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RULE 58 Preliminary Injunction

1) G.R. No. 159370 : October 3, 2012 PALM TREE ESTATES, INC. and BELLE AIR GOLF AND COUNTRY CLUB, INC., Petitioners, v. PHILIPPINE NATIONAL BANK, Respondent.
This is a Petition for Review on Certiorari1rll of the Decision2rll and Resolution3dated March 21, 2003 and August 4, 2003, respectively, of the Court of Appeals in CA-G.R. SP No. 67547, which granted the Petition for Certiorari filed by respondent Philippine National Bank (PNB) and reversed and set aside the Orders dated May 17, 2001 and September 3, 2001 of the Regional Trial Court (RTC) of Lapu-Lapu City, Branch 27, in Civil Case No. 5513-L. The Order4rll dated May 17, 2001 of the trial court granted the application for issuance of writ of preliminary injunction of petitioners Palm Tree Estates, Inc. (PTEI) and Belle Air Golf and Country Club, Inc. (BAGCCI), while the Order5rll dated September 3, 2001 denied PNBs motion for reconsideration. On January 29, 1997, PTEI entered into a seven-year term loan agreement6rll with PNB for the amount of P320 million, or its US dollar equivalent, in view of urgent need for additional funding for the completion of its ongoing projects in Lapu-Lapu City.7rll As security for the payment of the loan, a Real Estate Mortgage8rll over 48 parcels of land covering an aggregate area of 353,916 sq.m. together with the buildings and improvements thereon, was executed by PTEI in favor of PNB on February 21, 1997. On June 15, 1998, upon the request of PTEI, an Amendment to Loan Agreement9rll was signed by PNB and PTEI To (i) extend the grace period for the principal repayment of the Loan, (ii) amend the interest payment date of the Loan, and (iii) grant in favor of the Borrower

an additional Loan (the "Additional Loan") in the amount not exceeding P80,000,000.00, x x x.10rll On the same day, June 15, 1998, as a result of PTEIs transfer to BAGCCI of the ownership, title and interest over 199,134 sq.m. of the real properties mortgaged to PNB, PTEI executed an Amendment to Real Estate Mortgage11rll in favor of PNB with BAGCCI as accommodation mortgagor with respect to the real properties transferred to it by PTEI. The relevant portion of the agreement provides:chanroblesvirtuallawlibrary SECTION 1. AMENDMENTS 1.01 The Mortgaged Properties including that portion transferred to BAGCCI shall continue to secure PTEIs obligations to the Mortgagee of whatever kind and nature, and whether such obligations have been contracted, before, during or after the date of this instrument. 1.02 The existing mortgage lien in favor of the Mortgagee annotated on the titles covering the portion of the Mortgaged Properties which is transferred in favor of BAGCCI shall be carried over to the new titles to be issued as a result of the transfer.12rll On August 10, 1999, PTEI and PNB executed four documents. First, on account of PTEIs failure to avail of the P80 million additional loan granted under the amendment to Loan Agreement and upon its request, PTEI and PNB entered into a Loan Agreement13rll revalidating the said additional loan. Under this agreement, full payment of the additional loan shall be secured by a pledge on 204,000 shares of PTEI stock in the names of the accommodation pledgors, Matthew O. Tan and Rodolfo M. Bausa.14rll Second, a Contract of Pledge15rll was executed by Matthew O. Tan and Rodolfo M. Bausa as accommodation pledgors in favor of PNB to secure the loan agreement covering the P80 million additional loan. Under this contract, Tan and Bausa pledged their 204,000 shares of PTEI stock in favor of PNB as security for the full payment of the P80 million additional loan. Page 1 of 31

Third, upon the request of PTEI, a Restructuring Agreement16rll was executed by PTEI and PNB. Under this agreement, the full payment of the restructured loan shall be secured not only by the 48 parcels of land previously mortgaged to PNB but also by an additional mortgage on three parcels of land registered in the name of the accommodation mortgagor, Aprodicio D. Intong.17rll Fourth, a Supplement to Real Estate Mortgage18rll was executed by Aprodicio D. Intong as accommodation mortgagor in favor of the PNB. Under this instrument, in addition to the 48 parcels of land previously mortgaged to PNB, three parcels of land and their improvements have been included in the existing mortgage as additional security for the loans or credit facilities granted by PNB to PTEI. In a letter19rll dated September 20, 2000, PNB demanded payment of PTEIs outstanding obligations which amounted to P599,251,583.18 as of August 31, 2010. Thereafter, in a letter20rll dated February 19, 2001, PNB denied PTEIs request for another restructuring of its past due indebtedness which amounted to P621,977,483.61 as of December 6, 2000. In the said letter, the stated reason for the denial of PTEIs request was its failure to perform its contractual obligations:chanroblesvirtuallawlibrary It would be difficult for us to justify to our Board of Directors your request because of your failure to fulfill the basic terms and conditions agreed upon in our previous meetings. If you will recall, we mentioned that in order for us to evaluate PTEIs restructuring request, you should settle in full the companys unpaid insurance premium of P350,374.13, and your past due credit card advances of P1,848,292.78, and update the companys realty tax arrearages on the mortgaged properties. However, to this date, you have not remitted any payments nor submitted any payment plans therefor.21rll As PTEI defaulted in its payment of past due loan with PNB, the bank filed a Petition22rll for extrajudicial foreclosure of the mortgaged properties on March 27, 2001.23rll The following day, March 28, 2001, PTEIs

President, Kenichi Akimoto, wrote a letter24rll to PNBs President, Feliciano L. Miranda, Jr., requesting for "another 30 days to settle" PTEIs "accrued obligations." On April 23, 2001, to enjoin PNB from foreclosing on the mortgage, PTEI and BAGCCI filed a Complaint25rll in the RTC of Lapu-Lapu City for breach of contracts, nullity of promissory notes, annulment of mortgages, fixing of principal, accounting, nullity of interests and penalties, annulment of petition for extrajudicial foreclosure, injunction, damages, with prayer for temporary restraining order, and writ of preliminary injunction.26rll This was docketed as Civil Case No. 5513-L and raffled to Branch 27. In their complaint, PTEI and BAGCCI claimed that, out of the P320 million term loan committed by PNB under the loan agreement, PNB released only a total amount of P248,045,679.36,27rll or a deficiency of P71,954,320.64 which PNB failed to release despite demands.28rll PTEI and BAGCCI also averred that PNB took advantage of their financial difficulty by unilaterally (1) converting the US dollar denominated loan to a peso loan at an unreasonable conversion rate of P38.50:US$1, when the prevailing conversion rate at the time of the release of the loan was only P26.25:US$1, and (2) re-pricing the interests to exorbitant and unconscionable rates.29rll PTEI and BAGCCI further alleged that, under threat of foreclosure, they were forced to execute an amendment to the loan agreement acknowledging the principal obligation as of April 20, 1998 to be P345,035,719.07 even if they received only P248,045,679.36.30 Moreover, PTEI and BAGCCI signed the amendment to the loan agreement because of PNBs offer to extend an additional P80 million loan which the latter failed to release despite the fact that all conditions for its release had been complied with in April 1999.31rll PTEI and BAGCCI further claimed that the amendment to the loan agreement, amendment to the real estate mortgage, certain promissory notes and their respective disclosure statements and the restructuring agreement should be declared void as they were executed pursuant to a void Page 2 of 31

amendment to the loan agreement, and with vitiated consent and without full consideration.32rll Finally, PTEI and BAGCCI stated that the extrajudicial foreclosure initiated by respondent on their properties was patently null and void since it included promissory notes which were supposed to have already been paid, as well as properties which have already been transferred to BAGCCI and were being made to answer under the restructuring agreement of which BAGCCI was not a party.33rll Furthermore, PTEI averred that the amendment to the real estate mortgage had been novated by a subsequent loan agreement covering the new P80 million loan which was secured by a pledge on 204,000 shares of stock of PTEI. PTEI also alleged that the machinery and equipments being chattels should not be included in the foreclosure of the real estate mortgage.34rll On the other hand, PNB refuted PTEI and BAGCCIs allegations and claimed that it had already issued to PTEI the total amount of P356,722,152.46 which exceeded the P320 million covered by the loan agreement by P36 million.35rll Whatever delay in the release of the loan proceeds, if any, was attributable only to PTEI.36rll According to PNB, the conversion of dollar loans to peso loans was not unilateral but made upon the request of PTEI and that the use of dollar to peso rate of US$1:P39.975 was only proper as it was the prevailing exchange rate at the time of the conversion.37rll There was also no unilateral increase of the interest rate as PTEI never raised any objection to such an increase although it was duly notified of the loan repricing through various letter-advices.38rll PNB likewise denied that the loan agreement and the amendment to it, the amendment to real estate mortgage, certain promissory notes and their disclosure statements, as well as the restructuring agreement, were all executed without PTEIs consent.39rll Under the law, Kenichi Akimoto, PTEIs president, and other executive officers could be presumed to be responsible and intelligent enough to carefully read, understand

and evaluate each loan document for Akimotos signature.40rll PNB further claimed that PTEI was granted an additional P80 million loan which was secured by a pledge of PTEIs shares of stock. There was no novation because neither was the object and principal conditions changed, nor PTEI substituted as debtor, nor any third person subrogated in PNBs rights.41rll After hearing the PTEI and BAGCCIs application for issuance of writ of preliminary injunction, the RTC of Lapu-Lapu City required the parties to submit their respective memoranda. Subsequently, the RTC of Lapu-Lapu City issued the Order dated May 17, 2001 ordering the issuance of a writ of preliminary injunction: ORDER For resolution is plaintiffs application for issuance of writ of preliminary injunction to prevent the acts complained of. It is to be noted that the resolution of the application is only preliminary in character and may change depending upon the nature, character and weight of evidence that will be presented during trial on the merits. After carefully going through with the parties arguments contained in their respective memoranda together with their respective documentary evidences appended thereto, it is very clear that the positions of the parties are completely opposed to each other which indicates (sic) that real controversies exist. The Court believes that all these legal controversies can only be resolved in a trial on the merits where the parties are given complete opportunity to present their case and adduce evidence. The Court further believes that while all the legal controversies are being heard and tried, the status quo ante litem must be maintained which means that the acts being complained of must be enjoined pendentelite. Page 3 of 31

Noted by this Court is the issue of, among others, the propriety of the foreclosure proceedings in line with plaintiffs contention "x xx that properties of the plaintiffs are being made to answer by the defendants for obligations which are not secured by these properties, or that properties of plaintiffs which are already free from the mortgage are included in the Petition (Annex "W" of the Complaint) for extra-judicial foreclosure. Continuing, the plaintiffs elaborated that "While plaintiffs are not disputing the right of a creditor-mortgagee to proceed against the properties of a debtor-mortgagor to pay for any unpaid secured obligations, it must be clearly understood, however, that any foreclosure proceedings that may be effected relative thereto must only affect the properties subject of the mortgage contract and should only be made to answer for the correct and undisputed obligations which are secured by the properties sought to be foreclosed. Any foreclosure proceedings which will include properties which are not subject of the mortgage contract or which will make the said properties answer for obligations which are not secured by the said properties will be tantamount to taking of properties without due process of law in violation of the Constitution x xx." In other words, there are serious controversies whose resolution must not be rendered moot and academic by the performance of the assailed acts. In this regard, the Court is adopting the ruling of the Supreme Court in the case of Rava Development Corporation vs. Court of Appeals, 211 SCRA 144, that says: " x xx it is a well settled rule that the sole object of a preliminary injunction whether prohibitory or mandatory is to preserve the status quo until the merits of the case can be heard (Avila vs. Tapucan, 200 SCRA 148 1991). It is usually 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 Court is convinced that, at the very least, plaintiffs have the right to be fully heard before it is finally deprived of its rights over the mortgaged properties in question in the same manner that defendant bank has the right to be fully heard on its claims. Plaintiffs have the right to be heard on their claim that the principal amount and the total obligation alleged by the defendant is not correct, that the escalation of the interest is not legal or that their property can only be foreclosed after final determination of the exact and correct amount of the total obligation. On the other hand, the defendant bank is fully protected because its claims on the mortgaged properties are properly recorded, if not registered. Besides, plaintiffs admitted their said indebtedness to the defendant bank and signified to meet their said obligations only after the determination of the exact amount of the same. On the matter of the questioned and disputed principal obligation, interests and/penalties, the Court is of the opinion that it would be in the interest of justice and equity that the matter be also threshed out during the trial on the merits of this case before any foreclosure proceeding can proceed consonant to the following ruling of the Supreme Court in Almeda vs. Court of Appeals, 256 SCRA 292, 307, to wit: "In the first place, because of the dispute regarding the interest rate increases, an issue which was never settled on the merit in the courts below, the exact amount of petitioners obligation could not be determined. Thus, the foreclosure provisions of P.D. 385 could be validly invoked by respondent bank only after the settlement of the question invoking the interest rate of the loan, and only after the spouses refused to meet their obligations following such determination." In essence, therefore, the Court is swayed to order the maintenance of the status quo and direct the issuance of the writ of preliminary injunction by the fact that if plaintiffs are immediately deprived of their said properties altogether disregarding the demands of due process, plaintiffs will surely be damaged and injured gravely and even irreparably. The Court does not want that to happen until it has fully disposed of the case.blrlllbrr Page 4 of 31

WHEREFORE, premises considered, let a writ of preliminary injunction issue enjoining the defendants, or any person or agents acting for and in their behalf, from foreclosing the subject properties of the plaintiffs, and/or from further proceeding with foreclosure under the Petition (Annex "W" of the Complaint), upon filing by the plaintiffs, and approval by this Court, of an injunction bond in the amount of ONE MILLION AND FIVE HUNDRED THOUSAND (P1,500,000.00) PESOS.42rll Reconsideration of the above order was denied in an Order dated September 3, 2001. Thereafter, PNB filed a Petition for Certiorari with the Court of Appeals alleging that the RTC of Lapu-Lapu City acted with grave abuse of discretion in issuing the Orders dated May 17, 2001 and September 3, 2001. The Court of Appeals, in the assailed Decision dated March 21, 2003, found merit in PNBs petition. According to the Court of Appeals, PTEI and BAGCCI failed to show a clear and unmistakable right which would have necessitated the issuance of a writ of preliminary injunction, while PNB had the right to extrajudicial foreclosure under the loan agreement when its debtors defaulted in their obligation.43rll Thus, the Court of Appeals granted PNBs petition. Reconsideration was denied in a Resolution dated August 4, 2003. Hence, this petition. This Court is asked to resolve the issue of whether the writ of injunction was issued by the trial court with grave abuse of discretion, in which case the appellate court correctly set it aside. PTEI and BAGCCI claim that the Court of Appeals should not have given due course to PNBs Petition for Certiorari as such petition violated Section 1, Rule 65 of the Rules of Court when it deliberately omitted all the supporting material documents attached to the complaint such as the petition for foreclosure, the real estate mortgage, the loan agreements, and promissory notes. PTEI and BAGCCI question the reversal and setting aside by the Court of Appeals of the orders of

the trial court although there was no finding that the trial court acted without or in excess of its jurisdiction in issuing the said orders. PTEI and BAGCCI further assert that the Court of Appeals was wrong in ruling that no clear and unmistakable right in favor of PTEI and BAGCCI was shown to exist.44rll On the other hand, PNB insists that PTEI and BAGCCI failed to establish an indubitable right which was violated by PNB and which ought to be protected by an injunctive writ. They also failed to show that the absence of an injunctive writ would cause them irreparable injury.45rll For PNB, the Court of Appeals therefore correctly ruled that there was no basis for the trial courts issuance of a writ of preliminary injunction. The petition has no merit. The second paragraph of Section 1, Rule 65 of the Rules of Court provides:chanroblesvirtuallawlibrary The petition shall be accompanied by a certified true copy of the judgment, order or resolution subject thereof, copies of all pleadings and documents relevant and pertinent thereto, and a sworn certification of nonforum shopping as provided in the third paragraph of section 3, Rule 46. In this case, PNB attached the following documents to the Petition for Certiorari which it filed in the Court of Appeals: (a) Order dated May 17, 2001 granting PTEI and BAGCCIs application for the issuance of preliminary injunction; (b) Order dated September 3, 2001 denying PNBs motion for reconsideration; (c) PNBs memorandum in support of its opposition to the issuance of preliminary injunction; (d) PNBs motion for reconsideration of the order dated May 17, 2001; (e) PNBs motion for early resolution dated July 4, 2011; Page 5 of 31

(f) PNBs supplemental motion for early resolution dated July 26, 2001; (g) PNBs answer with counterclaim dated June 5, 2001, together with its annexes "A" to "L"; and (h) PTEI and BAGCCIs complaint dated April 16, 2001, without the annexes. PTEI and BAGCCI fault PNB for not including the annexes to their complaint which consisted of PNBs petition for foreclosure, the real estate mortgage, the loan agreements, and promissory notes. They argue that such failure on PNBs part constituted a violation of the second paragraph of Section 1, Rule 65 of the Rules of Court. The Court is not persuaded. The determination of the completeness or sufficiency of the form of the petition, including the relevant and pertinent documents which have to be attached to it, is largely left to the discretion of the court taking cognizance of the petition, in this case the Court of Appeals. If the petition is insufficient in form and substance, the same may be forthwith dismissed without further proceedings.46rll That is the import of Section 6, Rule 65 of the Rules of Court:chanroblesvirtuallawlibrary Sec. 6.Order to comment. If the petition is sufficient in form and substance to justify such process, the court shall issue an order requiring the respondent or respondents to comment on the petition within ten (10) days from receipt of a copy thereof. Such order shall be served on the respondents in such manner as the court may direct, together with a copy of the petition and any annexes thereto. In petitions for certiorari before the Supreme Court and the Court of Appeals, the provisions of section 2, Rule 56, shall be observed. Before giving due course thereto, the court may require the respondents to file their comment to, and not a motion to dismiss, the petition. Thereafter, the court may require the filing of a reply and such other responsive or other pleadings as it may deem necessary and proper.

The Court of Appeals already determined that PNBs petition complied with the second paragraph of Section 1, Rule 65 of the Rules of Court and, consequently, that the said petition is sufficient in form and substance when it ordered PTEI and BAGCCI to comment on PNBs petition. This Court sees no compelling reason to set aside the determination of the Court of Appeals on that matter. Moreover, PTEI and BAGCCI wasted their opportunity to question the formal sufficiency of PNBs petition when they failed to file their comment on time, leading the Court of Appeals to rule in its Decision dated March 21, 2003 as follows:chanroblesvirtuallawlibrary Parenthetically, the "Manifestation and Motion for Leave To Admit Respondents Comment [on] the Petition", as well as respondents Comment are hereby DENIED, considering that they were filed more than one (1) year from the lapse of the reglementary period of filing the same. Accordingly, respondents Comment is ordered EXPUNGED from the record of this case.47rll PTEI and BAGCCI compounded their error when they subsequently failed to raise the issue in their motion for reconsideration of the decision of the Court of Appeals. Such omission constituted a waiver of the said issue pursuant to the omnibus motion rule.48rll Nevertheless, an examination of PNBs petition and the documents attached to it would show that the Court of Appeals determination as to the formal sufficiency of the petition is correct. The documents attached to the petition were adequate to support the arguments of PNB and to give the Court of Appeals a satisfactory, or at least substantial, picture of the case. A complainants wrongful conduct respecting the matter for which injunctive relief is sought precludes the complainant from obtaining such relief.49rll A petition for a preliminary injunction is an equitable remedy, and one who comes to claim for equity must do so with clean hands50rll Since injunction is the strong arm of equity, he who must apply for it must come with equity or with clean hands. This is so because among the maxims of equity Page 6 of 31

are (1) he who seeks equity must do equity, and (2) he who comes into equity must come with clean hands. xx x.51rll (Citation omitted.) In this case, the hands of PTEI were not unsullied when it sought preliminary injunction. It was already in breach of its contractual obligations when it defaulted in the payment of its indebtedness to PNB. PTEIs President, Akimoto, admitted that PTEI has unsettled accrued obligations in the letter dated March 28, 2001. Moreover, PTEI had sought the rescheduling or deferral of its payment as well as the restructuring of its loan. This Court has held that a debtors various and constant requests for deferment of payment and restructuring of loan, without actually paying the amount due, are clear indications that said debtor was unable to settle his obligation.52rll As PTEI is not entitled to the issuance of a writ of preliminary injunction, so is BAGCCI. The accessory follows the principal. The accessory obligation of BAGCCI as accommodation mortgagor is tied to PTEIs principal obligation to PNB and arises only in the event of PTEIs default. Thus, BAGCCIs interest in the issuance of the writ of preliminary injunction is necessarily prejudiced by PTEIs wrongful conduct and breach of contract. In Barbieto v. Court of Appeals,53rll the Court stated the general principles in issuing a writ of preliminary injunction:chanroblesvirtuallawlibrary A preliminary injunction is an order granted at any stage of an action prior to judgment of final order, requiring a party, court, agency, or person to refrain from a particular act or acts. It is a preservative remedy to ensure the protection of a partys substantive rights or interests pending the final judgment in the principal action. A plea for an injunctive writ lies upon the existence of a claimed emergency or extraordinary situation which should be avoided for otherwise, the outcome of a litigation would be useless as far as the party applying for the writ is concerned. At times referred to as the "Strong Arm of Equity," we have consistently ruled that there is no power the

exercise of which is more delicate and which calls for greater circumspection than the issuance of an injunction. It should only be extended in cases of great injury where courts of law cannot afford an adequate or commensurate remedy in damages; "in cases of extreme urgency; where the right is very clear; where considerations of relative inconvenience bear strongly in complainants favor; where there is a willful and unlawful invasion of plaintiff's right against his protest and remonstrance, the injury being a continuing one, and where the effect of the mandatory injunction is rather to reestablish and maintain a preexisting continuing relation between the parties, recently and arbitrarily interrupted by the defendant, than to establish a new relation." For the writ to issue, two requisites must be present, namely, the existence of the right to be protected, and that the facts against which the injunction is to be directed are violative of said right. xx x.54rll A writ of preliminary injunction is an extraordinary event which must be granted only in the face of actual and existing substantial rights.55rll The duty of the court taking cognizance of a prayer for a writ of preliminary injunction is to determine whether the requisites necessary for the grant of an injunction are present in the case before it.56rll In the absence of the same, and where facts are shown to be wanting in bringing the matter within the conditions for its issuance, the ancillary writ must be struck down for having been rendered in grave abuse of discretion.57rll The right of PNB to extrajudicially foreclose on the real estate mortgage in the event of PTEIs default is provided under various contracts of the parties. Foreclosure is but a necessary consequence of nonpayment of mortgage indebtedness.58rll In view of PTEIs failure to settle its outstanding obligations upon demand, it was proper for PNB to exercise its right to foreclose on the mortgaged properties. It then became incumbent on PTEI and BAGCCI, when they filed the complaint and sought the issuance of a writ of preliminary injunction, to establish that they have a clear and unmistakable right which requires immediate Page 7 of 31

protection during the pendency of the action. The Order dated May 17, 2001 of the trial court granting the application for issuance of writ of preliminary injunction failed to show that PTEI and BAGCCI discharged that burden. In this connection, this Court has denied the application for a writ of preliminary injunction that would enjoin an extrajudicial foreclosure of a mortgage, and declared that foreclosure is proper when the debtors are in default of the payment of their obligation. In particular, this Court ruled in Equitable PCI Bank, Inc. v. OJ-Mark Trading, Inc.59rll Where the parties stipulated in their credit agreements, mortgage contracts and promissory notes that the mortgagee is authorized to foreclose the mortgaged properties in case of default by the mortgagors, the mortgagee has a clear right to foreclosure in case of default, making the issuance of a Writ of Preliminary Injunction improper. xx x.60rll (Citation omitted.) The Court of Appeals did not err when it ruled that PTEI and BAGCCI failed to show a clear and unmistakable right which would have necessitated the issuance of a writ of preliminary injunction. The Order dated May 17, 2001 of the trial court failed to state a finding of facts that would justify the issuance of the writ of preliminary injunction. It merely stated the conclusion that "real controversies exist" based on the observation that "the positions of the parties are completely opposed to each other."61rll It simply declared:chanroblesvirtuallawlibrary Noted by this Court is the issue of, among others, the propriety of the foreclosure proceedings in line with plaintiffs contention "x xx that properties of the plaintiffs are being made to answer by the defendants for obligations which are not secured by these properties, or that properties of plaintiffs which are already free from the mortgage are included in the Petition (Annex "W" of the Complaint) for extra-judicial foreclosure. Continuing, the plaintiffs elaborated that "While plaintiffs are not disputing the right of a creditor-mortgagee to proceed against the properties of a debtor-mortgagor to pay for any unpaid secured

obligations, it must be clearly understood, however, that any foreclosure proceedings that may be effected relative thereto must only affect the properties subject of the mortgage contract and should only be made to answer for the correct and undisputed obligations which are secured by the properties sought to be foreclosed. Any foreclosure proceedings which will include properties which are not subject of the mortgage contract or which will make the said properties answer for obligations which are not secured by the said properties will be tantamount to taking of properties without due process of law in violation of the Constitution x x x."62rll This clearly shows that the trial court relied only on the bare allegations of PTEI and BAGCCI that the mortgaged properties were being made to answer for obligations that are not covered by the mortgage and that properties which are not mortgaged are included in PNBs petition for extrajudicial foreclosure. Beyond bare allegations, however, no specific evidence was cited. Thus, the trial courts order granting the issuance of a writ of preliminary injunction had no factual basis. It is elementary that allegations are not proof.63rll Contentions and averments in pleadings do not constitute facts unless they are in the nature of admissions or proven by competent evidence. This becomes more significant in connection with the issuance of the writ of preliminary injunction in light of the Courts pronouncement in University of the Philippines v. Hon. Catungal, Jr.64rll The trial court must state its own findings of fact and cite the particular law to justify the grant of preliminary injunction. Utmost care in this regard is demanded. xx x.65rll Moreover, an application for injunctive relief is construed strictly against the pleader.66rll Also, the possibility of irreparable damage without proof of an actual existing right is not a ground for a preliminary injunction to issue.67rll At most, the trial courts finding of the existence of a real controversy because the respective claims of the parties are opposing simply amounted to a finding that Page 8 of 31

the rights of PTEI and BAGCCI are disputed, debatable or dubious. This Court has held, however, that:chanroblesvirtuallawlibrary In the absence of a clear legal right, the issuance of the injunctive writ constitutes grave abuse of discretion. Injunction is not designed to protect contingent or future rights. It is not proper when the complainants right is doubtful or disputed.68rll (Emphasis supplied, citation omitted.) In view of the doubtful nature of the alleged right of PTEI and BAGCCI, the trial courts pronouncement regarding the necessity to issue a writ of injunction to protect the right of PTEI and BAGCCI to be heard before they are deprived of such alleged right crumbles:chanroblesvirtuallawlibrary A writ of preliminary injunction is issued to prevent an extrajudicial foreclosure, only upon a clear showing of a violation of the mortgagors unmistakable right. Unsubstantiated allegations of denial of due process and prematurity of a loan are not sufficient to defeat the mortgagees unmistakable right to an extrajudicial foreclosure.69rll (Emphasis supplied.) Furthermore, without pre-empting the trial courts ruling on the allegation of PTEI and BAGCCI regarding PNBs alleged unilateral increase of interest rates, the trial court misapplied Almeda v. Court of Appeals70rll when it opined that "it would be in the interest of justice and equity" that "the matter of the questioned and disputed principal obligation, interests and/penalties" "be also threshed out during the trial on the merits" "before any foreclosure proceeding can proceed." In Almeda, the petitioner spouses questioned from the very start the unilateral increases in interest rates made by the creditor bank. They also tendered payment and, when refused by the creditor bank, consigned the amount equivalent to the principal loan and accrued interest calculated at the originally stipulated rate. In this case, it appears that, despite having.previously received letter-advices71rll in October and November 1997 regarding changes in the loan interest rate, PTEI and BAGCCI assailed the alleged unilateral increases in interest rates only when they

filed the complaint on April 23, 2001 and after PNB had already exercised its right to extrajudicial foreclosure. Moreover, despite admitting PTEI's indebtedness to PNB, no tender of payment or consignation was made. These substantial differences work against the applicability of Almeda in this case. WHEREFORE, the petition is hereby DENIED. Costs against petitioners BAGCCI.rllbrr SO ORDERED. PTEI and

2) G.R. No. 188768 January 7, 2013 TML GASKET INDUSTRIES, INC., Petitioner, vs.BPI FAMILY SAVINGS BANK, INC., Respondent.
Preliminary injunction; abuse of discretion if writ issued despite absence of clear legal right. The issuance of a preliminary injunction rests entirely within the discretion if the court taking cognizance of the case and is generally not interfered with except in cases of manifest abuse. For the issuance of the writ of preliminary injunction to be proper, it must be shown that the invasion of the right sought to be protected is material and substantial, that the right of complainant is clear and unmistakable, and that there is an urgent and paramount necessity for the writ to prevent serious damage. In the absence of a clear legal right, the issuance of a writ of injunction constitutes grave abuse of discretion. TML Gasket Industries, Inc. v. BPI Family Savings Bank, Inc.,

We are urged in this petition for review on certiorari to reverse and set aside the Decision1 of the Court of Appeals in CA-G.R. SP No. 81932 which, in turn, reversed the Orders,2 respectively dated 22 August 2003 and 27 November 2003, of the Regional Trial Page 9 of 31

Court (RTC), Branch 104, Paraaque City in Civil Case No. 02-0504. The assailed Orders issued a writ of preliminary injunction in favor of petitioner TML Gasket Industries, Inc. (TML), enjoining respondent BPI Family Savings Bank, Inc.'s (BPI's) extra-judicial foreclosure of TMLs mortgaged properties, and denied TMLs motion for reconsideration thereof. The facts are not in dispute. Sometime in September 1996, TML obtained a loan from the Bank of Southeast Asia, Inc. (BSA), which TML can avail via a credit facility of P85,000,000.00. As security for the loan, TML executed a real estate mortgage over commercial and industrial lots located at Dr. A. Santos Avenue, Paraaque City covered by Transfer Certificate of Title (TCT) Nos. 81278 and 81303 of the Registry of Deeds of Paraaque City. For additional security, BSA required TML to execute a promissory note for each availment from the credit facility. On different dates from September 1996 to 31 July 1997, TML executed several promissory notes (PN), which provided in pertinent part: Since time is of the essence hereof, TML is in default under this Note, without need for notice, demand, presentment or any other act or deed in any of the following events: a) TML fails to pay when due, totally or partially, the principal, interest and other charges under this Note x x x.3 During the period of the loan, BSA changed its corporate name to DBS Bank Phils. (DBS), which eventually merged with BPI under the latters corporate name. TML defaulted in the payment of its loan leading BPI to extra-judicially foreclose the mortgaged properties. As of 25 June 2002, TMLs indebtedness to BPI amounted to P71,877,930.56, excluding penalties, charges, attorneys fees and other expenses of foreclosure. On 24 October 2002, the Ex-Officio Sheriff of RTC, Paraaque City issued a Notice of Extra-judicial Foreclosure Sale of the mortgaged properties.

Because of the imminent foreclosure sale of its mortgaged properties, TML, on 21 November 2002, filed a "Complaint for Declaratory Relief, Accounting, Declaration of Nullity of Notice of Extra-Judicial Sale, Increased (sic) in Interest Rates, Penalty Charges Plus, (sic) Damages, with Prayer for the Issuance of Temporary Restraining Order (TRO) and/or Writ of Preliminary Injunction" against BPI and DBS before the RTC, Branch 194, Paraaque City. The complaint highlighted the following clause in the PNs signed by TML, to wit: If changes in the conditions and/or circumstances occur which, directly or indirectly, increase the overall costs of money to the Lender, such as but not limited to the following: (i) any change in the laws or regulations, including any amendments, modifications, interpretations, administrative implementation or repeal thereof affecting the Lender or its business such as reserve or similar requirement, tax on income, gross receipts, or the imposition of any levy, fees or other taxes; or (ii) changes in the interest rate of forbearance of money whether in the prevailing market rates or such other guiding or reference rates as may be adopted, determined and/or authorized by the CB; (iii) extraordinary inflation or there is an increase of fifteen percent (15%) in the consumer price index as announced by the CB or the National Economic Development Authority reckoned from the date of the granting of the loan or the credit line; or (iv) devaluation, revaluation, or depreciation in real value or purchasing power of the Philippine Peso, that is, when there has been an adverse change of at least fifteen percent (15%), in the CB Reference Exchange Rate for the Philippine Peso to the US Dollar and/or such other foreign currencies adopted by the Philippine Government or its instrumentalities or agencies, as forming part of its international reserves, reckoned from the date of granting of the loan or credit line; (v) any change in the reserve or similar requirements as a necessary consequence of obtaining a unibanking license on the part of the Lender, then the Lender may, at its sole option, correspondingly adjust the interest rate in all outstanding loans(s) and other obligations Page 10 of 31

under this Note/s and such other documents that may be thereafter be executed. The adjustment in interest rate shall take effect three (3) days after receipt by TML of the notice of adjustment.4 TML asseverated that BSA made it understand that the stipulation meant that TMLs loan would be subject to only a 16% interest rate per annum. TML alleged that "despite the odds and difficulties it encountered, aggravated by the global economic crisis, it tried hard to religiously pay its x xx obligation to BPI x xx." However, contrary to their actual understanding, BSA "unreasonably, unconscionably and unilaterally" imposed a 33% interest rate per annum, and ultimately, a penalty of 36% interest on past due principal and corresponding interest thereon. TML likewise pointed out that it had demanded an independent accounting and liquidation of its loan account, which went unheeded. Ultimately, for TML, it cannot be considered in default of an obligation with an undetermined and unascertained amount. In that regard, TML argued that the intended foreclosure of TMLs mortgaged properties is unwarranted for being illegal; thus, the foreclosure ought to be enjoined to prevent TML from suffering grave and irreparable damage, especially since TMLs office and factory are located at the mortgaged properties. Refuting TMLs allegations, BPI maintained that the interest rates on TMLs loan obligation were mutually and voluntarily agreed upon. On TMLs application for the issuance of a writ of preliminary injunction, BPI countered that it has the absolute right to foreclose the mortgage constituted over TMLs properties given that TML defaulted on its loan obligation, which had already become due and demandable. In an Order dated 20 June 2003, the trial court denied TMLs application for the issuance of a preliminary injunction, ratiocinating thus: In resolving whether or not to grant the injunctive writ, this Court is guided by the requisites thereof, as repeatedly (sic) enunciated by the Supreme Court, to wit: (1) the invasion of a right is material and

substantial; (2) the right of complainant is clear and unmistakable; and (3) there is an urgent and paramount necessity for the writ to prevent serious damage. x xx. From the testimony of TMLs witness, Lyman Lozada, it was established that TML is indeed indebted to BPI and has become delinquent in the payment of the loan obligation; that TML is willing to let go off (sic) the collaterals, the properties subject matter hereof, by way of dacion en pago. Apparently, the only concern of TML is the fact that it will be ousted from the properties after the period of redemption shall have lapsed. The foregoing testimony of TML casts doubt on its right over the property. The aforementioned requisites are not obtaining in favor of TML. Moreover, as held by the Supreme Court, "where the complainants right or title is doubtful or disputed, injunction is not proper. x xx. Furthermore, TML has in its favor the right of redemption.5 On motion for reconsideration, the trial court made a complete turn-around. It ordered the issuance of the writ in favor of TML, subject to the posting of a bond in the amount of P300,000.00, to wit: While it is admitted that TML has defaulted in the payment of its loan obligation, which thus conferred upon BPI the right of foreclosure, the Court, after a contemplation of the logical consequence of the denial of the injunctive writ, is convinced that great and irreparable damages may be caused TML. As pointed out by TML, it might lead to an absurd scenario of TML winning the case but losing its property in BPIs favor or in an even worse scenario, in favor of third parties. This is because of the short period within which TML could exercise its redemption right under the General Banking Act.6 BPI moved for reconsideration of the order. However, the trial court maintained its ruling: Admittedly, TML has incurred in default in the payment of its obligation but the amount has yet to be determined, the determination thereof being one of the provinces of the instant complaint, and considering the Page 11 of 31

brief redemption period under the General Banking Act,the redemption is next to impossible. Thus, the injury to TML would be very grave if not irreparable.7 Posthaste, BPI filed a petition for certiorari under Rule 65 of the Rules of Court before the Court of Appeals, seeking to annul and set aside the twin Orders of the trial court respectively dated 22 August 2003 and 27 November 2003 which granted the writ of preliminary injunction in favor of TML and enjoined the foreclosure sale of the mortgaged properties. The appellate court found grave abuse of discretion in the trial courts issuance of the orders as demonstrated by the following: 1. TML signed the PNs which stipulated that TML, as the Borrower, is considered in default when it "fails to pay, when due, totally or partially, the principal, interest and other charges thereunder." 2. Consistent therewith, the Real Estate Mortgage signed by TML provides that one of the effects of default of the mortgagor (TML) includes the right of the mortgagee (BPI) to immediately foreclose the mortgage, which foreclosure may be undertaken judicially or extra-judicially, at the discretion of the mortgagee (BPI). 3. TML itself admitted in its complaint that it has failed to pay its outstanding loan to BPI. 4. From all three points, BPI has the right to extrajudicially foreclose the mortgaged properties. 5. TML did not demonstrate an actual existing right to be protected. 6. Corollary thereto, there is no threatened or actual violation of TMLs doubtful right to the mortgaged properties. The dispositive portion of the appellate courts decision reads, thus:

WHEREFORE, the Petition is GRANTED. The twin Order(s), dated August 22, 2003 and November 27, 2003, of the Regional Trial Court of Paraaque City, Branch 164 (sic) in Civil Case No. 02-0504, are hereby REVERSED and SET ASIDE. Accordingly, the writ of preliminary injunction granted in favor of TML is hereby LIFTED.8 TML filed a motion for reconsideration. While the resolution thereof was pending, TML filed a Supplemental Motion for Reconsideration arguing that BPIs petition for certiorari has become moot and academic because BPI had supposedly filed an Amended Petition for Extra-judicial Foreclosure of Real Estate Mortgage under Act No. 3135 before the trial court. For TML, that effectively changed the amount of its obligation to BPI, which, in turn, rendered BPIs original petition for extra-judicial foreclosure of mortgage moot and academic. The appellate court denied the motions and affirmed its original decision: WHEREFORE, the instant motion for reconsideration and supplemental motion for reconsideration are hereby DENIED. Accordingly, Our Decision, dated August 19, 2008, STANDS.9 Hence, this petition for review on certiorari positing that the appellate court erred when it reversed and set aside the twin Orders of the trial court and lifted the injunctive writ. We subscribe to the appellate courts ruling. Section 3, Rule 58 of the Rules of Court lists the grounds for the issuance of a writ of preliminary injunction: SEC. 3.Grounds for issuance of preliminary injunction. A preliminary injunction may be granted when it is established: (a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually; Page 12 of 31

(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 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. As such, a writ of preliminary injunction may be issued only upon clear showing of an actual existing right to be protected during the pendency of the principal action. The requisites of a valid injunction are the existence of a right and its actual or threatened violations. Thus, to be entitled to an injunctive writ, the right to be protected and the violation against that right must be shown.10 In this case, TML anchors its right to the mortgaged properties on its claim that it cannot be considered in default of its loan obligation to BPI. Consequently, the mortgaged properties cannot be foreclosed. TML claims it had been religiously paying its loan; however, BPIs unilateral increase of the rate of interest to 33% prevented TML from further paying the loan. Thus, for TML, while an accounting and liquidation of the actual amount of its obligation to BPI remains undetermined, it cannot be considered in default. Ultimately, TML avers that the threatened foreclosure and auction sale of its mortgaged properties while its loan with BPI subsists is a violation of its right. We note that TML categorically admitted that it has an existing loan with BPI, secured by a real estate mortgage and several promissory notes, and that it stopped paying for one reason or another. On that point, we affirm the appellate courts findings: It is settled rule of law that foreclosure is proper when the debtors are in default of the payment of their obligation. On this note, it must be recalled that the promissory notes executed by TML in favor of BPI states that the Borrower - in this case, TML is considered in default when it fails to pay when due, totally or

partially, the principal, interest and other charges under the promissory note(s). In conjunction therewith, the real estate mortgage executed by the parties stipulates, among others, that: Sec. 6.Effects of Default by the Mortgagor.xxx a) The MORTGAGEE shall have the right to immediately foreclose on this Mortgage in accordance with Sec. 7, hereof; xxx Sec. 7.Foreclosure. Foreclosure shall, at the sole discretion of the MORTGAGEE, be either judicial or extrajudicial, xxx xxx. In its Complaint, TML admitted that it has not paid its obligation with BPI by reason of the exorbitant rates of interest unilaterally imposed by the latter. However, regardless of TMLs defenses, the fact that it has an outstanding obligation with BPI which it failed to pay despite demand remains undisputed. Verily, TMLs failure to comply with the terms and conditions of its credit agreement with BPI, as embodied in the real estate mortgage and the promissory notes it issued in favor of the latter, entitles BPI to extrajudicially foreclose the mortgaged properties. x xxx To our mind, the grounds relied upon by the trial court, do not justify the issuance of a writ of preliminary injunction in favor of TML. Under the factual setting of this case, TML has no right to be protected from the impending foreclosure of its properties. Certainly, the said foreclosure is authorized under the real estate mortgage and the promissory notes voluntarily executed by TML in favor of BPI. Needless to say, BPIs exercise of its right to foreclose the subject properties does not, in any way, constitute a violation of TMLs property rights. On the contrary, the foreclosure of the mortgage is to enforce the contractual obligation of BPI.11 The issuance of a preliminary injunction rests entirely within the discretion of the court taking cognizance of Page 13 of 31

the case and is generally not interfered with except in cases of manifest abuse. For the issuance of the writ of preliminary injunction to be proper, it must be shown that the invasion of the right sought to be protected is material and substantial, that the right of complainant is clear and unmistakable and that there is an urgent and paramount necessity for the writ to prevent serious damage.12 In the absence of a clear legal right, the issuance of a writ of injunction constitutes grave abuse of discretion. From the foregoing, it is apparent that the trial court committed grave abuse of discretion when it revoked its previous order and subsequently issued a writ of preliminary injunction simply on the following grounds: "(a) that TMLs mortgage debt is unliquidated; (b) that TML stands to suffer great and irreparable damages if it wins the case but, in the process, loses its mortgaged properties to BPI, or even worse, to third parties; and, (c) that, considering, the brief redemption period under the General Banking Act, TMLs chance to redeem its properties would be next to impossible." In Selegna Management and Development Corporation v. United Coconut Planters Bank,13 we ruled that the debt is considered liquidated despite the alleged lack of accounting: A debt is liquidated when the amount is known or is determinable by inspection of the terms and conditions of the relevant promissory notes and related documentation. Failure to furnish a debtor a detailed statement of account does not ipso facto result in an unliquidated obligation. Petitioners executed a Promissory Note, in which they stated that their principal obligation was in the amount of P103,909,710.82, subject to an interest rate of 21.75 percent per annum. Pursuant to the parties' Credit Agreement, petitioners likewise know that any delay in the payment of the principal obligation will subject them to a penalty charge of one percent per month, computed from the due date until the obligation is paid in full.

It is in fact clear from the agreement of the parties that when the payment is accelerated due to an event of default, the penalty charge shall be based on the total principal amount outstanding, to be computed from the date of acceleration until the obligation is paid in full. Their Credit Agreement even provides for the application of payments. It appears from the agreements that the amount of total obligation is known or, at the very least, determinable. Moreover, when they made their partial payment, petitioners did not question the principal, interest or penalties demanded from them. They only sought additional time to update their interest payments or to negotiate a possible restructuring of their account. Hence, there is no basis for their allegation that a statement of account was necessary for them to know their obligation. We cannot impair respondent's right to foreclose the properties on the basis of their unsubstantiated allegation of a violation of due process.14 Clearly, the possibility of irreparable damage without proof of actual existing right is no ground for an injunction. Once again, our holding in Selegna is relevant and sound: x xx Injunction is not designed to protect contingent or future rights. It is not proper when the complainant's right is doubtful or disputed. x xxx Petitioners do not have any clear right to be protected. As shown in our earlier findings, they failed to substantiate their allegations that their right to due process had been violated and the maturity of their obligation forestalled. Since they indisputably failed to meet their obligations in spite of repeated demands, we hold that there is no legal justification to enjoin respondent from enforcing its undeniable right to foreclose the mortgaged properties. In any case, petitioners will not be deprived outrightly of their property. Pursuant to Section 47 of the General Page 14 of 31

Banking Law of 2000, mortgagors who have judicially or extrajudicially sold their real property for the full or partial payment of their obligation have the right to redeem the property within one year after the sale. They can redeem their real estate by paying the amount due, with interest rate specified, under the mortgage deed; as well as all the costs and expenses incurred by the bank.15 Lastly, as the Court of Appeals had done, we clarify that our disposition in this case pertains only to the propriety of the trial courts Orders issuing a writ of preliminary injunction in favor of TML to enjoin the foreclosure of TMLs mortgaged properties. We do not dispose herein of the main case pending before the RTC, Branch 194, Paraaque City docketed as Civil Case No. 02-0504. All told, there is no reversible error in the appellate courts decision, reversing and setting aside the Orders dated 22 August 2003 and 27 November 2003 of the trial court and lifting the writ of preliminary injunction issued in favor of TML. WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 81932 is AFFIRMED. Costs against petitioner. SO ORDERED.

CUSTOMS, Port of San Fernando, La Union, and HEAD OF THE LAND TRANSFORTATION OFFICE, Petitioners, vs. FORERUNNER MULTI RESOURCES, INC., Respondent.
Preliminary injunction; injunctive relief not issued for self-inflicted losses which are damnumabsqueinjuria. In arriving at a contrary conclusion, the Court of Appeals dwelt on the grave and irremediable financial losses respondent was poised to sustain as a result of EO 156s enforcement, finding such prejudice inequitable. No doubt, by importing used vehicles in contravention of the ban under EO 156, respondent risked sustaining losses. Such risk, however, was self- imposed. Having miscalculated its chances, respondent cannot look to courts for an injunctive relief against self-inflicted losses which are in the nature of damnumabsqueinjuria. Injunction will not issue on the mere possibility that a litigant will sustain damage, without proof of a clear legal right entitling the litigant to protection. Executive Secretary, Secretary of Finance, Commissioner of Customs, District Collector of Customs, Port of Aparri, Cagayan, District Collector of Customs, Port of San Fernando La Union, and Head of the Land Transportation Office v. Forerunner Multi Resources, Inc., The Case We review1 a ruling2 of the Court of Appeals enjoining the government from enforcing, litispendentia, a ban on the importation of used motor vehicles. The Facts Executive Order No. 156 (EO 156)3, issued by President Gloria Macapagal-Arroyo (President Arroyo) on 12 December 2002, imposes a partial ban on the importation of used motor vehicles.4 The ban is part of several measures EO 156 adopts to "accelerate the sound development of the motor vehicle industry in the Philippines."5 In Executive Secretary v. Southwing Heavy Industries, Inc. and two related petitions6 (collectively, Southwing), we found EO 156 a valid Page 15 of 31

3)

G.R. No. 199324 January 7, 2013 EXECUTIVE SECRETARY, SECRETARY OF FINANCE, COMMISSIONER OF CUSTOMS, DISTRICT COLLECTOR OF CUSTOMS, Port of Aparri, Cagayan, DISTRICT COLLECTOR OF

executive issuance enforceable throughout the Philippine customs territory, except in the Subic Special Economic and Freeport Zone in Zambales (Subic Freeport) by virtue of its status as a "separate customs territory" under Republic Act No. 7227.7 Respondent Forerunner Multi Resources, Inc. (respondent), a corporation engaged in the importation of used motor vehicles via the ports of Aparri, Cagayan and San Fernando, La Union, sued the government in the Regional Trial Court of Aparri, Cagayan (trial court) to declare invalid EO 156, impleading petitioner public officials as respondents.8 Respondent attacked EO 156 for (1) having been issued by President Arroyo ultra vires; (2) trenching the Due Process and Equal Protection Clauses of the Constitution; and (3) having been superseded by Executive Order No. 418 (EO 418),9 issued by President Arroyo on 4 April 2005, modifying the tariff rates of imported used motor vehicles. Respondent sought a preliminary injunctive writ to enjoin, litispendentia, the enforcement of EO 156. The Ruling of the Trial Court Acting on respondents application for preliminary injunctive remedy, the trial court granted relief, initially by issuing a temporary restraining order followed by a writ of preliminary injunction granted in its Order of 27 November 2008.10 On petitioners motion, however, the trial court reconsidered its Order and lifted the injunctive writ on 7 July 2010. The trial court grounded its ruling on Southwing which it considered as negating any "clear and unmistakable legal right" on the part of respondent to receive the "protection of a writ of preliminary injunction."11 Respondent elevated the case to the Court of Appeals in a certiorari petition. The Ruling of the Court of Appeals The Court of Appeals granted certiorari, set aside the trial courts Order of 7 July 2010 and reinstated its Order of 27 November 2008. In the appellate courts estimation, the trial court committed grave abuse of discretion in lifting the preliminary injunctive writ it earlier issued. The appellate court held that the

implementation of EO 156 "would put petitioner in a financial crisis."12 As authority, the appellate court invoked by analogy this Courts ruling in Filipino Metals Corporation v. Secretary of the Department of Trade and Industry.13 Petitioners are now before this Court charging the Court of Appeals with having committed an error of law in reinstating the preliminary injunctive writ for respondent. They argue that Southwing controls the case, precluding the Court of Appeals from recognizing a clear legal right of respondent to import used motor vehicles. Respondent counters that the doctrinal import of Southwing was weakened by the subsequent issuance of EO 418, allegedly repealing EO 156. Respondent invokes our minute Resolution of 15 November 2010 denying the petition in G.R. No. 187475 (Executive Secretary v. Feniz [CEZA] International, Inc.) as judicial confirmation of the supposed repeal. As prayed for by petitioners, we issued a temporary restraining order on 16 January 2012 against the Court of Appeals ruling. The Issue The question is whether the Court of Appeals erred in granting preliminary injunctive relief to respondent to enjoin enforcement of EO 156. The Courts Ruling We hold that it was error for the Court of Appeals to grant preliminary injunctive relief to respondent. We set aside the Court of Appeals ruling and reinstate the trial courts Order of 7 July 2010. Respondent Without Clear Legal Right to Import Used Motor Vehicles It is a deeply ingrained doctrine in Philippine remedial law that a preliminary injunctive writ under Rule 5814 issues only upon a showing of the applicants "clear legal right"15 being violated or under threat of violation by the defendant.16 "Clear legal right," within the Page 16 of 31

meaning of Rule 58, contemplates a right "clearly founded in or granted by law."17 Any hint of doubt or dispute on the asserted legal right precludes the grant of preliminary injunctive relief.18 For suits attacking the validity of laws or issuances with the force and effect of law, as here, the applicant for preliminary injunctive relief bears the added burden of overcoming the presumption of validity inhering in such laws or issuances.19 These procedural barriers to the issuance of a preliminary injunctive writ are rooted on the equitable nature of such relief, preserving the status quo while, at the same time, restricting the course of action of the defendants even before adverse judgment is rendered against them. Respondent sought preliminary injunctive relief as ancillary to its principal cause of action to invalidate EO 156. Respondents attack on EO 156, however, comes on the heels of Southwing where we passed upon and found EO 156 legally sound, albeit overextended in application. We found EO 156 a valid police power measure addressing an "urgent national concern": There is no doubt that the issuance of the ban to protect the domestic industry is a reasonable exercise of police power. The deterioration of the local motor manufacturing firms due to the influx of imported used motor vehicles is an urgent national concern that needs to be swiftly addressed by the President. In the exercise of delegated police power, the executive can therefore validly proscribe the importation of these vehicles. x x x20 The narrow ambit of this review precludes us from passing upon the merits of the constitutional and administrative issues respondent raised to attack EO 156. Nevertheless, we have no hesitation in holding that whatever legal right respondent may possess vis vis the operation of EO 156, we find such legal right to be doubtful by force of the Southwing precedent. Until reversed or modified by this Court, Southwing makes conclusive the presumption of EO 156s validity. Our holding is bolstered by respondents failure to remove its case from the confines of such ruling.

In arriving at a contrary conclusion, the Court of Appeals dwelt on the "grave and irremediable" financial losses respondent was poised to sustain as a result of EO 156s enforcement, finding such prejudice "inequitable."21 No doubt, by importing used motor vehicles in contravention of the ban under EO 156, respondent risked sustaining losses. Such risk, however, was selfimposed. Having miscalculated its chances, respondent cannot look to courts for injunctive relief against selfinflicted losses which are in the nature of damnumabsqueinjuria. Injunction will not issue on the mere possibility that a litigant will sustain damage, without proof of a clear legal right entitling the litigant to protection.22 Nor does our ruling in Filipino Metals furnish doctrinal support for respondent.1wphi1 We sustained the trial courts issuance of a preliminary injunctive writ in that case to enjoin the enforcement of Republic Act No. 8800 (RA 8800) delegating to a cabinet member the power to adopt measures to address prejudicial importations in contravention of relevant international agreements. We grounded our ruling on the fact that the petitioners, which principally argued that RA 8800 violates Article VI, Section 28(2) of the Constitution (limiting Congress delegation of the power to fix trade quotas to the President), "have established a strong case for the unconstitutionality of RA 8800."23 In short, the petitioners in Filipino Metals discharged the burden of overcoming the presumption of validity accorded to RA 8800, warranting the issuance of a preliminary injunctive writ in their favor. Southwing forecloses a similar finding for respondent. Lastly, we find no merit in respondents submission that EO 418 repealed EO 156, removing the legal bar to its importation of used motor vehicles. The question of whether EO 418 repealed EO 156 was already settled in our Resolution dated 22 August 2006 denying reconsideration of our ruling in Southwing. The respondents in those cases, importers of used motor vehicles via the Subic Freeport, had espoused the theory presently advanced by respondent. We rejected the proffered construction of the two issuances:

Page 17 of 31

The subsequent issuance of E.O. No. 418 increasing the import duties on used motor vehicles did not alter the policy of the executive department to prohibit the importation of said vehicle. x xx There is nothing in the text of E.O. No. 418 which expressly repeals E.O. No. 156. The Congress, or the Office of the President in this case, is presumed to know the existing laws, such that whenever it intends to repeal a particular or specific provision of law, it does so expressly. The failure to add a specific repealing clause indicates that the intent was not to repeal previous administrative issuances. x xx E.O. No. 156 is very explicit in its prohibition on the importation of used motor vehicles. On the other hand, E.O. No. 418 merely modifies the tariff and nomenclature rates of import duty on used motor vehicles. Nothing therein expressly revokes the importation ban. (Italicization supplied) Contrary to respondent's claim, our minute Resolution dated 15 November 2010 denying the petition in Feniz did not have the effect of modifying much less reversing our holding in Southwing. The petition in Feniz sought a review of the ruling of the trial court striking down Section 2 of EO 418. The trial court found such provision, which imposed additional specific duty of P500,000 on each imported used motor vehicle, void for having been issued by President Arroyo ultra vires. Neither the validity of EO 156 nor the alleged repeal by EO 418 of EO 156 was the lismota in Feniz. WHEREFORE, we GRANT the petition. We SET ASIDE the Decision dated 27 June 2011 and the Resolution dated 14 November 2011 of the Court of Appeals. The Order dated 7 July 201 0 of the Regional Trial Court of Aparri, Cagayan, Branch 10, is REINSTATED. The temporary restraining order issued on 16 January 2012 is made PERMANENT. SO ORDERED.

4)

G.R. No. 170770

January 9, 2013

VITALIANO N. AGUIRRES II and FIDEL N. AGUIRRE, Petitioners, vs.FQB+7, INC., NATHANIEL D. BOCOBO, PRISCILA BOCOBO and ANTONIO DE VILLA, Respondents.
Preliminary injunction; requirement of actual and existing right. Petitioners argument fails to impress. The CA did not nullify the October 15, 2004 Order merely because of the interchanged pages. Instead, the CA determined that the applicant, Vitaliano, was not able to show that he had an actual and existing right that had to be protected by a preliminary injunction. The most that Vitaliano was able to prove was a future right based on his victory in the suit. Contrasting this future right of Vitaliano with respondents existing right under the GIS, the CA determined that the trial court should not have disturbed the status quo. Vitaliano Aguirre II and Fidel Aguirre v. FQB+7, Inc., Nathaniel Bocobo, PriscilaBocobo, and Antonio De Villa, G.R. No. 170770. January 9, 2013 Pursuant to Section 145 of the Corporation Code, an existing intra-corporate dispute, which does not constitute a continuation of corporate business, is not affected by the subsequent dissolution of the corporation. Before the Court is a Petition for Review on Certiorari of the June 29, 2005 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 87293, which nullified the trial courts writ of preliminary injunction and dismissed petitioner Vitaliano N. Aguirres (Vitaliano) Complaint before the Regional Trial Court (RTC) for lack of jurisdiction. The dispositive portion of the assailed Decision reads: WHEREFORE, the assailed October 15, 2004 Order, as well as the October 27, 2004 Writ of Preliminary Injunction, are SET ASIDE. With FQB+7, Inc.s dissolution on September 29, 2003 and Case No. 04111077s ceasing to become an intra-corporate dispute said case is hereby ordered DISMISSED for want of jurisdiction. Page 18 of 31

SO ORDERED.2 Likewise assailed in this Petition is the appellate courts December 16, 2005 Resolution,3 which denied a reconsideration of the assailed Decision. Factual Antecedents On October 5, 2004, Vitaliano filed, in his individual capacity and on behalf of FQB+7, Inc. (FQB+7), a Complaint4 for intra-corporate dispute, injunction, inspection of corporate books and records, and damages, against respondents Nathaniel D. Bocobo (Nathaniel), Priscila D. Bocobo (Priscila), and Antonio De Villa (Antonio). The Complaint alleged that FQB+7 was established in 1985 with the following directors and subscribers, as reflected in its Articles of Incorporation: Directors Subscribers

1. Nathaniel D. Bocobo 1. Nathaniel D. Bocobo 2. Priscila D. Bocobo 3. Fidel N. Aguirre 4. Victoriano Santos 5. Victorino Santos 2.Priscila D. Bocobo 3. Fidel N. Aguirre 4. Victorino7 Santos 5.Victorino Santos

6. Consolacion Santos8 6.Consolacion Santos9

Further, the GIS reported that FQB+7s stockholders held their annual meeting on September 3, 2002.10 The substantive changes found in the GIS, respecting the composition of directors and subscribers of FQB+7, prompted Vitaliano to write to the "real" Board of Directors (the directors reflected in the Articles of Incorporation), represented by Fidel N. Aguirre (Fidel). In this letter11 dated April 29, 2004, Vitaliano questioned the validity and truthfulness of the alleged stockholders meeting held on September 3, 2002. He asked the "real" Board to rectify what he perceived as erroneous entries in the GIS, and to allow him to inspect the corporate books and records. The "real" Board allegedly ignored Vitalianos request. On September 27, 2004, Nathaniel, in the exercise of his power as FQB+7s president, appointed Antonio as the corporations attorney-in-fact, with power of administration over the corporations farm in Quezon Province.12 Pursuant thereto, Antonio attempted to take over the farm, but was allegedly prevented by Fidel and his men.13 Characterizing Nathaniels, Priscilas, and Antonios continuous representation of the corporation as a usurpation of the management powers and prerogatives of the "real" Board of Directors, the Complaint asked for an injunction against them and for the nullification of all their previous actions as purported directors, including the GIS they had filed with the SEC. The Complaint also sought damages for the plaintiffs and a declaration of Vitalianos right to inspect the corporate records. Page 19 of 31

1. Francisco Q. Bocobo 1. Francisco Q. Bocobo 2. Fidel N. Aguirre 3. Alfredo Torres 4. Victoriano Santos 5. Victorino Santos5 2. Fidel N. Aguirre 3. Alfredo Torres 4.Victoriano Santos 5.Victorino Santos

6. Vitaliano N. Aguirre II 7. Alberto Galang 8. Rolando B. Bechayda6 To Vitalianos knowledge, except for the death of Francisco Q. Bocobo and Alfredo Torres, there has been no other change in the above listings. The Complaint further alleged that, sometime in April 2004, Vitaliano discovered a General Information Sheet (GIS) of FQB+7, dated September 6, 2002, in the Securities and Exchange Commission (SEC) records. This GIS was filed by Francisco Q. Bocobos heirs, Nathaniel and Priscila, as FQB+7s president and secretary/treasurer, respectively. It also stated FQB+7s directors and subscribers, as follows: Directors Subscribers

The case, docketed as SEC Case No. 04-111077, was assigned to Branch 24 of the RTC of Manila (Manila RTC), which was a designated special commercial court, pursuant to A.M. No. 03-03-03-SC.14

The respondents failed, despite notice, to attend the hearing on Vitalianos application for preliminary injunction.15 Thus, in an Order16 dated October 15, 2004, the trial court granted the application based only on Vitalianos testimonial and documentary evidence, consisting of the corporations articles of incorporation, by-laws, the GIS, demand letter on the "real" Board of Directors, and police blotter of the incident between Fidels and Antonios groups. On October 27, 2004, the trial court issued the writ of preliminary injunction17 after Vitaliano filed an injunction bond. The respondents filed a motion for an extension of 10 days to file the "pleadings warranted in response to the complaint," which they received on October 6, 2004.18 The trial court denied this motion for being a prohibited pleading under Section 8, Rule 1 of the Interim Rules of Procedure Governing Intra-corporate Controversies under Republic Act (R.A.) No. 8799.19 The respondents filed a Petition for Certiorari and Prohibition,20 docketed as CA-G.R. SP No. 87293, before the CA. They later amended their Petition by impleading Fidel, who allegedly shares Vitalianos interest in keeping them out of the corporation, as a private respondent therein.21 The respondents sought, in their certiorari petition, the annulment of all the proceedings and issuances in SEC Case No. 04-11107722 on the ground that Branch 24 of the Manila RTC has no jurisdiction over the subject matter, which they defined as being an agrarian dispute.23 They theorized that Vitalianos real goal in filing the Complaint was to maintain custody of the corporate farm in Quezon Province. Since this land is agricultural in nature, they claimed that jurisdiction belongs to the Department of Agrarian Reform (DAR), not to the Manila RTC.24 They also raised the grounds of improper venue (alleging that the real corporate

address is different from that stated in the Articles of Incorporation)25 and forum-shopping26 (there being a pending case between the parties before the DAR regarding the inclusion of the corporate property in the agrarian reform program).27 Respondents also raised their defenses to Vitalianos suit, particularly the alleged disloyalty and fraud committed by the "real" Board of Directors,28 and respondents "preferential right to possess the corporate property" as the heirs of the majority stockholder Francisco Q. Bocobo.29 The respondents further informed the CA that the SEC had already revoked FQB+7s Certificate of Registration on September 29, 2003 for its failure to comply with the SEC reportorial requirements.30 The CA determined that the corporations dissolution was a conclusive fact after petitioners Vitaliano and Fidel failed to dispute this factual assertion.31 Ruling of the Court of Appeals The CA determined that the issues of the case are the following: (1) whether the trial courts issuance of the writ of preliminary injunction, in its October 15, 2004 Order, was attended by grave abuse of discretion amounting to lack of jurisdiction; and (2) whether the corporations dissolution affected the trial courts jurisdiction to hear the intra corporate dispute in SEC Case No. 04-111077.32 On the first issue, the CA determined that the trial court committed a grave abuse of discretion when it issued the writ of preliminary injunction to remove the respondents from their positions in the Board of Directors based only on Vitalianos self-serving and empty assertions. Such assertions cannot outweigh the entries in the GIS, which are documented facts on record, which state that respondents are stockholders and were duly elected corporate directors and officers of FQB+7, Inc. The CA held that Vitaliano only proved a future right in case he wins the suit. Since an injunction is not a remedy to protect future, contingent or abstract rights, then Vitaliano is not entitled to a writ.33 Further, the CA disapproved the discrepancy between the trial courts October 15, 2004 Order, which granted Page 20 of 31

the application for preliminary injunction, and its writ dated October 27, 2004. The Order enjoined all the respondents "from entering, occupying, or taking over possession of the farm owned by Atty. Vitaliano Aguirre II," while the writ states that the subject farm is "owned by plaintiff corporation located in Mulanay, Quezon Province." The CA held that this discrepancy imbued the October 15, 2004 Order with jurisdictional infirmity.34 On the second issue, the CA postulated that Section 122 of the Corporation Code allows a dissolved corporation to continue as a body corporate for the limited purpose of liquidating the corporate assets and distributing them to its creditors, stockholders, and others in interest. It does not allow the dissolved corporation to continue its business. That being the state of the law, the CA determined that Vitalianos Complaint, being geared towards the continuation of FQB+7, Inc.s business, should be dismissed because the corporation has lost its juridical personality.35 Moreover, the CA held that the trial court does not have jurisdiction to entertain an intra-corporate dispute when the corporation is already dissolved.36 After dismissing the Complaint, the CA reminded the parties that they should proceed with the liquidation of the dissolved corporation based on the existing GIS, thus: With SECs revocation of its certificate of registration on September 29, 2004 [sic], FQB+7, Inc. will be obligated to wind up its affairs. The Corporation will have to be liquidated within the 3-year period mandated by Sec. 122 of the Corporation Code. Regardless of the method it will opt to liquidate itself, the Corporation will have to reckon with the members of the board as duly listed in the General Information Sheet last filed with SEC. Necessarily, and as admitted in the complaint below, the following as listed in the Corporations General Information Sheet dated September 6, 2002, will have to continue acting as Members of the Board of FQB+7, Inc. viz: x xx x37

Herein petitioners filed a Motion for Reconsideration.38 They argued that the CA erred in ruling that the October 15, 2004 Order was inconsistent with the writ. They explained that pages 2 and 3 of the said Order were interchanged in the CAs records, which then misled the CA to its erroneous conclusion. They also posited that the original sentence in the correct Order reads: "All defendants are further enjoined from entering, occupying or taking over possession of the farm owned by plaintiff corporation located in Mulanay, Quezon." This sentence is in accord with what is ordered in the writ, hence the CA erred in nullifying the Order. On the second issue, herein petitioners maintained that the CA erred in characterizing the reliefs they sought as a continuance of the dissolved corporations business, which is prohibited under Section 122 of the Corporation Code. Instead, they argued, the relief they seek is only to determine the real Board of Directors that can represent the dissolved corporation. The CA denied the Motion for Reconsideration in its December 16, 2005 Resolution.39 It determined that the crucial issue is the trial courts jurisdiction over an intra-corporate dispute involving a dissolved corporation.40 Based on the prayers in the Complaint, petitioners seek a determination of the real Board that can take over the management of the corporations farm, not to sit as a liquidation Board. Thus, contrary to petitioners claims, their Complaint is not geared towards liquidation but a continuance of the corporations business. Issues 1. Whether the CA erred in annulling the October 15, 2004 Order based on interchanged pages. 2. Whether the Complaint seeks to continue the dissolved corporations business. 3. Whether the RTC has jurisdiction over an intracorporate dispute involving a dissolved corporation. Our Ruling The Petition is partly meritorious. Page 21 of 31

On the nullification of the Order of preliminary injunction. Petitioners reiterate their argument that the CA was misled by the interchanged pages in the October 15, 2004 Order. They posit that had the CA read the Order in its correct sequence, it would not have nullified the Order on the ground that it was issued with grave abuse of discretion amounting to lack of jurisdiction.41 Petitioners argument fails to impress. The CA did not nullify the October 15, 2004 Order merely because of the interchanged pages. Instead, the CA determined that the applicant, Vitaliano, was not able to show that he had an actual and existing right that had to be protected by a preliminary injunction. The most that Vitaliano was able to prove was a future right based on his victory in the suit. Contrasting this future right of Vitaliano with respondents existing right under the GIS, the CA determined that the trial court should not have disturbed the status quo. The CAs discussion regarding the interchanged pages was made only in addition to its above ratiocination. Thus, whether the pages were interchanged or not will not affect the CAs main finding that the trial court issued the Order despite the absence of a clear and existing right in favor of the applicant, which is tantamount to grave abuse of discretion. We cannot disturb the CAs finding on this score without any showing by petitioners of strong basis to warrant the reversal. Is the Complaint a continuation ofbusiness? Section 122 of the Corporation Code prohibits a dissolved corporation from continuing its business, but allows it to continue with a limited personality in order to settle and close its affairs, including its complete liquidation, thus: Sec. 122.Corporate liquidation. Every corporation whose charter expires by its own limitation or is annulled by forfeiture or otherwise, or whose corporate existence for other purposes is terminated in any other manner, shall nevertheless be continued as a body corporate for three (3) years after the time when it would have been so dissolved, for the purpose of

prosecuting and defending suits by or against it and enabling it to settle and close its affairs, to dispose of and convey its property and to distribute its assets, but not for the purpose of continuing the business for which it was established. x xxx Upon learning of the corporations dissolution by revocation of its corporate franchise, the CA held that the intra-corporate Complaint, which aims to continue the corporations business, must now be dismissed under Section 122. Petitioners concede that a dissolved corporation can no longer continue its business. They argue, however, that Section 122 allows a dissolved corporation to wind up its affairs within 3 years from its dissolution. Petitioners then maintain that the Complaint, which seeks only a declaration that respondents are strangers to the corporation and have no right to sit in the board or act as officers thereof, and a return of Vitalianos stockholdings, intends only to resolve remaining corporate issues. The resolution of these issues is allegedly part of corporate winding up. Does the Complaint seek a continuation of business or is it a settlement of corporate affairs? The answer lies in the prayers of the Complaint, which state: PRAYER WHEREFORE, it is most respectfully prayed of this Honorable Court that judgment be rendered in favor of the plaintiffs and against the defendants, in the following wise: I. ON THE PRAYER OF TRO/STATUS QUO ORDER AND WRIT OF PRELIMINARY INJUNCTION: 1. Forthwith and pending the resolution of plaintiffs prayer for issuance of writ of preliminary injunction, in order to maintain the status quo, a status quo order or temporary restraining order (TRO) be issued enjoining the defendants, their officers, employees, and agents from exercising the powers and authority as members of the Board of Directors of plaintiff FQB as well as Page 22 of 31

officers thereof and from misrepresenting and conducting themselves as such, and enjoining defendant Antonio de Villa from taking over the farm of the plaintiff FQB and from exercising any power and authority by reason of his appointment emanating from his co-defendant Bocobos. 2. After due notice and hearing and during the pendency of this action, to issue writ of preliminary injunction prohibiting the defendants from committing the acts complained of herein, more particularly those enumerated in the immediately preceeding paragraph, and making the injunction permanent after trial on the merits. II. ON THE MERITS After trial, judgment be rendered in favor of the plaintiffs and against the defendants, as follows: 1. Declaring defendant Bocobos as without any power and authority to represent or conduct themselves as members of the Board of Directors of plaintiff FQB, or as officers thereof. 2. Declaring that Vitaliano N. Aguirre II is a stockholder of plaintiff FQB owning fifty (50) shares of stock thereof. 3. Allowing Vitaliano N. Aguirre II to inspect books and records of the company. 4. Annulling the GIS, Annex "C" of the Complaint as fraudulent and illegally executed and filed. 5. Ordering the defendants to pay jointly and solidarily the sum of at least P200,000.00 as moral damages; at least P100,000.00 as exemplary damages; and at least P100,000.00 as and for attorneys fees and other litigation expenses. Plaintiffs further pray for costs and such other relief just and equitable under the premises.42 The Court fails to find in the prayers above any intention to continue the corporate business of FQB+7. The Complaint does not seek to enter into contracts, issue new stocks, acquire properties, execute business transactions, etc. Its aim is not to continue the

corporate business, but to determine and vindicate an alleged stockholders right to the return of his stockholdings and to participate in the election of directors, and a corporations right to remove usurpers and strangers from its affairs. The Court fails to see how the resolution of these issues can be said to continue the business of FQB+7. Neither are these issues mooted by the dissolution of the corporation. A corporations board of directors is not rendered functus officio by its dissolution. Since Section 122 allows a corporation to continue its existence for a limited purpose, necessarily there must be a board that will continue acting for and on behalf of the dissolved corporation for that purpose. In fact, Section 122 authorizes the dissolved corporations board of directors to conduct its liquidation within three years from its dissolution. Jurisprudence has even recognized the boards authority to act as trustee for persons in interest beyond the said three-year period.43 Thus, the determination of which group is the bona fide or rightful board of the dissolved corporation will still provide practical relief to the parties involved. The same is true with regard to Vitalianos shareholdings in the dissolved corporation. A partys stockholdings in a corporation, whether existing or dissolved, is a property right44 which he may vindicate against another party who has deprived him thereof. The corporations dissolution does not extinguish such property right. Section 145 of the Corporation Code ensures the protection of this right, thus: Sec. 145.Amendment or repeal. No right or remedy in favor of or against any corporation, its stockholders, members, directors, trustees, or officers, nor any liability incurred by any such corporation, stockholders, members, directors, trustees, or officers, shall be removed or impaired either by the subsequent dissolution of said corporation or by any subsequent amendment or repeal of this Code or of any part thereof. (Emphases supplied.) On the dismissal of the Complaint forlack of jurisdiction.

Page 23 of 31

The CA held that the trial court does not have jurisdiction over an intra-corporate dispute involving a dissolved corporation. It further held that due to the corporations dissolution, the qualifications of the respondents can no longer be questioned and that the dissolved corporation must now commence liquidation proceedings with the respondents as its directors and officers. The CAs ruling is founded on the assumptions that intra-corporate controversies continue only in existing corporations; that when the corporation is dissolved, these controversies cease to be intra-corporate and need no longer be resolved; and that the status quo in the corporation at the time of its dissolution must be maintained. The Court finds no basis for the said assumptions. Intra-corporate disputes remain even when the corporation is dissolved. Jurisdiction over the subject matter is conferred by law. R.A. No. 879945 conferred jurisdiction over intracorporate controversies on courts of general jurisdiction or RTCs,46 to be designated by the Supreme Court. Thus, as long as the nature of the controversy is intracorporate, the designated RTCs have the authority to exercise jurisdiction over such cases. So what are intra-corporate controversies? R.A. No. 8799 refers to Section 5 of Presidential Decree (P.D.) No. 902-A (or The SEC Reorganization Act) for a description of such controversies: a) Devices or schemes employed by or any acts, of the board of directors, business associates, its officers or partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or of the stockholder, partners, members of associations or organizations registered with the Commission; b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members, or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or

associates, respectively; and between such corporation, partnership or association and the state insofar as it concerns their individual franchise or right to exist as such entity; c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships or associations. The Court reproduced the above jurisdiction in Rule 1 of the Interim Rules of Procedure Governing Intracorporate Controversies under R.A. No. 8799: SECTION 1. (a) Cases Covered These Rules shall govern the procedure to be observed in civil cases involving the following: (1) Devices or schemes employed by, or any act of, the board of directors, business associates, officers or partners, amounting to fraud or misrepresentation which may be detrimental to the interest of the public and/or of the stockholders, partners, or members of any corporation, partnership, or association; (2) Controversies arising out of intra-corporate, partnership, or association relations, between and among stockholders, members, or associates; and between, any or all of them and the corporation, partnership, or association of which they are stockholders, members, or associates, respectively; (3) Controversies in the election or appointment of directors, trustees, officers, or managers of corporations, partnerships, or associations; (4) Derivative suits; and (5) Inspection of corporate books. Meanwhile, jurisprudence has elaborated on the above definitions by providing tests in determining whether a controversy is intra-corporate. Reyes v. Regional Trial Court of Makati, Br. 14247 contains a comprehensive discussion of these two tests, thus: A review of relevant jurisprudence shows a development in the Court's approach in classifying what constitutes an intra-corporate controversy. Initially, the Page 24 of 31

main consideration in determining whether a dispute constitutes an intra-corporate controversy was limited to a consideration of the intra-corporate relationship existing between or among the parties. The types of relationships embraced under Section 5(b) x xx were as follows: a) between the corporation, partnership, or association and the public; b) between the corporation, partnership, or association and its stockholders, partners, members, or officers; c) between the corporation, partnership, or association and the State as far as its franchise, permit or license to operate is concerned; and d) among the stockholders, partners or associates themselves. xxx The existence of any of the above intra-corporate relations was sufficient to confer jurisdiction to the SEC now the RTC, regardless of the subject matter of the dispute. This came to be known as the relationship test. However, in the 1984 case of DMRC Enterprises v. Estadel Sol Mountain Reserve, Inc., the Court introduced the nature of the controversy test. We declared in this case that it is not the mere existence of an intra-corporate relationship that gives rise to an intra-corporate controversy; to rely on the relationship test alone will divest the regular courts of their jurisdiction for the sole reason that the dispute involves a corporation, its directors, officers, or stockholders. We saw that there is no legal sense in disregarding or minimizing the value of the nature of the transactions which gives rise to the dispute. Under the nature of the controversy test, the incidents of that relationship must also be considered for the purpose of ascertaining whether the controversy itself is intra-corporate. The controversy must not only be rooted in the existence of an intra-corporate relationship, but must as well pertain to the enforcement of the parties' correlative rights and obligations under the Corporation Code and the internal and intra-corporate regulatory rules of the corporation.

If the relationship and its incidents are merely incidental to the controversy or if there will still be conflict even if the relationship does not exist, then no intra-corporate controversy exists. The Court then combined the two tests and declared that jurisdiction should be determined by considering not only the status or relationship of the parties, but also the nature of the question under controversy. This two-tier test was adopted in the recent case of Speed Distribution, Inc. v. Court of Appeals: 'To determine whether a case involves an intracorporate controversy, and is to be heard and decided by the branches of the RTC specifically designated by the Court to try and decide such cases, two elements must concur: (a) the status or relationship of the parties, and [b] the nature of the question that is the subject of their controversy.1wphi1 The first element requires that the controversy must arise out of intra-corporate or partnership relations between any or all of the parties and the corporation, partnership, or association of which they are stockholders, members or associates, between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership, or association and the State insofar as it concerns the individual franchises. The second element requires that the dispute among the parties be intrinsically connected with the regulation of the corporation. If the nature of the controversy involves matters that are purely civil in character, necessarily, the case does not involve an intra-corporate controversy.' (Citations and some emphases omitted; emphases supplied.) Thus, to be considered as an intra-corporate dispute, the case: (a) must arise out of intra-corporate or partnership relations, and (b) the nature of the question subject of the controversy must be such that it is intrinsically connected with the regulation of the corporation or the enforcement of the parties rights and obligations under the Corporation Code and the internal regulatory rules of the corporation. So long as Page 25 of 31

these two criteria are satisfied, the dispute is intracorporate and the RTC, acting as a special commercial court, has jurisdiction over it. Examining the case before us in relation to these two criteria, the Court finds and so holds that the case is essentially an intra-corporate dispute. It obviously arose from the intra-corporate relations between the parties, and the questions involved pertain to their rights and obligations under the Corporation Code and matters relating to the regulation of the corporation. We further hold that the nature of the case as an intra-corporate dispute was not affected by the subsequent dissolution of the corporation. It bears reiterating that Section 145 of the Corporation Code protects, among others, the rights and remedies of corporate actors against other corporate actors. The statutory provision assures an aggrieved party that the corporations dissolution will not impair, much less remove, his/her rights or remedies against the corporation, its stockholders, directors or officers. It also states that corporate dissolution will not extinguish any liability already incurred by the corporation, its stockholders, directors, or officers. In short, Section 145 preserves a corporate actors cause of action and remedy against another corporate actor. In so doing, Section 145 also preserves the nature of the controversy between the parties as an intra-corporate dispute. The dissolution of the corporation simply prohibits it from continuing its business. However, despite such dissolution, the parties involved in the litigation are still corporate actors. The dissolution does not automatically convert the parties into total strangers or change their intra-corporate relationships. Neither does it change or terminate existing causes of action, which arose because of the corporate ties between the parties. Thus, a cause of action involving an intracorporate controversy remains and must be filed as an intra-corporate dispute despite the subsequent dissolution of the corporation. WHEREFORE, premises considered, the Petition for Review on Certiorari is PARTIALLY GRANTED. The

assailed June 29, 2005 Decision of the Court of Appeals in CA-G.R. SP No. 87293, as well as its December 16, 2005 Resolution, are ANNULLED with respect to their dismissal of SEC Case No. 04-111077 on the ground of lack of jurisdiction. The said case is ordered REINSTATED before Branch 24 of the Regional Trial Court of Manila. The rest of the assailed issuances are AFFIRMED. SO ORDERED.

5)

G.R. No. 174385 February 20, 2013 REPUBLIC OF THE PHILIPPINES, Petitioner, vs. HON. RAMON S. CAGUIOA, Presiding Judge, Branch 74, Regional Trial Court, Third Judicial Region, Olongapo City, META TRANS TRADING INTERNATIONAL CORPORATION, and HUNDRED YOUNG SUBIC INTERNATIONAL, INC., Respondents.

We resolve in this petition for certiorari and prohibition 1 (the present petition) the challenge to the August 11, 2005 and July 5, 2006 orders2 of respondent Judge Ramon S. Caguioa, Regional Trial Court (RTC) of Olongapo City, Branch 74, in Civil Case No. 102-0-05. The August 11, 2005 order granted the motion to intervene filed by private respondents Metatrans Trading International Corporation and Hundred Young Subic International, Inc., while the July 5, 2006 order denied the motion for reconsideration and the motion to suspend the proceedings filed by the petitioner Republic of the Philippines (Republic). The Factual Antecedents On March 14, 2005,3 Indigo Distribution Corporation and thirteen other petitioners (collectively referred to as lower court petitioners) filed before the respondent judge a petition for declaratory relief with prayer for temporary restraining order (TRO) and preliminary mandatory injunction4 against the Honorable Secretary of Finance, et al. The petition sought to Page 26 of 31

nullify the implementation of Section 6 of Republic Act (R.A.) No. 9334, otherwise known as "AN ACT INCREASING THE EXCISE TAX RATES IMPOSED ON ALCOHOL AND TOBACCO PRODUCTS, AMENDING FOR THE PURPOSE SECTIONS 131, 141, 142, 143, 144, 145 AND 288 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED," as unconstitutional. Section 6 of R.A. No. 9334, in part, reads: SEC. 6. Section 131 of the National Internal Revenue Code of 1997, as amended, is hereby amended to read as follows: SEC. 131.Payment of Excise Taxes on Imported Articles. (A) Persons Liable. x xx. x xxx The provision of any special or general law to the contrary notwithstanding, the importation of cigars and cigarettes, distilled spirits, fermented liquors and wines into the Philippines, even if destined for tax and duty-free shops, shall be subject to all applicable taxes, duties, charges, including excise taxes due thereon. This shall apply to cigars and cigarettes, distilled spirits, fermented liquors and wines brought directly into the duly chartered or legislated freeports of the Subic Special Economic and Freeport Zone, created under Republic Act No. 7227; the Cagayan Special Economic Zone and Freeport, created under Republic Act No. 7922; and the Zamboanga City Special Economic Zone, created under Republic Act No. 7903, and such other freeports as may hereafter be established or created by law: Provided, further, That importations of cigars and cigarettes, distilled spirits, fermented liquors and wines made directly by a government- owned and operated duty-free shop, like the Duty-Free Philippines (DFP), shall be exempted from all applicable duties only[.] [emphasis ours; italics supplied] The lower court petitioners are importers and traders duly licensed to operate inside the Subic Special Economic and Freeport Zone (SSEFZ).

By way of background, Congress enacted, in 1992, R.A. No. 7227, otherwise known as "The BASES CONVERSION AND DEVELOPMENT ACT OF 1992," which provided, among others, for the creation of the SSEFZ, as well as the Subic Bay Metropolitan Authority (SBMA). Pursuant to this law, the SBMA granted the lower court petitioners Certificates of Registration and Tax Exemption. The certificates allowed them to engage in the business of import and export of general merchandise (including alcohol and tobacco products) and uniformly granted them tax exemptions for these importations. On January 1, 2005, Congress passed R.A. No. 9334. Based on Section 6 of R.A. No. 9334, the SBMA issued a Memorandum on February 7, 2005 directing its various departments to require importers in the SSEFZ to pay the applicable duties and taxes on their importations of tobacco and alcohol products before these importations are cleared and released from the freeport. The memorandum prompted the lower court petitioners to bring before the RTC their petition for declaratory relief (Civil Case No. 102-0- 05). The petition included a prayer for the issuance of a writ of preliminary injunction and/or a TRO to enjoin the Republic (acting through the SBMA) from enforcing the challenged memorandum. On May 4, 2005,5 the respondent judge granted the lower court petitioners application for preliminary injunction despite the Republics opposition, and on May 11, 2005, he issued the preliminary injunction. The Republic filed before this Court a petition for certiorari and prohibition docketed in this Court as G.R. No. 168584 to annul the respondent judges order and the writ issued pursuant to this order. The petition asked for the issuance of a TRO and/or a writ of preliminary injunction. By motion dated July 21, 2005 filed before the lower court, the Republic asked the respondent judge to suspend the proceedings pending the resolution of G.R. No. 168584. On August 5, 2005, the private respondents (in the present petition now before us) filed before the respondent judge motions for leave to intervene and Page 27 of 31

to admit complaints-in-intervention. They also asked in these motions that the respondent judge extend to them the effects and benefits of his May 4, 2005 order, in the lower court petitioners favor, and the subsequently issued May 11, 2005 writ of preliminary mandatory injunction. Without acting on the Republics motion to suspend the proceedings, the respondent judge granted on August 11, 2005 the private respondents motions and complaints-in-intervention. The respondent judge found the private respondents to be similarly situated as the lower court petitioners; they stood, too, to be adversely affected by the implementation of R.A. No. 9334.

hearing, nor any copy of the questioned motions and complaints-in-intervention.7 Further, the Republic posits that the respondent judge abused his discretion when he extended to the private respondents the benefits of the preliminary injunction earlier issued to the lower court petitioners under the same P1,000,000.00 bond the lower court petitioners posted. The Republic labels this action as a violation of Section 4, Rule 58 of the Rules of Court, claiming at the same time that the bond is manifestly disproportionate to the resulting damage the Republic stood to incur considering the number of the original and the additional lower court petitioners.8 Finally, in support of its prayer for the issuance of a TRO and/or a writ of preliminary injunction, the Republic stresses that the assailed orders continue to cause it multi-million tax losses. It justifies its prayer for the respondent judges inhibition by pointing to the latters act of continuously allowing parties to intervene despite the absence of notice and to the inclusion of non-parties to the original case. During the pendency of the present petition, the Court en banc partially granted the Republics petition in G.R. No. 168584. By a Decision9 dated October 15, 2007, this Court set aside and nullified the respondent judges order of May 4, 2005 and the subsequent May 11, 2005 writ of preliminary injunction. On January 15, 2008, the Court denied with finality the lower court petitioners motion for reconsideration.10 The Respondents Position In their defense, the private respondents point to the procedural defects in the petition, specifically: first, the petition was filed out of time, arguing that the Republic only had 53 remaining days to file the petition from notice of the denial of its motion for reconsideration, maintaining that the 60-day period within which to file the petition is counted from the notice of the denial of the August 11, 2005 order; second, the petition did not comply with the rules on proof of filing and service; third, the Republic failed to properly serve their counsel of record a copy of the Page 28 of 31

The Republic moved to reconsider6 the respondent judges August 11, 2005 order, arguing that it had been denied due process because it never received copies of the private respondents motions and complaints-inintervention. On July 5, 2006, the respondent judge denied the Republics motion for reconsideration and the previously filed motion to suspend the proceedings. The respondent judge held that all of the parties in the case had been duly notified per the records. To justify the denial of the motion to suspend the proceedings, the respondent judge pointed to the absence of any restraining order in G.R. No. 168584. The Republic responded to the respondent judges actions by filing the present petition. The Petition The present petition charges that the respondent judge acted with manifest partiality and with grave abuse of discretion when he issued his August 11, 2005 and July 5, 2006 orders. In particular, the Republic contends that the respondent judge violated its right to due process when he peremptorily allowed the private respondents motions and complaints-inintervention and proceeded with their hearing ex parte despite the absence of any prior notice to it. The Republic maintains that it never received any notice of

petition; and fourth, the Republic did not observe the hierarchy of courts in filing the instant petition.11 The private respondents further contend that the respondent judge correctly allowed their complaintsin-intervention as the matter of intervention is addressed to the courts discretion; as noted in the assailed orders, the records show that the notice of hearing was addressed to all of the parties in the original case.12 Finally, on the Republics prayer for prohibition, the private respondents maintain that prohibition is improper since this Court, in G.R. No. 168584, denied the Republics prayer for a writ of prohibition, noting that the respondent judge had been suspended, pending resolution of this petition.13 The Courts Ruling We resolve to PARTLY GRANT the petition. Relaxation of procedural rules for compelling reasons We disagree with the private respondents procedural objections. First, we find that the present petition was filed within the reglementary period. Contrary to the private respondents position, the 60- day period within which to file the petition for certiorari is counted from the Republics receipt of the July 5, 2006 order denying the latters motion for reconsideration. Section 4, Rule 65 of the Rules of Court is clear on this point "In case a motion for reconsideration or new trial is timely filed, whether such motion is required or not, the sixty (60) day period shall be counted from notice of the denial of said motion."14 We find too that the present petition complied with the rules on proof of filing and service of the petition. Attached to the petition in compliance with Sections 12 and 13, Rule 13 of the Rules of Court are the registry receipts and the affidavit of the person who filed and served the petition by registered mail. Second, while the principle of hierarchy of courts does indeed require that recourses should be made to the

lower courts before they are made to the higher courts,15 this principle is not an absolute rule and admits of exceptions under well-defined circumstances. In several cases, we have allowed direct invocation of this Courts original jurisdiction to issue writs of certiorari on the ground of special and important reasons clearly stated in the petition;16 when dictated by public welfare and the advancement of public policy; when demanded by the broader interest of justice; when the challenged orders were patent nullities;17 or when analogous exceptional and compelling circumstances called for and justified our immediate and direct handling of the case.18 The Republic claims that the respondent judge violated and continues to violate its right to due process by allowing the private respondents and several others to intervene in the case sans notice to the Republic; by extending to them the benefit of the original injunction without the requisite injunction bond applicable to them as separate injunction applicants; and by continuing to suspend the Republics right to collect excise taxes from the private respondents and from the lower court petitioners, thus adversely affecting the governments revenues. To our mind, the demonstrated extent of the respondent judges actions and their effects constitute special and compelling circumstances calling for our direct and immediate attention. Lastly, under our rules of procedure,19 service of the petition on a party, when that party is represented by a counsel of record, is a patent nullity and is not binding upon the party wrongfully served.20 This rule, however, is a procedural standard that may admit of exceptions when faced with compelling reasons of substantive justice manifest in the petition and in the surrounding circumstances of the case.21 Procedural rules can bow to substantive considerations through a liberal construction aimed at promoting their objective of securing a just, speedy and inexpensive disposition of every action and proceeding.22 The Republic has consistently and repeatedly maintained that it never received a copy of the motions and complaints-in-intervention, as evidenced Page 29 of 31

by the certification of the Docket Division of the Office of the Solicitor General (OSG); it learned of the private respondents presence in this case only after it received copies of the assailed orders, and it even had to inquire from the lower court for the private respondents addresses. Although their counsels did not formally receive any copy of the petition, the private respondents themselves admitted that they received their copy of the present petition. The records show that the Republic subsequently complied with the rules on service when, after the private respondents comment, the Republic served copies of its reply and memorandum to the respondents counsel of record. Under these circumstances, we are satisfied with the Republics explanation on why it failed to initially comply with the rule on service of the present petition; its subsequent compliance with the rule after being informed of the presence of counsels of record sufficiently warrants the rules relaxed application.23 The lack of a proper service unlike the situation when the Republic was simply confronted with already-admitted complaints-in-intervention did not result in any prejudice; the private respondents themselves were actually served with, and duly received, their copies of the present petition, allowing them to comment and to be heard on the petition. The Republic was denied due process; the respondent judge issued the assailed orders with grave abuse of discretion Due process of law is a constitutionally guaranteed right reserved to every litigant.1wphi1 Even the Republic as a litigant is entitled to this constitutional right, in the same manner and to the same extent that this right is guaranteed to private litigants. The essence of due process is the opportunity to be heard, logically preconditioned on prior notice, before judgment is rendered.24 A motion for intervention, like any other motion, has to comply with the mandatory requirements of notice and hearing, as well as proof of its service,25 save only for those that the courts can act upon without

prejudice to the rights of the other parties.26 A motion which fails to comply with these requirements is a worthless piece of paper that cannot and should not be acted upon.27 The reason for this is plain: a movant asks the court to take a specific course of action, often contrary to the interest of the adverse party and which the latter must then be given the right and opportunity to oppose.28 The notice of hearing to the adverse party thus directly services the required due process as it affords the adverse party the opportunity to properly state his agreement or opposition to the action that the movant asks for.29 Consequently, our procedural rules provide that a motion that does not afford the adverse party this kind of opportunity should simply be disregarded.30 The notice requirement is even more mandatory when the movant asks for the issuance of a preliminary injunction and/or a TRO. Under Section 5, Rule 58 of the Rules of Court, no preliminary injunction shall be granted without a hearing and without prior notice to the party sought to be enjoined. The prior notice under this requirement is as important as the hearing, as no hearing can meaningfully take place, with both parties present or represented, unless a prior notice of the hearing is given. Additionally, in the same way that an original complaint must be served on the defendant, a copy of the complaint-in-intervention must be served on the adverse party with the requisite proof of service duly filed prior to any valid court action. Absent these or any reason duly explained and accepted excusing strict compliance, the court is without authority to act on such complaint; any action taken without the required service contravenes the law and the rules, and violates the adverse partys basic and constitutional right to due process. In the present case, records show that the OSG had never received contrary to the private respondents claim a copy of the motions and complaints-inintervention.31 The Republic duly and fully manifested the irregularity before the respondent judge.32 Thus, the mere statement in the assailed orders that the parties were duly notified is insufficient on the face of Page 30 of 31

the appropriate manifestation made and the supporting proof that the Republic submitted. In these lights, the motions and complaints-in-intervention cannot but be mere scraps of paper that the respondent judge had no reason to consider; in admitting them despite the absence of prior notice, the respondent judge denied the Republic of its right to due process. While we may agree with the private respondents claim that the matter of intervention is addressed to the sound discretion of the court,33 what should not be forgotten is the requirement that the exercise of discretion must in the first place be "sound." In other words, the basic precepts of fair play and the protection of all interests involved must always be considered in the exercise of discretion. Under the circumstances of the present case, these considerations demand that the original parties to the action, which include the Republic, must have been properly informed to give them a chance to protect their interests. These interests include, among others, the protection of the Republics revenue-generating authority that should have been insulated against damage through the filing of a proper bond. Thus, even from this narrow view that does not yet consider the element of fair play, the private respondents case must fail; judicial discretion cannot override a party litigants right to due process. All told, the respondent judge acted with grave abuse of discretion warranting the issuance of the corrective writ of certiorari. Grave abuse of discretion arises when a lower court or tribunal violates the Constitution or grossly disregards the law or existing jurisprudence.34 The term refers to such capricious and whimsical exercise of judgment equivalent to lack of jurisdiction, as when the act amounts to an evasion of a positive duty or to a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of law .35 The respondent judge so acted so that the orders he issued should be declared void and of no effect. Petition for prohibition and prayer for inhibition are denied for having been mooted by subsequent events

On November 9, 2006, the Republic filed an administrative case against the respondent judge for gross ignorance of the law, manifest partiality and conduct prejudicial to the best interest of the service. The case, docketed as A.M. No. RTJ-07-2063, is likewise related to Civil Case No. 102-0-05 that underlie the present petition. By a decision dated June 26, 2009, and while this case was still pending, this Court found the respondent judge guilty of gross ignorance of the law and conduct prejudicial to the best interest of the service. The Court accordingly dismissed the respondent judge from the service. In light of these supervening events, the Court sees no reason to resolve the other matters raised in this petition for being moot. WHEREFORE, under these premises, we PARTIALLY GRANT the petition. We GRANT the writ of certiorari and accordingly SET ASIDE the orders dated August 11, 2005 and July 5, 2006 of respondent Judge Ramon S. Caguioa in Civil Case No. 102-0-05 for being NULL and VOID. We DISMISS the prayer for writ of prohibition on the ground of mootness. Costs against Metatrans Trading International Corporation and Hundred Young Subic International, Inc.So ordered.

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