Region IV, Bureau of Telecommunications, Iloilo City, and VIVENCIO ALAGBAY, in his capacity as Chief Operator, Bureau of Telecommunications, Roxas City, petitioners, vs. HON. JOSE A. ALIGAEN, in his capacity as Judge of the Court of First Instance of Capiz, Branch II, and JOSE, M. F. BELO, respondents.Office of the Solicitor General Felix V. Makasiar, Assistant Solicitor General Conrado T. Limcaoco and Solicitor Pedro A. Ramirez for petitioners.Siguion Reyna, Montecillo, Belo & Ongsiako for respondent Jose M. F. Belo.ZALDIVAR, J.:

On August 1, 1969, herein respondent Jose M. F. Belo filed with the Court of First Instance of Capiz, presided over by respondent Judge Jose A. Aligaen, a verified petition captioned "Injunction with Preliminary Injunction" (Civil Case No. V-3192), naming as respondents therein the Director of the Bureau of Telecommunications, Leo Cervantes, the Regional Superintendent of Region IV of the Bureau of Telecommunications with station in Iloilo City, and their agents and/or representatives acting in their behalf, and Vivencio Alagbay, Chief Operator of the Bureau of Telecommunications in Roxas City. The petitioner alleged that he, Belo, was the grantee of a Congressional franchise, Republic Act No. 2957, as amended, to establish, maintain and operate a telephone system in Roxas City and in the province of Capiz, which franchise was confirmed and given effect by the order, dated June 26, 1961, of the Public Service Commission; that pursuant to said franchise he had put up in Roxas City, since July, 1961, at a cost of P417,041.27, an automatic telephone system which had been operating and rendering good service with 410 telephones and sufficient reserves for additional lines when needed; that the Bureau of Telecommunications, through therein respondents, was starting to establish, maintain and operate in the same geographical area of Roxas City another local telephone system which would directly compete with, and seriously prejudice, the telephone system that he was already operating and would render ineffective his franchise; that the Bureau of Telecommunications was not authorized to establish an additional local telephone system in places where there was no demand for it, as in Roxas City, that no prior inquiry was ever made by the authorities concerned if there was any need for another telephone system in Roxas City; that therein respondents had never attempted to negotiate with him for the use of his facilities in conjunction with the national hook-up of a telephone system; that the telephone system that he was operating was already connected with the Philippine Long Distance Telephone Company, which is a national system; and that he would suffer serious and irreparable loss and injury if therein respondents would go ahead with the establishment of a new telephone system. Belo then prayed the Court of First Instance of Capiz that due to the urgency of the matter a writ of preliminary injunction be issued ex parte, enjoining therein respondents from establishing another local telephone system in Roxas City; that after hearing, the writ be made permanent; and that

damages be assessed against therein respondents in their personal and individual capacities.

On the same day, August 1, 1969, Judge Jose A. Aligaen of the Court of First Instance of Capiz, entered an order authorizing the issuance of the writ of preliminary injunction prayed for upon Belo's posting a bond of P5,000, and, accordingly, a writ of preliminary injunction was issued, restraining therein respondents, their agents, and representatives, from further committing and continuing the acts complained of, and from constructing another telephone system in Roxas City. 1

On August 5, 1969, Belo filed with the Court of First Instance of Capiz, an urgent motion to declare Vivencio Alagbay and his agents in contempt of court because in spite of the injunction they continued the work of installing the new telephone system in Roxas City. This motion was amended on August 9, 1969, to include the Director of the Bureau of Telecommunications and Leon Cervantes, the Regional Director of the Bureau, to be cited for contempt. On August 9, 1969 Vivencio Alagbay filed his opposition to the motion, alleging that as a mere employee of the Bureau of Telecommunications he had nothing to do with the construction of the telephone exchange, and that it was the International Telegraph and Telephone Philippines, Inc. (ITT for short) over which he had no supervision and control, that was working on the project. On the same date, the respondents in the court below filed a joint motion for dissolution of the writ of injunction, offering at the same time to put up a counterbond in the sum of P20,000, to which motion Belo filed his opposition, then respondents below filed their reply to the opposition and Belo filed his rejoinder to the reply.

The Solicitor General, upon request of the Director of the Bureau of Telecommunications, filed, on August 27, 1969, an answer to the petition for injunction of Belo, denying the material allegations thereof and setting up special and affirmative defenses, to wit: (1) that the trial court did not have jurisdiction over the case, it being a suit against the Government which had not given its consent to be sued; (2) that the court had no jurisdiction to issue the writ of injunction against the Director of the Bureau of Telecommunications whose official residence was beyond the territorial jurisdiction of the court; (3) that the Bureau of Telecommunications had authority to operate its own telecommunications network in the whole country pursuant to Section 1930 of the Revised Administrative Code, without need of a legislative franchise; (4) that the Bureau of Telecommunications was not prohibited from expanding its telephone system and that its operations were not limited to non-commercial activities; (5) that the Bureau of Telecommunications had entered into an agreement with ITT for the supply and installation of expanded telecommunications network project, which, when completed, would cover not only telephone services but also data processing computer, telegraphic transfers, etc. which services have not been made available by Belo; (6) that it was the ITT, and not the Bureau of Telecommunications, that was actually constructing the telecommunications system in Roxas City; (7) that Belo's franchise, as per section 12 of Republic Act No. 2957, is not exclusive; (8) that there being 67,800 residents in Roxas City out of which only a total of 410 are being served, the facilities of Belo are inadequate or inefficient. Respondents below alleged as counterclaim that the writ of preliminary injunction was improvidently issued and was causing a damage of P10,000 for every day of delay in the completion of the project.

On September 1, 1969, the City Fiscal of Roxas City, not knowing that an answer had already been filed by the Solicitor General, filed a motion to dismiss upon the grounds of: (1) lack of jurisdiction over the persons of therein respondents, the subject matter of the action, and the nature of the action; and (2) failure to state a cause of action.

After hearing on the motion to declare Vivencio Alagbay in contempt, the lower court, its order of September 3, 1969, held Vivencio Alagbay and the men working under him, even if they be working under the guise of being workers of the ITT, liable for contempt of court, but the court did not impose any penalty on them because they had stopped working and only declared that they would be arrested and confined in jail should they resume the work of erecting telephone poles and connecting telephone cables and wires. At the same time the lower court denied the motion for the dissolution of the injunction. 2

Belo moved, on September 11, 1969, to reconsider the order of September 3, 1969, praying that appropriate penalty be imposed on Alagbay and the men working under him. Petitioner Alagbay also filed a motion for the reconsideration of said order.

In the meantime, on September 10, 1969, the respondents in the court below filed a motion for preliminary hearing on the affirmative defenses alleged in their answer, as well as the motion to dismiss. On September 15, 1969, Belo filed his reply to the answer, and his answer to the counterclaim.

In an order, dated October 1, 1969, the Court of First Instance of Capiz denied the motions filed by Alagbay and Belo for the reconsideration of the order of September 3, 1969. In a separate order also of the same date, the court denied the motion to dismiss the petition and set the pre-trial of the case for October 23, 1969. 3

Seeking to annul and set-aside the various orders issued by the Court of First Instance of Capiz, namely, those dated August 1, 1961, granting the motion for the issuance of a writ of preliminary injunction, and the writ of preliminary injunction issued pursuant thereto; the order dated September 3, 1969 holding Alagbay and the men working under him in contempt of court; and the orders issued on October 1, 1969 denying Alagbay's motion for reconsideration and the motion to dismiss filed by the respondents below and setting the pre-trial of the case for October 23, 1969, the instant petition for a writ of certiorari and prohibition with preliminary injunction was filed with this Court by herein petitioners, the Director or Officer-in-charge of the Bureau of Telecommunications, Leon Cervantes and Vivencio Alagbay, on October 27, 1969, praying that pending the determination of the case on the merits, a writ of preliminary injunction be issued, ex parte and without bond, restraining herein respondent Judge Jose Aligaen, who presides the Court of First Instance of Capiz, from enforcing the abovecited orders, and from taking cognizance of Civil Case No. V-3192 of said court until further orders from this Court.

By resolution, dated October 30, 1969, this Court issued the writ of preliminary injunction prayed for, and required herein respondents to file their answer.

Herein respondent Jose M. F. Belo filed his answer, making certain admissions and denials of the allegations in the petition for certiorari and prohibition, and rebutted the grounds alleged in support of the petition.

Before this Court herein petitioners now contend that:

(a) Respondent court has no jurisdiction to hear and determine the case because it involves a suit against the Government which has not given its consent to be sued;

(b) Respondent court has no jurisdiction, power and authority to issue writs of certiorari, prohibition, mandamus and

injunction requiring the execution of acts by, or controlling the acts of, national officials with residences and offices beyond its territorial jurisdiction;

(c) Respondent court acted with grave abuse of discretion amounting to lack of jurisdiction in issuing ex parte the orders and writ of injunction complained of despite the fact that respondent Belo's complaint states no cause of action and, therefore, he is not entitled to the main relief; and it follows that he is not entitled to the writ of preliminary injunction;

(d) Respondent court acted with grave abuse of discretion amounting to lack of jurisdiction in refusing to dissolve the ex parte writ of preliminary injunction despite petitioners' offer to put up a counterbond.

1. Petitioners argue that the Bureau of Telecommunications is an entity of the Government of the Republic of the Philippines, created pursuant to Executive Order No. 94, series of 1947, and charged with the governmental function of operating and maintaining a telecommunications network in the entire length and breadth of the country, and the action against the Director of the Bureau of Telecommunications and his subordinates was tantamount to a suit against the Government which cannot be done without the consent of the Government. 4

On the other hand, respondent Belo argues that even if petitioners are officers of the Government their act of establishing a local telephone system in Roxas City is without authority of law, and violates his rights, hence the action for the redress of injuries that he suffered or would suffer is not a suit against the State. 5

We sustain the stand of respondent Belo. We hold that the suit commenced by said respondent against herein petitioners cannot be considered as a suit against the State.

Decisive in the resolution of the issues raised by petitioners in the present case are the provisions of the franchise granted to respondent Belo, and the powers and functions of the Bureau of Telecommunications. The franchise, Republic Act No. 2957, granted to Belo "the right and privilege to construct, maintain, and operate in the Province of Capiz and Roxas City, a telephone system to carry on the business of electrical transmission of conversations and signals in "said province and city," 6 but the rights granted therein" shall not be exclusive;" 7 that the "Philippine Government shall have the privilege, without compensation, of using the poles of the grantee to attach one ten-pin crossarm, and to install, maintain and operate wires of its telegraph system thereon; Provided,however, that the Bureau of Telecommunications shall have the right to place additional crossarms and wires on the poles of the grantee by paying a compensation, the rate of which is to be agreed upon by the Director of Telecommunications and the grantee;" 8 and that "it is expressly provided that in the event the Philippine Government should desire to maintain and operate for itself the system and enterprise herein authorized, the grantee shall surrender his franchise and will turn over to the Government said system and all serviceable equipment therein, at cost, less reasonable depreciation." 9

The powers and duties of the Bureau of Telecommunications, on the other hand, as provided in Executive Order No. 94 of July 1, 1947, insofar as relevant to the instant case are as follows:

Sec. 79. The Bureau of Telecommunications shall exercise the following powers and duties:

'(a) To operate and maintain existing wire-telegraph and radio telegraph offices, stations, and facilities, and those to be established to restore the pre-war telecommunication service under the Bureau of Posts, as well as such additional offices or stations as may hereafter be established to provide telecommunications service in places requiring such service;

'(b) To investigate, consolidate, negotiate for, operate and maintain wire-telephone or radio telecommunications service throughout the Philippines by utilizing such existing facilities in cities, towns, and provinces as may be found feasible and under such terms and conditions or arrangements with the present owners or operators thereof as may be agreed upon to the satisfaction of all concerned.'

From the above-quoted provisions, it is clear that the Bureau of Telecommunications is empowered to establish telecommunications service in places where such service does not exist, but in places where such service already exists it may only negotiate for, operate and maintain a telecommunication system by utilizing such existing facilities in cities, towns and provinces under such terms, conditions or arrangements as may be agreed upon with their owners or operators.

It is not denied that respondent Belo had already established, since July 1961, an automatic telephone system in Roxas City. Respondent Belo was operating the telephone system when the Bureau of Telecommunications, through petitioners, took steps to establish another local telephone system without having made any negotiation with respondent Belo for the utilization of the existing facilities being used by said respondent under terms, conditions and arrangements that would be satisfactory to all concerned — which acts gave rise to the filing by respondent Belo of Civil Case No. V-3192 for injunction in the Court of First Instance of Capiz on August 1, 1969. The officers of the Bureau of Telecommunications, therefore, attempted to establish a local telephone system in Roxas City in violation of law and the rights of respondent Belo. Inasmuch as the State authorizes only legal acts by its officers, unauthorized acts of government officials or officers are not acts of the State, and an action against the officials or officers by one whose rights have been invaded or violated by such acts, for the protection of his rights, is not a suit against the State within the rule of immunity of the State from suit. 10 In the same tenor, it has been said that an action at law or suit in equity against a State officer or the director of a State department on the ground that, while claiming to act for the State, he violates or invades the personal and property rights of the plaintiff, under an unconstitutional act or under

an assumption of authority which he does not have, is not a suit against the State within the constitutional provision that the State may not be sued without its consent. 11

2. In support of their contention that respondent court did not have jurisdiction to issue the writ of injunction in question, herein petitioners argue that the office of petitioner Director of the Bureau of Telecommunications is in Manila, and that of petitioner Regional Superintendent of Region IV is in Iloilo City, both of which places are outside the territorial jurisdiction of respondent court, hence their actions could not be controlled or enjoined by respondent Court. 12

Respondent Belo, on the contrary, contends that the Court of First Instance has power to issue the writ of injunction under Sec. 44, of the Judiciary Act of 1948; that the respondents in the lower court (now petitioners in this Court) were joined as such respondents because they were necessary to a complete determination of the questions involved and were the ones responsible for the project of establishing a new telephone system in Roxas City; that their acts, violative of herein respondent Belo's rights, were committed or being pursued in Roxas City which is within the territorial jurisdiction of the court. 13

We find merit in the contention of respondent Belo. The ruling in the cases relied upon by petitioners, namely:Acosta v. Alvendia, supra; Samar Mining Co. v. Arnado, supra; Alhambra Cigar and Cigarette Co. v. The National Administrator of Regional Office No. 2, supra, is to the effect that the court of first instance has no jurisdiction to restrain by injunction acts committed outside the territorial boundaries of their respective provinces or districts. InAcosta v. Alvendia, this Court held that, pursuant to Sec. 44(h) of the Judiciary Act and Sec. 2, Rule 60 of the Rules of Court, 14 courts of first instance have jurisdiction to control or restrain acts committed or about to be committed within the territorial boundaries of their respective provinces and districts by means of the writ of injunction. In the instant case, the acts relative to the establishment of a local telephone system by petitioners were being done within the territorial boundaries of the province or district of respondent court, and so said court had jurisdiction to restrain them by injunction. It does not matter that some of the respondents in the trial court, against whom the injunctive order was issued, had their official residences outside the territorial jurisdiction of the trial court. In the case of Gonzales v. Secretary of Public Works, et al., 15 wherein the only question raised was whether the Court of First Instance of Davao had jurisdiction to entertain a case the main purpose of which was to prevent the enforcement of a decision of the Secretary of Public Works who was in Manila, this Court held that inasmuch as the acts sought to be restrained were to be performed within the territorial boundaries of the province of Davao, the Court of First Instance of Davao had jurisdiction to hear and decide the case, and to issue the necessary injunctive order. This Gonzales case was an action for certiorari and prohibition with preliminary injunction and/or preliminary mandatory injunction to prevent the demolition of Gonzales' dam in Davao in compliance with the order of the Secretary of Public Works.

It follows, therefore, that since the acts to be restrained were being done in Roxas City, or within the territorial jurisdiction of respondent court, the latter had jurisdiction to restrain said acts even if the office of respondent Director of the Bureau of Telecommunications is in Manila, and that of respondent Regional Superintendent of Region IV is in Iloilo City.

3. Petitioners also maintain that respondent Belo's petition for injunction before respondent court states no cause of action, and respondent court committed a grave abuse of discretion in issuing the orders and the writ of preliminary injunction now in question. 16

The contention of petitioners has no merit. A cause of action is "an act or omission of one party in violation of the legal right or rights of the other; and its essential elements are legal right of the plaintiff, correlative obligation of the defendant, and act or omission of the defendant in violation of said legal right." 17 The petition filed with the respondent lower court clearly alleges: (1) the legal right of respondent Belo to establish and operate a telephone system in Roxas City as authorized by a legislative franchise and the certificate of public convenience issued by the Public Service Commission, and his having actually established the telephone system and operating the same; (2) the violation of respondent Belo's right by the unauthorized or illegal acts of the petitioners in taking steps to install another telephone system in Roxas City without previously having negotiated or entered into any arrangement with respondent Belo as required by law; and (3) the injury that would be caused to respondent Belo by the acts of petitioners. Certainly the petitioners herein — more so because they are officials or officers of the government — have a correlative obligation to respect the right of respondent Belo, or to act in accordance with law. The allegations in the petition, which was under oath, served as a basis for respondent court to exercise its sound discretion whether or not to issue the writ of preliminary injunction. We do not see in the actuation of respondent court any whimsical or capricious exercise of judgment when it issued the writ of preliminary injunction in question. In its order authorizing the issuance of the writ respondent court said:

That it has not been shown that petitioner (Belo) is remiss in his operation under his franchise, and that the establishment, maintenance and operation of another local telephone system in the same geographical area of Roxas City will result in direct competition with petitioner which is contrary to the franchise granted to him; and that the continuance of the acts complained of would work serious and irreparable loss and injury to the petitioner (Belo) unless restrained.

We believe that respondent court had acted in accordance with the provisions of Section 3, Rule 58 of the Rules of Court. By its order it can be gathered that respondent court had found respondent Belo (petitioner below) entitled to the relief demanded, when it said "that the continuance of the acts complained of would work serious and irreparable loss and injury to the petitioner unless restrained." The respondent court considered it necessary to issue the writ because the continuance of the acts of installing the new telephone system by the respondents below (petitioners herein) would render the judgment in the petition for injunction ineffectual.

Petitioners herein anchor their contention that respondent court committed a grave abuse of discretion when it issued the writ of preliminary injunction because the Bureau of Telecommunications has the power to establish a telephone system in Roxas City, so that respondent court should not have restrained the Director of the Bureau and the men under him from pursuing the work of installing the telephone system. The power of the Bureau of Telecommunications to establish, operate and maintain a nationwide telephone system is conceded. But that power is subject to a limitation, and that limitation is, that in cities, towns or provinces where telephone systems are already in operation it should utilize such existing facilities under such terms and conditions or arrangements with the owners or operators of those systems as may be agreed upon to the satisfaction of all concerned. The Bureau of Telecommunications can even expropriate the local facilities if it becomes necessary to resort to this recourse. Thus, this Court, in the case of Republic v. Philippine Long Distance Telephone Co., 18 said:

The Bureau of Telecommunications, under Section 79(b) of Executive Order No. 94, may operate and maintain wire telephone or radio telephone communications throughout the Philippines by utilizing existing facilities in cities, towns and provinces under such terms and conditions or arrangement with present owners or operators as may be agreed upon to the satisfaction of all concerned; but there is nothing in this section that would exclude resort to condemnation proceedings where unreasonable or unthinking terms and conditions are exacted, to the extent of crippling or seriously hampering the operation of said Bureau.

It is claimed by petitioners that the project of the Bureau of Telecommunications in Roxas City is a part of a nationwide telecommunications expansion project, as contemplated in Republic Act 2612, and that Roxas City had been chosen as the site of one of the telephone exchanges and of one of the base points in the turnkey installation projects. It will be noted that the respondent court did not enjoin the Bureau of Telecommunications from working on its telephone exchange and turnkey installation project in Roxas City in relation to its alleged nationwide telecommunications expansion project. The respondent court only enjoined the petitioners herein "to desist and refrain from establishing, maintaining and operating another local telephone system in the geographical area of Roxas City ..." 19 In other words, the petitioners could go on with the work on the installation of the national hook-up, but not to establish another local telephone system. The idea of respondent court, as gathered from its order authorizing the issuance of the writ, was to prevent the competition between the new telephone system and the system already operated by respondent Belo. Respondent Belo alleged in his petition before respondent lower court — and the allegation is not denied — that the officials or authorities of the Bureau of Telecommunications had never attempted to negotiate with him for the use of the facilities of his local telephone system in conjunction with the Bureau's national hook-up project. It is plain, therefore, that petitioners herein did not act in accordance with law.

It is Our considered view that the powers and duties of the Bureau of Telecommunications in connection with the operation and maintenance of a nationwide telecommunications system are as provided, and delimited, in Section 79 of Executive Order No. 94, series of 1947. We believe that the provision of paragraph (b) of Section 79 of the Executive Order, which authorizes the Bureau of Telecommunications "to investigate, consolidate, negotiate for, operate and maintain wire telephone or radio telecommunication service throughout the Philippines by utilizing such existing facilities ... under such terms and conditions or arrangements with the present owners or operators as may be agreed upon ...", was intended to protect the operators of telephone systems already existing and duly authorized by law to operate. The Bureau of Telecommunications may take steps to improve the telephone service in any locality in the Philippines, but in so doing it must first enter into negotiation or arrangement with the operator or owner of the existing telephone system. We believe that the intention of the executive order, precisely, is to avoid a competition which would prove ruinous or disadvantageous to both the government and the private operator. When a private person or entity is granted a legislative franchise to operate a telephone system, or any public utility for that matter, the government has the correlative obligation to afford the grantee of the franchise all the chances or opportunity to operate profitably, as long as public convenience is properly served, rather than promote a competition with the grantee. We can not accept the view, as urged by herein petitioners, that the Bureau of Telecommunications can install and operate a telephone

system in any place in the Philippines regardless of the rights and interests of existing private operators, especially if the existing operator is a grantee of a legislative franchise. That view is not in consonance with the provisions of paragraph (b) of Section 79 of Executive Order No. 94, series of 1947. Indeed, it should be the concern of the Bureau of Telecommunications and the Public Service Commission that telephone services in the country are efficient and satisfactory. But in promoting satisfactory service the rights and interests of prior operators should not be wantonly disregarded. If the Bureau of Telecommunications believes that it has to embark on a project of improving the telephone service in a particular place, it should negotiate or arrange with the existing operator as provided in paragraph (b) of Section 79 of Executive Order No. 94. If no satisfactory arrangement can be arrived at between the Bureau of Telecommunications and the existing operator, the Bureau of Telecommunications may resort to expropriation as suggested in the decision of this Court in the case of Republic v. Philippine Long Distance Telephone Co., supra. Or, if the government would decide to operate the telephone system to the exclusion of the grantee of the legislative franchise, the grantee may be required to surrender his franchise and turn over to the government the telephone system he is operating. We have noted that all legislative franchises for the operation of a telephone system contain a proviso similar to that of Section 18 of the franchise of respondent Belo (Rep. Act 2957), as follows:

Sec. 18. It is expressly provided that in the event the Philippine Government should desire to maintain and operate for itself the system and enterprise herein authorized, the guarantee shall surrender his franchise and will turn over to the Government said system and all serviceable equipment therein, at cost, less reasonable depreciation.

It is urged by herein petitioners that the franchise granted to respondent Belo is not exclusive. This is true, but it does not follow that any person or entity — not even the Bureau of Telecommunications — can put up another telephone system in Roxas City in a manner not in accordance with law.

Notwithstanding a franchise is not exclusive so as to prevent the grant of a similar franchise to another or to prevent competition on the part of a person or entity duly authorized in that regard, such a franchise has been regarded or characterized as exclusive against one who carries a competing operation without due authorization or in violation of the law governing the matter. 20

There is authority for the view, however, that the owner of a franchise which is not exclusive, in that ... does not prevent the grantor from granting a similar franchise to another or does not prevent lawful competition on the part of public authorities, is entitled to relief by injunction against competition which is illegal or is carried on by one not authorized in that regard, in the case either of actual or of threatened injury from such competition. 21

And so in the case at bar, because the Director of the Bureau of Telecommunications, or any of the herein petitioners, had not negotiated or made arrangement with respondent Belo before taking steps to install a new local telephone system in Roxas City, as required in paragraph (b) of Section 79 of Executive Order No. 94, the respondent court had properly

issued the writ of preliminary injunction enjoining said petitioners to "desist and refrain from establishing, maintaining and operating another local telephone system in ... Roxas City."

4. It is also the contention of the petitioners that respondent court committed a grave abuse of discretion when it refused to dissolve the writ of preliminary injunction in spite of petitioners' offer to put up a counterbond of P20,000, although the Government is exempt from filing a bond. Under the circumstances obtaining in this case, this contention has no merit.

The mere filing of a counterbond does not necessarily warrant the dissolution of the writ of preliminary injunction. Under Section 6 of Rule 58 of the Rules of Court, a preliminary injunction, if granted, may be dissolved "if it appears after hearing that although the plaintiff is entitled to the injunction, the continuance thereof, as the case may be, would cause great damage to the defendant while the plaintiff can be fully compensated for such damages as he may suffer, and the defendant files a bond in an amount fixed by the judge conditioned that he will pay all damages which the plaintiff may suffer by the ... dissolution of the injunction." Under this quoted provision of the rules of court, the court is called upon to exercise its discretion in determining or weighing the relative damages that may be suffered by the parties. If the damages that may be suffered by the defendant by the continuance of the injunction outweigh the damages that may be suffered by the plaintiff by the dissolution of the injunction, then the injunction should be dissolved. In the case at bar the respondent court, in refusing to dissolve the writ of preliminary injunction, took into consideration that "the petitioner (Belo) will suffer great and irreparable injury considering the tremendous investment of the petitioner, his time and gigantic efforts made to put up telephone service in Roxas City." An injunction issued to stop an unauthorized act should not be dissolved by the mere filing of a counterbond, otherwise, the counterbond would come the vehicle of the commission or continuance of an unauthorized or illegal act which the injunction precisely is intended to prevent. 22

We hold, therefore, that respondent court did not commit a grave abuse of discretion when it refused to dissolve the writ of preliminary injunction it had issued.

Having thus declared that respondent court had jurisdiction to issue the writ of preliminary injunction in question, and that it did not abuse its discretion in refusing to dissolve the said writ, it follows that it also acted with jurisdiction when it issued the orders of August 1, 1969, of September 3, 1969, and of October 1, 1969, which are questioned in these proceedings. 23

IN VIEW OF THE FOREGOING, the writ of preliminary injunction issued by this Court on October 30, 1969 is dissolved, and the instant petition for certiorari and prohibition is dismissed. The questioned writ of preliminary injunction and the orders issued by respondent court (Annexes B, C, M, Q and Q-1 of the Petition) are held valid. No pronouncement as to costs. It is so ordered.

G.R. No. L-23868 October 22, 1970 ZACARIAS C. AQUINO, petitioner, vs. FRANCISCO SOCORRO and COURT OF APPEALS, respondents. Tranquilino O. Calo, Jr. for petitioner. Alfaro and Associates for respondent Francisco Socorro. CASTRO, J.:.

On February 14, 1964 the Court of Appeals, upon petition of Francisco Socorro in CA-G.R. 33560-R,1 issued a writ of preliminary injunction in his favor upon his posting a P1,000 bond. The writ of preliminary injunction, among others, restrained Zacarias Aquino "from entering, cutting, hauling, selling and/or exporting logs or other forest products from the forest area" subject of litigation. Aquino, however, filed a counterbond in the amount of P2,000, effecting the immediate dissolution of the writ.

The Court of Appeals, on June 29, 1964, dismissed Socorro's petition re the main action, for lack of jurisdiction to entertain the same. Socorro subsequently appealed the decision of the appellate court to this Court. We affirmed the appellate court's decision in a resolution dated December 24, 1964 in case G.R. L-23608.

On July 15, 1964, before the appellate court's decision dismissing Socorro's petition became final, Aquino filed with the appellate court his claim for damages in the amount of P199,000 on account of the wrongful issuance of the writ of preliminary injunction. The appellate court denied Aquino's claim, for want of bad faith and malice on the part of Socorro in filing his petition and securing the issuance of the writ of preliminary injunction. Aquino's subsequent motion for reconsideration was denied.

Hence, the present petition for certiorari to review the resolution of the Court of Appeals denying his claim for damages.

Aquino contends that the respondent appellate court erred in denying his claim for damages on the ground of want of bad faith and malice on the part of the respondent Socorro in filing

the petition for certiorari re the main case and securing the issuance of the writ of preliminary injunction. He invokes the provisions of Section 9, Rule 58 in relation to Section 20, Rule 57, of the Rules of Court. Section 9, Rule 58 recites:.

Judgement to include damages against party and surities. — Upon the trial the amount of damages to be awarded to the plaintiff, or to the defendant, as the case may be, upon the bond of the other party, shall be claimed, ascertained, and awarded under the same procedure as prescribed in Section 20 of Rule 57.

Section 20, Rule 57 reads:.

Claim for damages on account of illegal attachment. — If the judgment on the action be in favor of the party against whom attachment was issued, be may recover, upon the bond given or deposit made by the attaching creditor, any damages resulting from the attachment. Such damages may be awarded only upon application and after proper hearing, and shall be included in the final judgment. The application must be filed before the trial or before appeal is perfected or before the judgment becomes executory, with due notice to the attaching creditor and his surety or sureties, setting forth the facts showing his right to damages and the amount thereof.

If the judgment of the appellate court be favorable to the party against whom the attachment was issued, he must claim damages sustained during the pendency of the appeal by filing an application with notice to the party in whose favor the attachment was issued or his surety or sureties, before the judgment of the appellate court becomes executory. The appellate court may allow the application to be heard and decided by the trial court.

Aquino points out that the said provisions do not require a claimant who seeks to recover damages on account of the wrongful issuance of a writ of preliminary injunction, to prove bad faith and malice on the part of the party who obtained the issuance of the writ. To reinforce his contention, he invokes the provisions of Section 4 (b) of Rule 58 of the Rules of Court. This rule, Aquino avers, makes the party applying for an injunction liable for all damages sustained by the other party if the court finally decides the party applicant as not entitled thereto. He maintains that, in the case at bar, the dissolution of the writ of preliminary injunction by the respondent appellate court clearly demonstrates that the respondent Socorro was not entitled thereto.

Socorro, on the other hand, plays for the dismissal of the present petition on the following grounds: (1) The petitioner "refused to prosecute his claim for damages ... in the main action then already on appeal to this Court;" (2) The petitioner "failed to state in his motion claiming for damages the facts upon which his rights thereto are based;" (3) The petitioner, if "suing on the bond ... has no more cause of action as the said bond had already been dissolved 2 upon motion by the petitioner Aquino;" and (4) The petitioner, if "suing beyond the bond ... failed to show, or there is no showing that the respondent Socorro," in filing his petition for certiorari and securing the issuance of the writ of preliminary injunction, "was motivated by malice or bad faith."

The present case raises the question of whether Aquino's claim for damages on account of the improvident issuance by the respondent appellate court of the writ of preliminary injunction should be dismissed on the ground that he has failed to show or prove bad faith and malice on the part of the respondent Socorro in obtaining the issuance of the writ of preliminary injunction.

In Pacis vs. The Commission on Elections,3 this Court made an extensive discussion of the principles applicable to the recovery of damages caused through the improvident issuance of a writ of preliminary injunction. This Court said that "damages sustained as a result of a wrongfully obtained injunction may be recovered upon the injunction bond required to be filed with the court." The same provisions permitting the issuance of the writ of preliminary injunction require the filing of a bond before the grant of the writ. "The statutory undertaking of the bond is that it shall answer for all damages which the party to be restrained may sustain by reason of the injunction if the court should finally decide that the plaintiff was not entitled thereto. Malice or lack of good faith is not an element of recovery on the bond. This must be so, because to require malice as a prerequisite would make the filing of the bond a useless formality."

Continuing, this Court said that "the dissolution of the injunction, even if the injunction was obtained in good faith, amounts to a determination that the injunction was wrongfully obtained and a right of action on the injunction bond immediately accrues." Thus, for the purpose of recovery upon the injunction bond, "the dissolution of the injunction because of the failure of petitioner's main cause of action" provides the "actionable wrong" for the purpose of recovery upon the bond.

This Court also stressed, in the same case, that "there is nothing in the Rules of Court which allows recovery of damages other than upon the bond pledged by the party suing for an injunction. Section 9, Rule 58, limits recovery only upon the bond, and it specifically states that ... 'the amount of damages to be awarded to the plaintiff, or to the defendant, as the case may be, upon the bond of the other party, shall be claimed, ascertained, and awarded under the same procedure as prescribed in Section 20 of Rule 57.' " Under this provision, the party restrained, if he can recover anything, can recover only by reason of and upon the bond — the only security and protection conceded to him by the rules. Consequently, the rule limits the amount of recovery in a suit on an injunction bond to the sum thus fixed, the amount measuring the extent of the assumed liability.

This Court also finds it necessary to restate the rule in Molina vs. Somes4 that "an action for damages for the improper suing out of an injunction must be maintained upon the same principles which govern an action for the wrongful bringing of an action." This rule, however, applies only when the party restrained pursues his claim for damages not upon the injunction bond. In such a case where the party restrained sues not on the injunction bond, the rules accord him no relief by way of a claim for damages unless he can establish that the party applicant secured the issuance of the writ maliciously and without probable cause. This Court stated that "... when the process has been sued out maliciously there may be a right of action in favor of the defendant. But this right depends upon the law governing malicious prosecutions, and has no relation to the claim for damages urged by the defendant in this case. ..."5

Additionally, this Court, citing Palmer vs. Foley (71 N.Y. 106, 108), said:. It seems that, without some security given before the granting of an injunction order, or without some order of the court or a judge, requiring some act on the part of the plaintiff, which is equivalent to the giving of security — such as a deposit of money in court — the defendant has no

remedy for any damages which he may sustain from the issuing of the injunction, unless the conduct of the plaintiff has been such as to give ground for an action for malicious prosecution.

In the case at bar, the record reveals that the petitioner Aquino, in the proceedings before the respondent appellate court filed a counterbond in the amount of P2,000 and opposed the injunction bond filed by the respondent Socorro on the ground of its insufficiency. In effect, those brought about the immediate dissolution of the writ of preliminary injunction. Thus Aquino pursues his claim for damages in the amount of P199,000 no longer upon the injunction bond in the amount of P1,000 filed by Socorro with the respondent appellate court. This being the case, applicable here is the holding in Molina vs. Somes, supra, that an application for damages on account of the improvident issuance of a preliminary injunction writ must be governed by the same principles applicable to an action for the wrongful bringing of action. Before the respondent's liability can attach, it must appear that he filed his petition for certiorari re the main action and obtained the issuance of the writ of preliminary injunction maliciously and without probable cause. These two essential requisites, malicious prosecution and lack of probable cause, are neither alleged nor proved in this case before us. Nothing in the record tends to establish the liability of the respondent Socorro.

ACCORDINGLY, the present petition for certiorari is hereby denied. No cost.