September 9, 2015
dismissal case he filed against Watercraft which had been decided
G.R. No. 181721
WATERCRAFT VENTURE CORPORATION, represented by its Vice-
President, ROSARIO E. RANOA, Petitioners,
vs.
ALFRED RAYMOND WOLFE, Respondent.
DECISION
PERALTA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules
of Court, seeking to reverse and set aside the Court of Appeals
(CA) Resolution1 dated January 24, 2008 denying the motion for
reconsideration of its Decision2 dated September 27, 2007 in CA-
G.R. SP No. 97804.
The facts are as follows:
Petitioner Watercraft Venture Corporation (Watercraft) is engaged
in the business of building, repairing, storing and maintaining
yachts, boats and other pleasure crafts at the Subic Bay Freeport
Zone, Subic, Zambales. In connection with its operations and
maintenance of boat storage facilities, it charges a boat storage
fee of Two Hundred Seventy-Two US Dollars (US$272.00) per
month with interest of 4% per month for unpaid charges.
Sometime in June 1997, Watercraft hired respondent Alfred
Raymond Wolfe (Wolfe), a British national and resident of Subic
Bay Freeport Zone, Zambales, as its Shipyard Manager.
During his empolyment, Wolfe stored the sailboat, Knotty Gull,
within Watercraft's boat storage facilities, but never paid for the
storage fees.
On March 7, 2002, Watercraft terminated the employment of
Wolfe.
Sometime in June 2002, Wolfe pulled out his sailboat from
Watercraft's storage facilities after signing a Boat Pull-Out
Clearance dated June 29, 2002 where he allegedly acknowledged
the outstanding obligation of Sixteen Thousand Three Hundred
and Twenty-Four and 82/100 US Dollars (US$16,324.82)
representing unpaid boat storage fees for the period of June 1997
to June 2002. Despite repeated demands, he failed to pay the said
amount.
Thus, on July 7, 2005, Watercraft filed against Wolfe a Complaint
for Collection of Sum of Money with Damages with an Application
for the Issuance of a Writ of Preliminary Attachment. The case was
docketed as Civil Case No. 4534-MN, and raffled to Branch 1703 of
the Regional Trial Court (RTC) of Malabon City.
In his Answer, Wolfe claimed he was hired as Service and Repair
Manager, instead of Shipyard Manager. He denied owing
Watercraft the amount of US$16,324.82 representing storage fees
for the sailboat. He explained that the sailboat was purchased in
February 1998 as part of an agreement between him and
Watercraft's then General Manager, Barry Bailey, and its President,
Ricky Sandoval, for it to be repaired and used as training or fill-in
project for the staff, and to be sold later on. He added that
pursuant to a central Listing Agreement for the sale of the sailboat,
he was appointed as agent, placed in possession thereof and
entitled to a ten percent (10%) sales commission. He insisted that
nowhere in the agreement was there a stipulation that berthing
and storage fees will be charged during the entire time that the
sailboat was in Watercraft's dockyard. Thus, he claimed to have
been surprised when he received five (5) invoices billing him for
the said fees two (2) months after his services were terminated. He
pointed out that the complaint was an offshoot of an illegal
in his favor by the Labor Arbiter.
Meanwhile, finding Watercraft's ex-parte application for writ of
preliminary attachment sufficient in form and in substance
pursuant to Section 1 of Rule 57 of the Rules of Court, the RTC
granted the same in the Order dated July 15, 2005, thus:
WHEREFORE, let a Writ of Preliminary Attachment be issued
accordingly in favor of the plaintiff, Watercraft Ventures
Corporation conditioned upon the filing of attachment bond in the
amount of Three Million Two Hundred Thirty-One Thousand Five
Hundred and Eighty-Nine and 25/100 Pesos (Php3,231,589.25) and
the said writ be served simultaneously with the summons, copies
of the complaint, application for attachment, applicant's affidavit
and bond, and this Order upon the defendant.
SO ORDERED.4
Pursuant to the Order dated July 15, 2005, the Writ of Attachment
dated August 3, 2005 and the Notice of Attachment dated August
5, 2005 were issued, and Wolfe's two vehicles, a gray Mercedes
Benz with plate number XGJ 819 and a maroon Toyota Corolla with
plate number TFW 110, were levied upon.
On August 12, 2005, Wolfe's accounts at the Bank of the Philippine
Islands were also garnished.
By virtue of the Notice of Attachment and Levy dated September 5,
2005, a white Dodge pick-up truck with plate number XXL 111 was
also levied upon. However, a certain Jeremy Simpson filed a
Motion for Leave of Court to Intervene, claiming that he is the
owner of the truck as shown by a duly-notarized Deed of Sale
executed on August 4, 2005, the Certificate of Registration No.
3628665-1 and the Official Receipt No. 271839105.
On November 8, 2005, Wolfe filed a Motion to Discharge the Writ
of Attachment, arguing that Watercraft failed to show the
existence of fraud and that the mere failure to pay or perform an
obligation does not amount to fraud. He also claimed that he is not
a flight risk for the following reasons: (1) contrary to the claim that
his Special Working Visa expired in April 2005, his Special Subic
Working Visa and Alien Certificate of Registration are valid until
April 25, 2007 and May 11, 2006, respectively; (2) he and his family
have been residing in the Philippines since 1997; (3) he is an
existing stockholder and officer of Wolfe Marine Corporation
which is registered with the Securities and Exchange Commission,
and a consultant of "Sudeco/Ayala" projects in Subic, a member of
the Multipartite Committee for the new port development in
Subic, and the Subic Chamber of Commerce; and (4) he intends to
finish prosecuting his pending labor case against Watercraft. On
even date, Watercraft also filed a Motion for Preliminary Hearing
of its affirmative defenses of forum shopping, litis pendentia, and
laches.
In an Order dated March 20, 2006, the RTC denied Wolfe's Motion
to Discharge Writ of Attachment and Motion for Preliminary
Hearing for lack of merit.
Wolfe filed a motion for reconsideration, but the RTC also denied it
for lack of merit in an Order dated November 10, 2006. Aggrieved,
Wolfe filed a petition for certiorari before the CA.
The CA granted Wolfe's petition in a Decision dated September 27,
2007, the dispositive portion of which reads:
WHEREFORE, the Order dated March 20, 2006 and the Order
dated November 10, 2006 of respondent Judge are hereby
ANNULLED and SET ASIDE. Accordingly, the Writ of Attachment
issued on August 3, 2005, the Notice of Attachment dated August
5, 2005 and the Notice of Attachment and Levy dated September
5, 2005 are hereby also declared NULL and VOID, and private
respondent is DIRECTED to return to their owners the vehicles that
were attached pursuant to the Writ.
SO ORDERED.5
The CA ruled that the act of issuing the writ of preliminary
attachment ex-parte constitutes grave abuse of discretion on the
part of the RTC, thus:
x x x In Cosiquien [v. Court of Appeals], the Supreme Court held
that:
"Where a judge issues a fatally defective writ of preliminary
attachment based on an affidavit which failed to allege the
requisites prescribed for the issuance of the writ of preliminary
attachment, renders the writ of preliminary attachment issued
against the property of the defendant fatally defective. The judge
issuing it is deemed to have acted in excess of jurisdiction. In fact,
the defect cannot even be cured by amendment. Since the
attachment is a harsh and rigorous remedy which exposed the
debtor to humiliation and annoyance, the rule authorizing its
issuance must be strictly construed in favor of defendant. It is the
duty of the court before issuing the writ to ensure that all the
requisites of the law have been complied with. Otherwise, a judge
acquires no jurisdiction to issue the writ." (emphasis supplied)
In the instant case, the Affidavit of Merit executed by Rosario E.
Rañoa, Watercraft's Vice-President, failed to show fraudulent
intent on the part of Wolfe to defraud the company. It merely
enumerated the circumstances tending to show the alleged
possibility of Wolfe's flight from the country. And upon Wolfe's
filing of the Motion to Discharge the Writ, what the respondent
Judge should have done was to determine, through a hearing,
whether the allegations of fraud were true. As further held in
Cosiquien:
"When a judge issues a writ of preliminary attachment ex-parte, it
is incumbent on him, upon proper challenge of his order to
determine whether or not the same was improvidently issued. If
the party against whom the writ is prayed for squarely controverts
the allegation of fraud, it is incumbent on the applicant to prove
his allegation. The burden of proving that there indeed was fraud
lies with the party making such allegation. This finds support in
Section 1, Rule 131 Rules of Court. In this jurisdiction, fraud is
never presumed." (Emphasis supplied) As correctly noted by
Wolfe, although Sec. 1 of Rule 57 allows a party to invoke fraud as
a ground for the issuance of a writ of attachment, the Rules
require that in all averments of fraud, the circumstances
constituting fraud must be stated with particularity, pursuant to
Rule 8, Section 5. The Complaint merely stated, in paragraph 23
thereof that "For failing to pay the use [of] facilities and services –
in the form of boat storage fees, the Defendant is clearly guilty of
fraud which entitles the Plaintiff to a Writ of Preliminary
Attachment upon the property of the Defendant as security for the
satisfaction of any judgment herein." This allegation does not
constitute fraud as contemplated by law, fraud being the "generic
term embracing all multifarious means which human ingenuity can
devise, and which are resorted to by one individual to secure an
advantage over another by false suggestions or by suppression of
truth and includes all surprise, trick, cunning, dissembling and any
unfair way by which another is cheated." In this instance, Wolfe's
mere failure to pay the boat storage fees does not necessarily
amount to fraud, absent any showing that such failure was due to
[insidious] machinations and intent on his part to defraud
Watercraft of the amount due it.
As to the allegation that Wolfe is a flight risk, thereby warranting
the issuance of the writ, the same lacks merit. The mere fact that
Wolfe is a British national does not automatically mean that he
would leave the country at will. As Wolfe avers, he and his family
had been staying in the Philippines since 1997, with his daughters
studying at a local school. He also claims to be an existing
stockholder and officer of Wolfe Marine Corporation, a SEC-
registered corporation, as well as a consultant of projects in the
Subic Area, a member of the Multipartite Committee for the new
port development in Subic, and a member of the Subic Chamber of
Commerce. More importantly, Wolfe has a pending labor case
against Watercraft – a fact which the company glaringly failed to
mention in its complaint – which Wolfe claims to want to
prosecute until its very end. The said circumstances, as well as the
existence of said labor case where Wolfe stands not only to be
vindicated for his alleged illegal dismissal, but also to receive
recompense, should have convinced the trial court that Wolfe
would not want to leave the country at will just because a suit for
the collection of the alleged unpaid boat storage fees has been
filed against him by Watercraft.
Neither should the fact that Wolfe's Special Working Visa expired
in April 2005 lead automatically to the conclusion that he would
leave the country. It is worth noting that all visas issued by the
government to foreigners staying in the Philippines have expiration
periods. These visas, however, may be renewed, subject to the
requirements of the law. In Wolfe's case, he indeed renewed his
visa, as shown by Special Working Visa No. 05-WV-0124P issued by
the Subic Bay Metropolitan Authority Visa Processing Office on
April 25, 2005, and with validity of two (2) years therefrom.
Moreover, his Alien Certificate of Registration was valid up to May
11, 2006.
Based on the foregoing, it is therefore clear that the writ was
improvidently issued. It is well to emphasize that "[T]he rules on
the issuance of a writ of attachment must be construed strictly
against the applicants. This stringency is required because the
remedy of attachment is harsh, extraordinary and summary in
nature. If all the requisites for the granting of the writ are not
present, then the court which issues it acts in excess of its
jurisdiction. Thus, in this case, Watercraft failed to meet all the
requisites for the issuance of the writ. Thus, in granting the same,
respondent Judge acted with grave abuse of discretion.6
In a Resolution dated January 24, 2008, the CA denied Watercraft's
motion for reconsideration of its Decision, there being no new or
significant issues raised in the motion.
Dissatisfied with the CA Decision and Resolution, Watercraft filed
this petition for review on certiorari, raising these two issues:
I.
WHETHER THE EX-PARTE ISSUANCE OF THE
PRELIMINARY ATTACHMENT BY THE TRIAL
COURT IN FAVOR OF THE PETITIONER IS VALID.
II.
WHETHER THE ALLEGATIONS IN THE AFFIDAVIT
OF MERIT CONCERNING FRAUD ARE SUFFICIENT
TO WARRANT THE ISSUANCE OF A PRELIMINARY
WRIT OF ATTACHMENT BY THE
TRIAL COURT IN FAVOR OF THE PETITIONER.7
Watercraft argues that the CA erred in holding that the RTC
committed grave abuse of discretion in issuing the writ of
preliminary attachment, and in finding that the affidavit of merit
only enumerated circumstances tending to show the possibility of
Wolfe's flight from the country, but failed to show fraudulent
intent on his part mpany.
Stressing that its application for such writ was anchored on two (2)
grounds under Section 1,8 Rule 57, Watercraft insists that, contrary
to the CA ruling, its affidavit of merit sufficiently averred with
particularity the circumstances constituting fraud as a common
element of said grounds.
Watercraft points out that its affidavit of merit shows that from
1997, soon after Wolfe's employment as Shipyard Manager, up to
2002, when his employment was terminated, or for a period of five
(5) years, not once did he pay the cost for the use of the
company's boat storage facilities, despite knowledge of obligation
and obvious ability to pay by reason of his position.
Watercraft adds that its affidavit clearly stated that Wolfe, in an
attempt to avoid settling of his outstanding obligations to the
company, signed a Boat Pull-Out Clearance where he merely
acknowledged but did not pay Sixteen Thousand Three Hundred
and Twenty-Four and 82/100 US Dollars (US$16,324.82)
representing unpaid boat storage fees for the period commencing
June 1997 to June 2002. It avers that the execution of such
clearance enabled Wolfe to pull out his boat from the company
storage facilities without payment of storage fees.
Watercraft also faults the CA in finding no merit in its allegation
that Wolfe is a flight risk. It avers that he was supposed to stay and
work in the country for a limited period, and will eventually leave;
that despite the fact that his wife and children reside in the
country, he can still leave with them anytime; and that his work in
the country will not prevent him from leaving, thereby defeating
the purpose of the action, especially since he had denied
responsibility for his outstanding obligations. It submits that the
CA overlooked paragraph 28 of its Complaint which alleged that
"[i]n support of the foregoing allegations and the prayer for the
issuance of a Writ of Preliminary Attachment in the instant case,
the Plaintiff has attached hereto the Affidavit of the Vice-President
of the Plaintiff, MS. ROSARIO E. RAÑOA x x x."9
Watercraft asserts that it has sufficiently complied with the only
requisites for the issuance of the writ of preliminary attachment
under Section 3, Rule 57 of the Rules of Court, i.e., affidavit of
merit and bond of the applicant. It posits that contrary to the CA
ruling, there is no requirement that evidence must first be offered
before a court can grant such writ on the basis of Section 1 (d) of
Rule 57, and that the rules only require an affidavit showing that
the case is one of those mentioned in Section 1, Rule 57. It notes
that although a party is entitled to oppose an application for the
issuance of the writ or to move for the discharge thereof by
controverting the allegations of fraud, such rule does not apply
when the same allegations constituting fraud are the very facts
disputed in the main action, as in this case.
Watercraft also points out the inconsistent stance of Wolfe with
regard to the ownership and possession of the sailboat. Contrary
to Wolfe's Answer that the purchase of the sailboat was made
pursuant to a three (3)-way partnership agreement between him
and its General Manager and Executive Vice-President, Barry
Bailey, and its President, Ricky Sandoval, Watercraft claims that he
made a complete turnaround and exhibited acts of soleownership
by signing the Boat Pull-Out Clearance in order to retrieve the
sailboat. It argues that common sense and logic would dictate that
he should have invoked the existence of the partnership to answer
the demand for payment of the storage fees.
Watercraft contends that in order to pre-empt whatever action it
may decide to take with respect to the sailboat in relation to his
liabilities, Wolfe accomplished in no time the clearance that paved
the way for its removal from the company's premises without
paying his outstanding obligations. It claims that such act reveals a
fraudulent intent to use the company storage facilities without
payment of storage fees, and constitutes unjust enrichment.
The petition lacks merit.
A writ of preliminary attachment is defined as a provisional
remedy issued upon order of the court where an action is pending
to be levied upon the property or properties of the defendant
therein, the same to be held thereafter by the sheriff as security
for the satisfaction of whatever judgment that might be secured in
the said action by the attaching creditor against the
defendant.10 However, it should be resorted to only when
necessary and as a last remedy because it exposes the debtor to
humiliation and annoyance.11 It must be granted only on concrete
and specific grounds and not merely on general averments quoting
the words of the rules.12 Since attachment is harsh, extraordinary,
and summary in nature,13 the rules on the application of a writ of
attachment must be strictly construed in favor of the defendant.
the court14 in which the action is pending. Such bond executed to
the adverse party in the amount fixed by the court is subject to the
conditions that the applicant will pay: (1) all costs which may be
adjudged to the adverse party; and (2) all damages which such
party may sustain by reason of the attachment, if the court shall
finally adjudge that the applicant was not entitled thereto.15 As to
the requisite affidavit of merit, Section 3,16 Rule 57of the Rules of
Court states that an order of attachment shall be granted only
when it appears in the affidavit of the applicant, or of some other
person who personally knows the facts:
1. that a sufficient cause of action exists;
2. that the case is one of those mentioned in Section 117 hereof;
3. that there is no other sufficient security for the claim sought to
be enforced by the action; and
4. that the amount due to the applicant, or the value of the
property the possession of which he is entitled to recover, is as
much as the sum for which the order is granted above all legal
counterclaims.
The mere filing of an affidavit reciting the facts required by Section
3, Rule 57, however, is not enough to compel the judge to grant
the writ of preliminary attachment. Whether or not the affidavit
sufficiently established facts therein stated is a question to be
determined by the court in the exercise of its discretion.18 "The
sufficiency or insufficiency of an affidavit depends upon the
amount of credit given it by the judge, and its acceptance or
rejection, upon his sound discretion."19 Thus, in reviewing the
conflicting findings of the CA and the RTC on the pivotal issue of
whether or not Watercraft's affidavit of merit sufficiently
established facts which constitute as grounds upon which
attachment may be issued under Section 1 (a) 20 and (d),21 Rule 57,
the Court will examine the Affidavit of Preliminary Attachment22 of
Rosario E. Rañoa, its Vice-President, which reiterated the following
allegations in its complaint to substantiate the application for a
writ of preliminary attachment:
xxxx
4. Sometime in June 1997, the Defendant was hired as
Watercraft's Shipyard Manager.
5. Soon thereafter, the Defendant placed his sailboat, the Knotty
Gull, within the boat storage facilities of Watercraft for purposes of
storage and safekeeping.
6. Despite having been employed by Watercraft, the Defendant
was not exempted from paying Watercraft boat storage fees for
the use of the said storage facilities.
7. By virtue of his then position and employment with Watercraft,
the Defendant was very much knowledgeable of the foregoing
fact.
8. All throughout his employment with Watercraft, the Defendant
used the boat storage facilities of Watercraft for his Knotty Gull.
9. However, all throughout the said period of his employment, the
Defendant never paid the boat storage fees in favor of the Plaintiff.
10. The Defendant's contract of employment with Watercraft was
terminated on 07 March 2002.
11. [Sometime] thereafter, that is, in or about June 2002, the
Defendant pulled out the Knotty Gull from the boat storage
facilities of Watercraft.
12. Instead of settling in full his outstanding obligations concerning
unpaid storage fees before pulling our the Knotty Gull, the
Defendant signed a Boat Pull-Out Clearance dated 29 June 2002
wherein he merely acknowledged the then outstanding balance of
Sixteen Thousand Three Hundred and Twenty-four and 82/100 US
Dollars (US$16,324.82), representing unpaid boat storage fees for
the period commencing June 1997 to June 2002, that he owed
Watercraft.
13. By reason of Defendant's mere accomplishment of the said
Boat Pull-Out Clearance with acknowledgment of his outstanding
obligation to Watercraft in unpaid boat storage fees, Mr. Franz
Urbanek, then the Shipyard Manager who replaced the Defendant,
contrary to company policy, rules and regulations, permitted the
latter to physically pull out his boat from the storage facilities of
the Plaintiff without paying any portion of his outstanding
obligation in storage fees.
14. Several demands were then made upon the Defendant for him
to settle his outstanding obligations to the Plaintiff in unpaid
storage fees but the same went unheeded.
15. As of 02 April 2005, the outstanding obligation of the
Defendant to the Plaintiff in unpaid boat storage fees stands at
Three Million Two Hundred Thirty-One Thousand Five Hundred
and Eighty-Nine and 25/100 Pesos (Php 3,231,589.25) inclusive of
interest charges.
16. For failing to pay for the use [of] facilities and services—in the
form of boat storage facilities—duly enjoyed by him and for failing
and refusing to fulfill his promise to pay for the said boat storage
fees, the Defendant is clearly guilty of fraud which entitles the
Plaintiff to a Writ of Preliminary Attachment upon the property of
the Defendant as security for the satisfaction of any judgment in
its favor in accordance with the provisions of Paragraph (d),
Section 1, Rule 57 of the Rules of Court.
17. The instant case clearly falls under the said provision of law.
18. Furthermore, lawful factual and legal grounds exist which show
that the Defendant may have departed or is about to depart the
country to defraud his creditors thus rendering it imperative that a
Writ of Preliminary Attachment be issued in favor of the Plaintiff in
the instant case.
19. The possibility of flight on the part of the Defendant is
heightened by the existence of the following circumstances:
a. The Special Working Visa issued in favor of the Defendant
expired in April 2005;
b. The Defendant is a British national who may easily leave the
country at will;
c. The Defendant has no real properties and visible, permanent
business or employment in the Philippines; and
e. The house last known to have been occupied by the Defendant
is merely being rented by him.
20. All told, the Defendant is a very serious flight risk which fact
will certainly render for naught the capacity of the Plaintiff to
recover in the instant case.23
After a careful perusal of the foregoing allegations, the Court
agrees with the CA that Watercraft failed to state with particularity
the circumstances constituting fraud, as required by Section
5,24 Rule 8 of the Rules of Court, and that Wolfe's mere failure to
pay the boat storage fees does not necessarily amount to fraud,
absent any showing that such failure was due to insidious
machinations and intent on his part to defraud Watercraft of the
amount due it.
In Liberty Insurance Corporation v. Court of Appeals,25 the Court
explained that to constitute a ground for attachment in Section
1(d), Rule 57 of the Rules of Court, it must be shown that the
debtor in contracting the debt or incurring the obligation intended
to defraud the creditor. A debt is fraudulently contracted if at the
time of contracting it, the debtor has a preconceived plan or
intention not to pay. "The fraud must relate to the execution of
the agreement and must have been the reason which induced the
other party into giving consent which he would not have otherwise
given."26
Fraudulent intent is not a physical entity, but a condition of the
mind beyond the reach of the senses, usually kept secret, very
unlikely to be confessed, and therefore, can only be proved by
unguarded expressions, conduct and circumstances.27 Thus, the
applicant for a writ of preliminary attachment must sufficiently
show the factual circumstances of the alleged fraud because
fraudulent intent cannot be inferred from the debtor's mere non-
payment of the debt or failure to comply with his obligation. 28 The
particulars of such circumstances necessarily include the time,
persons, places and specific acts of fraud committed.29 An affidavit
which does not contain concrete and specific grounds is
inadequate to sustain the issuance of such writ. In fact, mere
general averments render the writ defective and the court that
ordered its issuance acted with grave abuse of discretion
amounting to excess of jurisdiction.30
In this case, Watercraft's Affidavit of Preliminary Attachment does
not contain specific allegations of other factual circumstances to
show that Wolfe, at the time of contracting the obligation, had a
preconceived plan or intention not to pay. Neither can it be
inferred from such affidavit the particulars of why he was guilty of
fraud in the performance of such obligation. To be specific,
Watercraft's following allegation is unsupported by any particular
averment of circumstances that will show why or how such
inference or conclusion was arrived at, to wit: "16. For failing to
pay for the use [of] facilities and services - in the form of boat
storage facilities – duly enjoyed by him and for failing and refusing
to fulfill his promise to pay for the said boat storage fees, the
Defendant is clearly guilty of fraud x x x." 31 It is not an allegation of
essential facts constituting Watercraft's causes of action, but a
mere conclusion of law.
With respect to Section 1 (a),32 Rule 57, the other ground invoked
by Watercraft for the issuance of the writ of preliminary
attachment, the Court finds no compelling reason to depart from
the CA's exhaustive ruling to the effect that such writ is
unnecessary because Wolfe is not a flight risk, thus:
As to the allegation that Wolfe is a flight risk, thereby warranting
the issuance of the writ, the same lacks merit. The mere fact that
Wolfe is a British national does not automatically mean that he
would leave the country at will. As Wolfe avers, he and his family
had been staying in the Philippines since 1997, with his daughters
studying at a local school. He also claims to be an existing
stockholder and officer of Wolfe Marine Corporation, a SEC-
registered corporation, as well as a consultant of projects in the
Subic Area, a member of the Multipartite Committee for the new
port development in Subic, and a member of the Subic Chamber of
Commerce. More importantly, Wolfe has a pending labor case
against Watercraft – a fact which the company glaringly failed to
mention in its complaint – which Wolfe claims to want to
prosecute until its very end. The said circumstances, as well as the
existence of said labor case where Wolfe stands not only to be
vindicated for his alleged illegal dismissal, but also to receive
recompense, should have convinced the trial court that Wolfe
would not want to leave the country at will just because a suit for
the collection of the alleged unpaid boat storage fees has been
filed against him by Watercraft.
Neither should the fact that Wolfe's Special Working Visa expired
in April 2005 lead automatically to the conclusion that he would
leave the country.1âwphi1 It is worth noting that all visas issued by
the government to
foreigner staying in the Philippines have expiration periods. These
visas, however, may be renewed, subject to the requirements of
the law. In Wolfe's case, he indeed renewed his visa, as shown by
Special Working Visa No. 05-WV-0124P issued by the Subic Bay
Metropolitan Authority Visa Processing Office on April 25, 2005,
and with validity of two (2) years therefrom. Moreover, his Alien
Certificate of Registration was valid up to May 11, 2006.33
Meanwhile, Watercraft's reliance on Chuidian v.
Sandiganbayan34 is misplaced. It is well settled that:
x x x when the preliminary attachment is issued upon a ground
which is at the same time the applicant's cause of action; e.g., "an
action for money or property embezzled or fraudulently
misapplied or converted to his own use by a public officer, or an
officer of a corporation, or an attorney, factor, broker, agent, or
clerk, in the course of his employment as such, or by any other
person in a fiduciary capacity, or for a willful violation of duty," or
"an action against a party who has been guilty of fraud in
contracting the debt or incurring the obligation upon which the
action is brought," the defendant is not allowed to file a motion to
dissolve the attachment under Section 13 of Rule 57 by offering to
show the falsity of the factual averments in the plaintiff's
application and affidavits on which the writ was based – and
consequently that the writ based thereon had been improperly or
irregularly issued – the reason being that the hearing on such a
motion for dissolution of the writ would be tantamount to a trial of
the merits of the action. In other words, the merits of the action
would be ventilated at a mere hearing of a motion, instead of at
the regular trial.35
Be that as it may, the foregoing rule is not applicable in this case
because when Wolfe filed a motion to dissolve the writ of
preliminary attachment, he did not offer to show the falsity of the
factual averments in Watercraft's application and affidavit on
which the writ was based. Instead, he sought the discharge of the
writ on the ground that Watercraft failed to particularly allege any
circumstance amounting to fraud. No trial on the merits of the
action at a mere hearing of such motion will be had since only the
sufficiency of the factual averments in the application and affidavit
of merit will be examined in order to find out whether or not
Wolfe was guilty of fraud in contracting the debt or incurring the
obligation upon which the action is brought, or in the performance
thereof.
Furthermore, the other ground upon which the writ of preliminary
attachment was issued by the RTC is not at the same time the
applicant's cause of action. Assuming arguendo that the RTC was
correct in issuing such writ on the ground that Watercraft's
complaint involves an action for the recovery of a specified
amount of money or damages against a party, like Wolfe, who is
about to depart from the Philippines with intent to defraud his
creditors, the Court stresses that the circumstances36 cited in
support thereof are merely allegations in support of its application
for such writ.37 Such circumstances, however, are neither the core
of Watercraft's complaint for collection of sum of money and
damages, nor one of its three (3) causes of action therein.38
All told, the CA correctly ruled that Watercraft failed to meet one
of the requisites for the issuance of a writ of preliminary
attachment, i.e., that the case is one of those mentioned in Section
1 of Rule 57, and that the RTC gravely abused its discretion in
improvidently issuing such writ. Watercraft failed to particularly
state in its affidavit of merit the circumstances constituting intent
to defraud creditors on the part of Wolfe in contracting or in the
performance of his purported obligation to pay boat storage fees,
as well as to establish that he is a flight risk. Indeed, if all the
requisites for granting such writ are not present, then the court
which issues it acts in excess of its jurisdiction.39
WHEREFORE, premises considered, the petition is DENIED. The
Court of Appeals Decision dated September 27, 2007 and its
Resolution dated January 24, 2008 in CA-G.R. SP No. 97804, are
AFFIRMED.
SO ORDERED.
G.R. No. 157163               June 25, 2014
BANK OF THE PHILIPPINE ISLANDS, Petitioner,
vs.
HON. JUDGE AGAPITO L. HONTANOSAS, JR., REGIONAL TRIAL
COURT, BRANCH 16, CEBU CITY, SILVERIO BORBON, SPOUSES
XERXES AND ERLINDA FACULTAD, AND XM FACULTAD &
DEVELOPMENT CORPORATION, Respondents.
DECISION
BERSAMIN, J.:
Injunction should not issue except upon a clear showing that the
applicant has a right in esse to be protected, and that the acts
sought to be enjoined are violative of such right. A preliminary
injunction should not determine the merits of a case, or decide
controverted facts, for, being a preventive remedy, it only seeks to
prevent threatened wrong, further injury, and irreparable harm or
injustice until the rights of the parties can be settled.
The Case
Under review at the instance of the defendant, now the petitioner
herein, is the decision promulgated on July 9, 2002, 1 whereby the
Court of Appeals (CA) upheld the order issuedon July 5, 2001 in
Civil Case No. CEB-26468 entitled Spouses Silverio & Zosima
Borbon, et al. v. Bank of the Philippine Islandsby the Regional Trial
Court (RTC), Branch 16, in Cebu City, presided by Hon. Judge
Agapito L. Hontanosas, Jr.
Antecedents
On May 22, 2001, respondents Spouses Silverio and Zosima
Borbon, Spouses Xerxes and Erlinda Facultad,and XM Facultad and
Development Corporation commenced Civil Case No. CEB-26468 to
seek the declaration of the nullity of the promissory notes,real
estate and chattel mortgages and continuing surety agreement
they had executed in favor of the petitioner. They further sought
damages and attorney’s fees, and applied for a temporary
restraining order (TRO) orwrit of preliminary injunction to prevent
the petitioner from foreclosing on the mortgages against their
properties.
The complaintalleged that the respondents had obtained a loan
from the petitioner, and had executed promissory notes binding
themselves, jointly and severally, to pay the sum borrowed; that as
security for the payment of the loan, they had constituted real
estate mortgages on several parcels of land in favor of the
petitioner; and that they had been made to sign a continuing
surety agreement and a chattel mortgage on their Mitsubishi
Pajero.
It appears that the respondents’obligation to the petitioner had
reached ₱17,983,191.49, but they had only been able to pay ₱13
Million because they had been adversely affected by the economic
turmoil in Asia in 1997. The petitioner required them to issue
postdated checks to cover the loan under threat of foreclosing on
the mortgages. Thus, the complaint sought a TRO or a writ of
preliminary injunction to stay the threatened foreclosure.
On June 6, 2001, the petitioner filed its answer with affirmative
defenses and counterclaim, as well as its oppositionto the issuance
of the writ of preliminary injunction, contending that the
foreclosure of the mortgages was within itslegal right to do.2
Also on June 6, 2001 the petitioner filed a motion to dismiss
reiterating its affirmative defenses, to wit:
I) THAT THE COMPLAINT SHOULD BE DISMISSED BECAUSE VENUE
IS IMPROPERLYLAID. (RULE 16, SECITON 1, PARAGRAPH (C);
II) THAT THE COURT HAS NOTACQUIRED JURISDICTION OVER THE
SUBJECT MATTER OFTHE CLAIM BECAUSE THE PROPER LEGAL FEES
HAS NOT BEEN PAID IN ACCORDANCE WITH RULE 14, OF THE
RULES OF COURT AND CIRCULAR NO. 7 OF THE SUPREME COURT,
SERIES OF 1988;
III) THAT ZOSIMA BORBON’S COMPLAINT SHOULD BE DISMISSED
BECAUSE PLAINTIFF ZOSIMA BORBON HAS NO LEGAL
PERSONALITY TO SUE BEING DECEASED, SPOUSE OF PLAINTIFF
SILVERIO BORBON. (RULE 16, SECTION 1(d);
IV) THAT THE ESTATE OF ZOSIMA BORBON BEING AN
INDISPENSABLE PARTY, THE COMPLAINT SHOULD BE AMENDED TO
INCLUDE THE ESTATE OF ZOSIMA BORBON. (RULE 16, SECTION 1(j);
V) THAT THE COMPLAINT OFPLAINTIFF XM FACULTAD AND
DEVELOPMENT CORPORATION, SHOULD BE DISMISSED BECAUSE
THERE IS NO BOARD RESOLUTION AUTHORIZING THE FILING OF
THIS CASE. [RULE 16, SECTION 1 (d)];
VI) THAT THE PLEADING ASSERTING THE CLAIM STATES NO CAUSE
OF ACTION.3
On July 5, 2001, the RTC denied the petitioner’s motion to
dismissfor being unmeritorious,4 but granted the respondents’
application for preliminary injunction,5 to wit:
WHEREFORE, premises considered, the application for preliminary
injunction is GRANTED. Upon filing by the plaintiffapplicants of a
bond in the amount of ₱2,000,000 in favor of defendant to the
effect that applicants will pay to adverse party all damages which it
may sustain by reason of the injunction, let a writ of preliminary
injunction be issued directing the defendant and its agents or
representatives, to cease and desist from commencing foreclosure
and sale proceedings of the mortgaged properties; from taking
possession of the Mitsubishi Pajero subject of the chattel
mortgage; and from using the questioned post-dated checks as
evidence for the filing of complaint against plaintiffs Facultad for
violation of Batas Pambansa Blg. 22, while the present case is
pending litigation.
This writ of preliminary injunction shall continue until further
orders from the Court.
Notify the parties of this Order.
SO ORDERED.6
The RTC later denied the petitioner’s motion for reconsideration
through its order7 of August 22, 2001.
Ruling of the CA
Dissatisfied, the petitioner assailed the orders of the RTC by
petition for certiorariin the CA, submitting the lone issue of:
WHETHER OR NOT THE PUBLIC RESPONDENT COMMITTED GRAVE
ABUSE OF DISCRETION WHEN IT ISSUED AN ORDER DENYING THE
MOTION TO DISMISS AND GRANTING THE WRIT OF PRELIMINARY
MANDATORY INJUNCTION.
On July 9, 2002, however, the CArendered the adverse decision
under review, to wit:
WHEREFORE, premises considered, the assailed order of the
Regional Trial Court (RTC) of Cebu City, Branch 16 dated July 5,
2001 and August 22, 2001 are hereby AFFIRMED. Let the original
records of this case be remanded immediately to the court a quo
for further proceedings. SO ORDERED.8
The CA held that the petitioner’s averment of non-payment of the
proper docket fee by the respondents asthe plaintiffs in Civil Case
No. CEB-26468 was not substantiated; that even if the correct
docket fee was not in fact paid, the strict application of the rule
thereon could be mitigated in the interest of justice;9 and that Civil
Case No. CEB-26468, being a personal action, was properly filed in
Cebu City where respondent XM Facultad and Development
Corporation’s principal office was located.10
The CA further held that ZosimaBorbon’s death rendered
respondent Silverio Borbon, her surviving spouse, the successor to
her estate; that although there was a valid transfer of interest
pending the litigation, the dismissal of the complaintwould not be
in order because it was permissible under the rules to continue the
action in the name of the original party;11 and that the RTC did not
commit grave abuse of discretion in issuing the writ of preliminary
injunction because it thereby only applied the pertinent law and
jurisprudence.12
The CA denied the petitioner’s motion for reconsiderationthrough
its resolution of February 12, 2003.13
Issues
Hence, this appeal, with the petitioner positing as follows:
1. Whether or not Civil Case No. CEB-26468 should be dismissed
for (a) non-payment of the correct amount of docket fee; and (b)
improper venue;14
2. Whether or not the issuance of the writ of preliminary
injunction against the petitioner, its agents and representatives,
was in order.
Ruling of the Court
The appeal is partly meritorious.
1. Civil Case No. CEB-26468 was a personal action; hence, venue
was properly laid
The CA and the RTC held that Civil Case No. CEB-26468, being for
the declaration of the nullity of a contract of loan and its
accompanying continuing surety agreement, and the real estate
and chattel mortgages, was a personal action; hence, its filing in
Cebu City, the place of business of one of the plaintiffs, was correct
under Section 2, Rule 4 of the Rules of Court.
The petitioner contends, however, that Civil Case No. CEB-26468
was a real action that should be commenced and tried in the
proper court having jurisdiction over the area wherein the real
property involved, or a portion thereof, was situated; and
thatconsequently the filing and docket fees for the
complaintshould be based on the value of the property as stated in
the certificate of sale attached thereto.
We sustain the lower courts’ holdings.
The determinants of whether an action is of a real or a personal
nature have been fixed by the Rules of Courtand relevant
jurisprudence. According to Section 1, Rule 4 of the Rules of Court,
a real action is one that affects title to or possession of real
property, or an interest therein. Such action is to be commenced
and tried in the proper court having jurisdiction over the area
wherein the real property involved, ora portion thereof, is
situated, which explains why the action is also referred to as a
localaction. In contrast, the Rules of Courtdeclares all other
actionsas personal actions.15 Such actions may include those
brought for the recovery of personal property, or for the
enforcement of some contract or recovery of damages for its
breach, or for the recovery of damages for the commission of an
injury to the person or property.16 The venue of a personal action
isthe place where the plaintiff or any of the principal plaintiffs
resides,or where the defendant or any of the principal defendants
resides, or in the case of a non-resident defendant where he may
be found, at the election of the plaintiff,17 for which reason the
action is considered a transitory one.
The complaintin Civil Case No. CEB-26468 pertinently alleged as
follows:18
xxxx
3.1 Plaintiffs signed blank pre-printed forms of promissory note no.
501253-000, continuing surety agreement, real estate mortgages,
chattel mortgage which violates the principle of mutuality of
contracts. These contracts are in the nature of contracts of
adhesion with provisions favouring defendant bank and plaintiffs
had nothing to do except to sign the unjust stipulations which
should be declared as NULL AND VOID. These contracts do not
reflect the real agreement of the parties and the stipulations are
tilted infavor of defendant bank.
3.2 Moreover, these real estate mortgages, chattel mortgages and
continuing surety agreement are securing specific amounts of
obligation and upon the payment of ₱13,000,000 to defendant
bank, automatically, these became functus de oficioand should be
released immediately without the encumbrance.
3.3 As the chattel mortgage involving the Mitsubishi Pajero
secured only ₱600,000.00, upon liquidation of more than
₱800,000.00 principal payment, the same became null and void,
and defendant bank should be ordered to cancel the mortgage and
to be directed not to take any appropriate action to take
possession.
3.4 In addition, Penbank Checks Nos. 11237 to 11242 with
amounts of ₱200,000.00 each and BPI Check Nos. 019098 &
019099 with amounts of ₱400,000.00 each, issued against the will
of plaintiffs Facultad and without any consideration, should be
declared null and void. Defendant bank should be directed not to
deposit the samefor collection with the drawee bank.
xxxx
3.6 Furthermore, the total obligation of plaintiffs is void and
baseless because it is based on illegal impositions of exorbitant
interest and excessive charges. Interest was converted into
principal which in turn earns interest. These illegal impositions are
considered by law and jurisprudence as null and void. These
excessive interest and charges should be applied to the principal
unless there isapplication, defendant bank is enriching itself at the
expense of plaintiffs. x x x x
Based on the aforequoted allegations of the complaintin Civil Case
No. CEB-26468, the respondents seek the nullification of the
promissory notes, continuing surety agreement, checks and
mortgage agreements for being executed against their will and
vitiated by irregularities, not the recovery of the possession or title
to the properties burdened by the mortgages. There was no
allegation that the possession of the properties under the
mortgages had already been transferred to the petitioner in the
meantime. Applying the determinants, Civil Case No. CEB-26468
was unquestionably a personal action, for, as ruled in Chua v. Total
Office Products and Services (Topros),Inc.:19
Well-settled is the rule that an action to annul a contract of loan
and its accessory real estate mortgageis a personal action. In a
personal action, the plaintiff seeks the recovery of personal
property, the enforcement of a contractor the recovery of
damages. In contrast, in a real action, the plaintiff seeks the
recovery of real property, or, as indicated in Section 2 (a), Rule 4 of
the then Rules of Court, a real action is an action affecting title to
real property or for the recovery of possession, or for partition or
condemnation of, or foreclosure of mortgage on, real property.
In the Pascual case, relied upon by petitioner, the contract of sale
of the fishpond was assailed as fictitious for lack of consideration.
We held that there being no contract to begin with, there is
nothing to annul. Hence, we deemed the action for annulment of
the said fictitious contract therein as one constituting a real action
for the recovery of the fishpond subject thereof.
We cannot, however, apply the foregoing doctrine to the instant
case. Note that in Pascual, title to and possession of the subject
fishpond had already passed to the vendee. There was, therefore,
a need to recover the said fishpond. But in the instant case,
ownership of the parcels of land subject of the questioned real
estatemortgage was never transferred to petitioner, but remained
with TOPROS. Thus, no real action for the recovery of real property
is involved. This being the case, TOPROS’ action for annulment of
the contracts of loan and real estate mortgage remains a personal
action.
xxxx
The Court of Appeals finds that Hernandez v. Rural Bank of Lucena,
Inc.provides the proper precedent in this case. In Hernandez,
appellants contended that the action of the Hernandez spouses for
the cancellation of the mortgage on their lots was a real action
affecting title to real property, which should have been filed in the
place where the mortgaged lots were situated. Rule 4, Section 2
(a), of the then Rules of Court, was applied, to wit:
SEC. 2. Venue in Courts of First Instance. – (a) Real actions. –
Actions affecting title to, or for recovery of possession, or for
partition or condemnation of, or foreclosure of mortgage on, real
property, shall be commenced and tried in the province where the
property or any part thereof lies.
The Court pointed out in the Hernandezcase that with respect to
mortgage, the rule on real actions only mentions an action for
foreclosure of a real estate mortgage. It does not include an action
for the cancellation of a real estate mortgage. Exclusio unios est
inclusio alterius. The latter thus falls under the catch-all provision
on personal actions under paragraph (b) of the above-cited
section, to wit:
SEC. 2 (b) Personal actions. – All other actions may be commenced
and tried where the defendant or any of the defendants resides or
may be found, or where the plaintiff or any of the plaintiffs resides,
at the election of the plaintiff.
In the same vein, the action for annulment of a real estate
mortgage in the present case must fall under Section 2 of Rule 4,
to wit:
SEC. 2. Venue of personal actions. – All other actions may be
commenced and tried where the plaintiff or any of the principal
plaintiffs resides, orwhere the defendant or any of the principal
defendants resides, or in the case of a nonresident defendant
where he may be found, at the election of the plaintiff.
Thus, Pasig City, where the parties reside, is the proper venue of
the action to nullify the subject loan and real estate mortgage
contracts. The Court of Appeals committed no reversible error in
upholding the orders of the Regional Trial Court denying
petitioner’s motion to dismiss the case on the ground of improper
venue.
Being a personal action, therefore, Civil Case No. CEB-26468 was
properly brought in the RTC in Cebu City, where respondent XM
Facultad and Development Corporation, a principal plaintiff, had
its address.
Upon the same consideration, the petitioner’s contention that the
filing and docket fees for the complaintshould be based on the
assessed values of the mortgaged real properties due to Civil Case
No. CEB-26468 being a real action cannot be upheld for lack of
factual and legal bases.
2. Respondents were not entitled to the writ of preliminary
injunction
In their application for the issuance of the writ of preliminary
injunction, the respondents averred that the nullity of the loan and
mortgage agreements entitled them to the relief of enjoining the
petitioner from: (a) foreclosing the real estateand chattel
mortgages; (b)taking possession, by replevin, of the Mitsubishi
Pajero; and (c) depositing the postdated checks; that respondents
Spouses Facultad would suffer injustice and irreparable injury
should the petitioner foreclose the mortgages and file criminal
complaints for violation of Batas Pambansa Blg.22 against them;
and that such threatened acts, if done, would render ineffectual
the judgment of the trial court.20 They prayed that the petitioner
be enjoined from doing acts that would disturb their material
possession of the mortgaged properties, manifesting their
willingness to post a bond for the issuance of the writ of
preliminary injunction.21
As mentioned, the RTC issued the writ of preliminary injunction on
July 16, 2001 based on the foregoing allegations of the
respondents’ application,22 and the CA upheld the issuance in its
assailed July 9, 2002 decision.23
The petitioner submits that the issuance of the writ of preliminary
injunction constituted a violation of Administrative Circular (AC)
No. 07-99 dated June 25, 1999, and thus subjected respondent
Judge to administrative sanction;24 that injunction could not issue
to enjoin the prosecution of the criminal offenses because such
prosecution was imbued with public interest;25 and that the
petitioner, as the mortgagee, could not be prohibited from
exercising its legal right to foreclose the mortgages because
foreclosure of the mortgages was its proper remedy under the
law.26
AC No. 07-99 was issued as a guideline for lower court judges in
the issuance of TROs and writs of preliminary injunctions to
prevent the implementation of infrastructure projects, or the
seizure and forfeiture proceedings by the Bureau of Customs, viz:
ADMINISTRATIVE CIRCULAR NO. 07-99 June 25,
1999
TO: ALL JUDGES OF LOWER COURTS RE:
EXERCISE OF UTMOST CAUTION, PRUDENCE,
AND JUDICIOUSNESS IN ISSUANCE OF
TEMPORARY RESTRAINING ORDERS AND WRITS
OF PRELIMINARY INJUNCTIONS
Despite well-entrenched jurisprudence and circulars regarding
exercise of judiciousness and care in the issuance of temporary
restraining orders (TRO) or grant of writs ofpreliminary injunction,
reports or complaints on abuses committed by trial judges in
connection therewith persist. Some even intimated
thatirregularities, including corruption, might have influenced the
issuance ofthe TRO or the writ of preliminary injunction.
No less than the President of the Philippines has requested this
Court to issue a circular reminding judges to respect P.D. No. 1818,
which prohibits the issuance of TROs in cases involving
implementation of government infrastructure projects. The Office
of the President has likewise brought to the attention of this Court
orders of judges releasing imported articles under seizure and
forfeiture proceedings by the Bureau of Customs.
Judges are thus enjoined to observe utmost caution, prudence and
judiciousness in the issuance of TRO and in the grant of writs of
preliminary injunction to avoid any suspicion that its issuance or
grant was for considerations other than the strict merits of the
case.
Judges should bear in mind that in Garcia v. Burgos(291 SCRA 546,
571-572 [1998]), this Court explicitly stated:
Sec. 1 of PD 1818 distinctly provides that "[n]o court in the
Philippines shall have jurisdiction to issue any restraining order,
preliminary injunction, or preliminary mandatory injunction in any
case, dispute, orcontroversy involvingan infrastructure project . . .
of the government, . . . to prohibit any person or persons, entity or
government official from proceeding with, or continuing the
execution or implementation of any such project . . . or pursuing
any lawful activity necessary for such execution, implementation
or operation." At the risk of being repetitious, we stress that the
foregoing statutory provision expressly deprives courts of
jurisdiction to issue injunctive writs against the implementation or
execution of an infrastructure project.
Their attention is further invited to Circular No. 68-94, issued on 3
November 1994 by the OCA OIC Deputy Court Administrator
Reynaldo L. Suarez, on the subject "Strict Observance of Section 1
of P.D. 1818 Envisioned by Circular No. 13-93 dated March 5, 1993,
and Circular No. 20-92 dated March 24, 1992.
Finally, judges should never forget what the Court categorically
declared in Mison v. Natividad(213 SCRA 734, 742 [1992] that "[b]y
express provision of law, amply supported by well-settled
jurisprudence, the Collector of Customs has exclusive jurisdiction
over seizure and forfeiture proceedings, and regular courts cannot
interfere with his exercise thereof or stifleor put it to naught."
The Office of the Court Administrator shall see to it that this
circular is immediately disseminated and shall monitor
implementation thereof.
STRICT OBSERVANCE AND COMPLIANCE of this Circular is hereby
enjoined.
AC No. 07-99 was irrelevant herein, however, because Civil Case
No. CEB-26468 did not involve the implementation of
infrastructure projects, or the seizure and forfeiture proceedings
by the Bureau of Customs. Consequently, the petitioner’s urging
that respondent Judge be held administratively liable for violating
AC No. 07-99 was misplaced.
However, the RTC’s issuance of the writ of preliminary injunction
to enjoin the petitioner from proceeding withthe foreclosure of
the mortgages was plainly erroneous and unwarranted.
A preliminary injunction is an order granted at any stage of an
action prior to the judgment or final order requiring a party or a
court, agency or a person to refrain from a particular act or
acts.27 It is the "strong arm of equity," an extraordinary
peremptory remedy that must be used with extreme caution,
affecting as it does the respective rights of the parties.28 The
requirements for the issuance of a writ of preliminary injunction or
TRO are enumerated in Section 3, Rule 58 of the Rules of Court, to
wit:
Section 3. Grounds for issuance of preliminary injunction. - A
preliminary injunction may be granted when it is established:
(a) That the applicant is entitled to the relief demanded, and the
whole or part of such relief consists in restraining the commission
or continuance of the act or acts complained of, or in requiring the
performance of an act or acts, eitherfor a limited period or
perpetually;
(b) That the commission, continuance or non-performance of the
act or acts complained of during the litigation would probably
work injustice to the applicant; or
(c) That a party, court, agency or a person is doing, threatening, or
is attempting to do, or is procuring or suffering to be done, some
act or acts probably in violation of the rights of the applicant
respecting the subject of the action or proceeding, and tending to
render the judgment ineffectual.
In City Government of Butuan v. Consolidated Broadcasting System
(CBS), Inc.,29 the Court restated the nature and concept of a writ of
preliminary injunction, as follows:
A preliminary injunction is an order granted at any stage of an
action or proceeding prior to the judgment orfinal order requiring
a party or a court, an agency, or a person to refrain from a
particular act or acts. It may also require the performance of a
particular act or acts, in which case it is known as a preliminary
mandatory injunction. Thus, a prohibitory injunction is one that
commands a party to refrain from doing a particular act, while a
mandatory injunction commands the performance of some
positive act to correct a wrong in the past.
As with all equitable remedies, injunction must be issued only at
the instance of a party who possesses sufficient interest in or title
to the right or the property sought to be protected. It is proper
only when the applicant appears to be entitled to the relief
demanded in the complaint, which must aver the existence of the
right and the violation of the right, or whose averments must in
the minimum constitute a prima facieshowing of a right to the final
relief sought. Accordingly, the conditions for the issuance of the
injunctive writ are: (a) that the right to be protected exists prima
facie; (b) that the act sought to be enjoined is violative of that
right; and (c) that there is an urgent and paramount necessity for
the writ to prevent serious damage. An injunction will not issue to
protect a right not in esse, or a right which is merely contingent
and may never arise; or to restrain an act which does not give rise
to a cause of action; or to prevent the perpetration of an act
prohibited bystatute. Indeed, a right, to be protected by
injunction, means a right clearly founded on or granted by law or is
enforceable as a matter of law. (Bold emphasis supplied)
Under the circumstances averred in the complaintin Civil Case No.
CEB-26468, the issuance ofthe writ of preliminary injunction upon
the application of the respondents was improper. They had
admittedly constituted the real estate and chattel mortgages to
secure the performance of their loan obligation to the petitioner,
and, as such, they were fully aware of the consequences on their
rights in the properties given as collaterals should the loan secured
be unpaid. The foreclosure of the mortgages would be the remedy
provided by law for the mortgagee to exact payment. 30 In fact,
they did not dispute the petitioner’sallegations that they had not
fully paid their obligation, and that Civil Case No. CEB-26468 was
precisely brought by them in order to stave off the impending
foreclosure of the mortgages based on their claim that they had
been compelled to sign pre-printed standard bank loan forms and
mortgage agreements.
It is true that the trial courts are given generous latitude to act on
applications for the injunctive writ for the reason that conflicting
claims in an application for the writ more often than not involve a
factual determination that is not the function of the appellate
courts;31 and that the exercise of sound discretion by the issuing
courts in injunctive matters ought not to be interfered with
exceptwhen there is manifest abuse.32 Nonetheless, the exercise of
such discretion must be sound, that is, the issuance of the writ,
though discretionary, should be upon the grounds and in the
manner provided by law.33 Judges should always bear in mind that
the writ of preliminary injunction is issued uponthe satisfaction of
two requisite conditions, namely: (1) the right to be protected
exists prima facie; and (2) the acts sought to be enjoined are
violative of that right. According toSaulog v. Court of Appeals, 34 the
applicant must have a sufficient interest or right to be protected,
but it is enough that:-
x x x for the court to act, there must be an existing basis of facts
affording a present right which is directly threatened by an act
sought to be enjoined. And while a clear showing ofthe right
claimed is necessary, its existence need not be conclusively
established. In fact, the evidence to be submitted to justify
preliminary injunction at the hearing thereon need not be
conclusive or complete but need only be a "sampling" intended
merely to give the court an idea of the justification for the
preliminary injunction pending the decision of the case on the
merits. This should really be so since our concern here involves
only the propriety of the preliminary injunction and not the merits
of the case still pending with the trial court.
Thus, to be entitled to the writ ofpreliminary injunction, the
private respondent needs only to show that it has the ostensible
right to the final relief prayed for in its complaint x x x.
It is also basic that the power to issue a writ of injunction is to be
exercised only where the reason and necessity therefor are clearly
established, and only in cases reasonably free from doubt.35 For,
truly, a preliminary injunction should not determine the merits of a
case,36 or decide controverted facts.37 As a preventive remedy,
injunction only seeks to prevent threatened wrong,38 further
injury,39 and irreparable harm40 or injustice41 until the rights of the
parties can be settled.1âwphi1 As an ancillary and preventive
remedy, it may be resorted to by a party to protect or preserve his
rights during the pendency of the principal action, and for no other
purpose.42 Such relief will accordingly protect the ability of the
court to render a meaningful decision;43 it will further serve to
guard against a change of circumstances that will hamper
orprevent the granting of proper relief after a trial on the
merits.44 Verily, its essential function is to preserve the status quo
between the parties until the merits of the case can be heard.45
Moreover, the applicant must prove that the violation sought to be
prevented would cause an irreparable injustice.46 But the
respondents failed to establish the irreparable injury they would
suffer should the writ of preliminary injunction not be issued.
Theyprincipally feared the loss of their possession and ownership
of the mortgaged properties, and faced the possibility of a criminal
prosecution for the post-dated checks they issued. But such fear of
potential loss ofpossession and ownership, or facing a criminal
prosecution did not constitute the requisite irreparable injury that
could have warranted the issuance of the writ of injunction. "An
injury is considered irreparable," according to Philippine National
Bank v. Castalloy Technology Corporation,47
x x x if it is of such constant and frequent recurrence that no fair or
reasonable redress can be had therefor ina court of law, or where
there is no standard by which their amount canbe measured with
reasonable accuracy, that is, it is not susceptible of mathematical
computation. The provisional remedy of preliminary injunction
may only be resorted to when there is a pressing necessity to avoid
injurious consequences which cannot be remedied under any
standard of compensation.
The injury being fearedby the herein respondents is not of such
nature. Ultimately, the amount to which the mortgagee-bank shall
be entitled will be determined by the disposition of the trial court
in the main issue of the case. We have explained in Equitable PCI
Bank, Inc. v. OJMark Trading, Inc.that all is not lost for defaulting
mortgagors whose properties were foreclosed by creditors-
mortgagees. The respondents will not be deprived outrightly of
their property, given the right of redemption granted to them
under the law. Moreover, in extrajudicial foreclosures, mortgagors
have the right toreceive any surplus in the selling price. Thus, if the
mortgagee is retaining more of the proceeds of the sale than he is
entitled to, this fact alone will not affect the validity of the sale but
will give the mortgagor a cause of action to recover such surplus.
As a general rule, the courts will not issue writs of prohibition or
injunction – whether preliminary or final – in order to enjoin or
restrain any criminal prosecution.48 But there are extreme cases in
which exceptions to the general rule have been recognized,
including: (1) when the injunction is necessary to afford adequate
protection to the constitutional rights of the accused; (2) when it is
necessary for the orderly administration of justice or to avoid
oppression or multiplicity of actions; (3) when there is a prejudicial
question that is sub judice; (4) when the acts of the officer are
without or in excess of authority; (5) when the prosecution is
under an invalid law, ordinance or regulation; (6) when double
jeopardy is clearly apparent; (7) when the court has no jurisdiction
over the offense; (8) when it is a case of persecution rather than
prosecution; (9) when the charges are manifestly false and
motivated by the lust for vengeance; and (10) when there is clearly
no prima faciecase against the accused and a motion to quash on
that ground has been denied.49 However, the respondents did not
sufficiently show that Civil Case No. CEB-26468 came under any of
the foregoing exceptions. Hence, the issuance by the RTC of the
writ of preliminary injunction to enjoin the petitioner from
instituting criminal complaints for violation of BP No. 22 against
the respondents was unwarranted.
Every court should remember that an injunction should not be
granted lightly or precipitately because it isa limitation upon the
freedom of the defendant's action. It should be granted only when
the court is fully satisfied that the law permits it and the
emergency demands it,50 for no power exists whose exercise is
more delicate, which requires greater caution and deliberation, or
is more dangerous in a doubtful case, than the issuance of an
injunction.51
In view of the foregoing, the CA grossly erred in not declaring that
the RTC committed grave abuse of discretion in granting the
application of the respondents as the plaintiffs in Civil Case No.
CEB-26468. The RTC apparently disregarded the aforecited well-
known norms and guidelines governing the issuance of the writ of
injunction. Thereby, the RTC acted capriciously and arbitrarily.
Grave abuse of discretion means either that the judicial or quasi-
judicial power was exercised in an arbitrary or despotic manner by
reason of passion or personal hostility, or that the respondent
judge, tribunal or board evaded a positive duty, or virtually refused
to perform the duty enjoined or to act in contemplation of law,
such as when such judge, tribunal or board exercising judicial or
quasi-judicial powers acted in a capricious or whimsical manner as
to be equivalent to lack of jurisdiction.52
WHEREFORE, the Court PARTIALLY GRANTS the petition for review
on certiorari; MODIFIES the decision promulgated on July 9, 2002
by annulling and setting aside the writ of preliminary injunction in
Civil Case No. CEB-26468 issued by the Regional Trial Court, Branch
16, in Cebu City for being devoid of factual and legal bases;
ORDERS the Regional Trial Court, Branch 16, in Cebu City to
proceed with dispatch in Civil Case No. CEB-26468; and DIRECTS
the respondents to pay the costs of suit.
SO ORDERED.
FIRST DIVISION
G.R. No. 124130 June 29, 1998
GOVERNOR PABLO P. GARCIA, THE PROVINCE OF CEBU; TOMAS R.
OSMEÑA; MAYOR ALVIN B. GARCIA, THE CITY OF CEBU; ALLAN C.
GAVIOLA, City Administrator; JOSE A. GUISADIO, City Planning and
Development Officer; METRO CEBU DEVELOPMENT PROJECT
OFFICE; BASHIR D. RASUMAN, Regional Director, Department of
Public Works and Highways (DPWH), Region VII; ROMEO C.
ESCANDOR, Regional Director, National Economic and
Development Board (NEDA), Region VII; and LANDBANK OF THE
PHILIPPINES, petitioners,
vs.
HON. JOSE P. BURGOS in his capacity as presiding judge of the
Regional Trial Court, Branch 17, Cebu City; and MALAYAN
INTEGRATED INDUSTRIES CORPORATION, respondents.
PANGANIBAN, J.:
Presidential Decree 1818 prohibits courts from issuing an
injunction against any infrastructure project, such as the Cebu
South Reclamation Project, "in order not to disrupt or hamper the
pursuit of essential government project" or frustrate "the
economic development effort of the nation." This Court will not
tolerate a violation of this prohibition.
Statement of the Case
Petitioners, through Rule 65 of the Rules of Court, assail the
validity of the Orders of Judge Jose P. Burgos of the Regional Trial
Court of Cebu. 1 The first assailed Order, dated February 22, 1996,
denied herein Petitioner Tomas R. Osmeña's Omnibus Motion with
Opposition to the Application for Writ of Preliminary Injunction,
which prayed that said application be cancelled or its hearing
deferred, and that the temporary restraining order already in favor
of herein private respondent be lifted. 2
The respondent judge's previous voluntary inhibition was set aside
by the second assailed Order dated March 12, 1996, which reads
as follows:
WHEREFORE, premises considered, the motion for reconsideration
is granted and accordingly, the order of the Presiding Judge in
voluntarily inhibiting himself from further sitting in the case dated
February 26, 1996 is reconsidered and set aside.
Set this case for another hearing on the application for preliminary
injunction on March 15, 1996 at 10 o'clock in the morning whereby
defendants are ordered to show cause if any they have why the
injunction should not be granted.
SO ORDERED. 3
Meanwhile, the preliminary injunction sought by herein private
respondent was granted by respondent judge who, in his third
assailed Order dated March 18, 1996, ruled in this wise:
WHEREFORE, premises considered, and in order to preserve the
status quo, upon the filing of an injunction bond with this Court in
the amount of Two Million (P2,000,000.00) Pesos, let a writ of
preliminary injunction be issued, hereby enjoining all the
defendants, their assigns, agents and representatives or anyone
acting for any or all of them or in their behalf from implementing
the memorandum of agreement dated September 11, 1995,
attached and marked as Annex "V" in the original complaint dated
January 18, 1996, except the construction of the Cebu South
Coastal Road, and all other agreements/contracts of defendants
concerning the Cebu South Reclamation Project tending to deprive
plaintiff of its prior contractual rights in the said Cebu South
Reclamation Project until further orders from this Court.
The amount of the required bond shall answer for all damages that
the defendants may sustain by reason of the injunction should the
Court finally decide that plaintiff was not entitled thereto.
SO ORDERED. 4
The Facts
In their pleading, the parties tried their best to give detailed
accounts of the factual antecedents of this case. In fairness to
them, the Court hereby reproduces in toto their respective
narrations.
Petitioner's Version
A. The Project
1. The Cebu South Reclamation Project (hereinafter referred to as
the "PROJECT") is a FOUR BILLION PESO (P4,000,000,000.00)
project of the, Government of the Republic of the Philippines
(hereinafter referred to as the "GOVERNMENT"), funded out of a
loan taken out by the government from the Government of Japan,
through its international financing institution, the Overseas
Economic Cooperation Fund (hereinafter referred to as the
"OECF").
2. The loan was made possible by virtue of an Exchange of Notes
between the Governments of the Republic of the Philippines and
Japan, whereby the latter extended a total loan package of ONE
HUNDRED BILLION NINE HUNDRED SIXTY-FOUR MILLION YEN
(Y101,964,000,000.00) [sic] to finance certain specified and listed
projects of the former. Among these projects to be financed by the
loan is the Cebu South Reclamation Project. (Refer to Annex "E" -
Petition)
3. The project is an integral part of the Third Phase of the Metro
Cebu Development Projects (hereinafter referred to as "MCDP III"),
which has been favorably endorsed and approved by the President
of the Republic of the Philippines, Fidel V. Ramos, as "one of the
projects of the national government." (Refer to Annex "F" -
Petition).
4. The project has likewise been approved by the National
Economic and Development Board (the "NEDA"), of which the
President is the Chairman, as an ICC Project, by virtue of NEDA
Resolution No. 1, Series of 1995. (Refer to Annex "G" - Petition)
5. The project is further certified as a project of the Government of
the Republic of the Philippines, by the Department of Foreign
[Affairs], through its Secretary, Domingo E. Siazon. (Refer to Annex
"H" - Petition)
6. In due course, loan agreements in implementation of the
Exchange of Notes between the two governments were executed
between the OECF and [P]etitioner Land Bank of the Philippines
(the "LANDBANK"). Under these agreements, the City of Cebu was
designated as the project's implementing agency. (Refer to Annex
"I" - Petition)
7. In accordance with the Constitution, the loan package to
finance, among others, the Cebu South Reclamation Project, was
granted final approval by the Monetary Board, by virtue of
Resolution No. 1260 issued on 07 November 1995. (Refer to Annex
"J" - Petition)
8. The loan arrangements having been entered into, and the funds
ready for release to the City of Cebu, the implementing agency of
the project, the City of Cebu, the Department of Public Works and
Highways (the "DPWH") and the Metro Cebu Development Project
Office (the "MCDPO") executed, on 11 September 1995, the
"implementing Arrangement for Metro Cebu Development Project
Phase III (MCDP III)" (Refer to Annex "K" - Petition), under which
agreement is outlined the procedure for implementation of the
project as well as the rights and obligations of the parties thereto.
B. The Suit Filed Below by Private Respondent
9. On 19 January 1996, [P]rivate [R]espondent Malayan Integrated
Industries Corporation (hereinafter referred to as "MALAYAN"),
filed a case for "Specific Performance, Declaration of Nullity,
Damages and Injunction, with Writ of Preliminary Injunction and
Temporary Restraining Order" against herein petitioners, docketed
as Civil Case No. CEB-18292, before the Regional Trial Court of
Cebu City. (Refer to Annex "L" - Petition) The case was raffled to
Branch 17 of the said court.
10. Pursuant to Supreme Court Administrative Circular No. 20-95, a
summary hearing was conducted by respondent [j]udge to
determine the propriety of issuing the temporary restraining order
(TRO) prayed for by [R]espondent Malayan in its complaint.
11. During the summary hearing to determine whether the
temporary restraining order (TRO) should issue, defendants
questioned the jurisdiction of the court to issue the same, citing
Section 1 of Presidential Decree No. 1818, which provides:
Sec. 1. No court in the Philippines shall have jurisdiction to issue
any restraining order, preliminary injunction, or preliminary
mandatory injunction in any case, dispute, or controversy involving
an infrastructure project, or a mining, fishery, forest, or other
natural resource development project of the government, or any
public utility operated by the government, including among others
public utilities for the transport of the goods or commodities,
stevedoring and arrastre contracts, to prohibit any person or
persons, entity or government officials from proceeding with, or
continuing the execution or implementation of any such project, or
the operation of such public utility, or pursuing any lawful activity
necessary for such execution, implementation or operation.(Sec. 1,
P.D. 1818; emphasis supplied)
12. It was also pointed out to herein respondent [j]udge that the
Supreme Court, in Administrative, Circular 13-93, pursuant to P.D.
1818, and in implementation of the policy behind the law,
prohibited all judges of all courts from issuing TRO's and/or writs
of preliminary injunction against the implementation of
government infrastructure projects.
13. It was further manifested that the Supreme Court, observing
non-compliance with the above-cited Circular by judges of trial
courts was compelled to reiterate its earlier prohibition, with a
warning against further violation, for their "strict compliance",
under Administrative Circular No. 68-94, issued on 3 November
1994, which states:
There have been reports that despite Circular 13-93, dated March
5, 1993, some courts are still issuing temporary restraining orders
and/or preliminary injunctions even in cases, disputes, or
controversies involving government infrastructure projects in
violation of Section 1 of P. D. 1818 . . .
xxx xxx xxx
In order to obviate complaints against the indiscriminate issuance
of restraining orders and court injunctions against government
public utilities and infrastructure projects in gross violation of the
aforesaid Presidential Decree, the provision of Circular No. 13-93
issued on March 5, 1993 is hereby reiterated for your strict
compliance.
xxx xxx xxx (Supreme Court Administrative Circular No 68-94;
emphasis supplied)
14. In gross violation of the law and the circulars of the Honorable
Supreme Court, however, respondent [j]udge issued a temporary
restraining order on 5 February 1996, the dispositive portion of
which reads as follows:
The verified complaint being sufficient in form and substance and
in order to preserve the status quo, all the defendants and their
agents, employees, workers and all persons acting in their behalf
are temporarily restrained from implementing the alleged
memorandum of agreement dated September 11, 1995, and any
and all such other agreements/contracts entered into by any and
all of the defendants, covering the Cebu South Reclamation Project
consisting of 330 hectares more or less" (Refer to Annex "M" -
Petition)
15. The hearing on [R]espondent Malayan's application for the writ
of preliminary injunction was set for 14 February 1996. During the
said hearing, [P]etitioner Tomas R. Osmeña filed an Omnibus
Motion for: (a) the immediate lifting of the Temporary Restraining
Order; (b) the cancellation of the hearing on the application for the
writ of preliminary injunction; and (c) the outright dismissal of the
complaint. The Omnibus Motion was subsequently adopted by the
defendants below. (Refer to Annex "N" - Petition)
16. The thrust of the Omnibus Motion was that the court below
had, under P.D. 1818, no jurisdiction and no compelling reason to
issue any TRO and/or writ of preliminary injunction against the
implementation of a government infrastructure project. Since it
had no jurisdiction to issue such TRO and/or writ of preliminary
injunction, much less does it have the jurisdiction to entertain any
application for the injunctive writ.
17. The Omnibus Motion likewise refuted respondent [j]udge's
arguments in its Order dated 5 February 1996 granting the TRO,
wherein he attempted to remove the case from the ambit of P.D.
1818 thus:
(a) the ruling in Genaro R. Reyes Construction, Inc. v. Court of
Appeals, 234 SCRA 116 applies to the case at bar;
(b) "plaintiff is not asking for enjoining the infrastructure
project . . . [but] the enjoining of the contract to be awarded to
another entity";
(c) "inclusion of reclamation of submerged lands as being covered
under the term "infrastructure project" [is a] classification [that]
has yet to be determined in the light of existing Presidential
Proclamations, Orders Executive Memorandums."
18. Respondent Judge — apparently to verify whether the project
was an infrastructure project of the national government —
required defendants below, petitioners herein, to show proof that
the project had the approval of the President of the Republic of
the Philippines.
19. In compliance with the order of respondent [j]udge,
petitioners, during the continuation of the hearing on the Omnibus
Motion, set on 16 February 1996, presented the documents
mentioned above (Refer to Annexes "D" to "J" - Petition), proving
that the project had the favorable recommendation and approval,
not only of the President, but likewise of the NEDA, and certified
as a project of the Government of the Republic of the Philippines
by the Department of Foreign Affairs. Insofar as the loan
agreements were concerned, the Exchange of Notes (Annex "D")
and the resolution of the Monetary Board (annex "J") approving
the loan agreement were presented. All requirements for the
implementation of a perfected contract are present and submitted
to the court.
20. Following the presentation of the foregoing documents,
respondent [j]udge gave the parties five (5) days to submit their
respective memoranda on the Omnibus Motion, after which the
incident would be deemed submitted for resolution.
21. On 21 February 1996, the parties filed their respective
memoranda. As the memorandum for [R]espondent Malayan
contained misstatements of the facts of the case, petitioner Tomas
R. Osmeña filed a "Reply to Plaintiff's Memorandum" at 9:00
o'clock in the morning of the following day, 22 February 1996.
22. With unusual dispatch in a time frame of only a few hours,
however, and under suspicious circumstances, in the afternoon of
the same day, 22 February 1996, respondent [j]udge had issued an
Order (Refer to Annex "A" - Petition), a quite comprehensive five-
page resolution denying petitioners' Omnibus Motion, received by
petitioners on 23 February 1996.
23. Without having to consider the unusual haste with which the
Order was issued — considering that it was issued the day
immediately after the last day for the filing of the memoranda, and
on the day, and just hours after petitioner Osmeña's "Reply to
Plaintiff's Memorandum" was filed, the Order dated 22 February
1996 was highly irregular for the most obvious reasons.
24. A cursory review of the Order dated 22 February 1996 would
reveal that it has practically decided the case on the merits, on a
mere resolution of an incident in the main case. The Order denying
the Omnibus Motion has practically ruled that: (a) [R]espondent
Malayan has valid, existing and enforceable contracts of
reclamation approved by the President of the Philippines; (b)
petitioners' reclamation project did not have the approval of the
President; and (c) petitioners were violating [R]espondent
Malayan's contracts.
These were precisely the issue[s] in the main case for specific
performance.
24.1 It would be relevant to mention that in so ruling, respondent
Judge practically considered "evidence" which were non-existent
in favor of [R]espondent Malayan, and suppressed the evidence
presented by petitioners.
25. [I]n view of the actions of respondent [j]udge, [P]etitioner
Osmeña filed, on 23 February 1996, an Omnibus Motion, praying,
among other things, for the voluntary inhibition of respondent
[j]udge on the ground of partiality manifested by the Order of 22
February 1996, which practically decided the case on the merits in
favor of [R]espondent Malayan, in a resolution of a mere incident
in the case.
26. In an Order dated 26 February 1996, respondent [j]udge
voluntarily inhibited himself. (Refer to Annex "O" - Petition)
27. Respondent Malayan, however, filed a motion for
reconsideration of the Order of voluntary inhibition, to which
petitioner Osmeña filed an Opposition.
28. In the meantime, petitioner Osmeña had filed a Motion for
Reconsideration of the Order dated 22 February 1996 denying the
Omnibus Motion, with the cautionary notice that it was not to be
deemed as a waiver of their opposition to the motion for
reconsideration filed by [R]espondent Malayan of respondent
[j]udge's Order of voluntary inhibition. Instead, the said Motion for
Reconsideration with Cautionary Notice was to be heard by the
court to which the case was to be eventually re-raffled, and
scheduled for hearing on 22 March 1996.
29. On 12 March 1996, however, respondent [j]udge reversed
himself and reconsidered his Order of voluntary inhibition dated
26 February 1996, and set the hearing on [R]espondent Malayan's
application for the writ of preliminary injunction for 15 March
1996. (Refer to Annex "C" - Petition)
30. Since the Motion for Reconsideration with Cautionary Notice
was still pending resolution (and the hearing thereon yet to be
conducted on 22 March 1996), petitioner filed an Urgent Motion
for Resetting of the hearing, considering that the Motion for
Reconsideration with Cautionary Notice — which questioned the
court's jurisdiction to entertain the application for the writ of
preliminary injunction — was prejudicial to the hearing set for 15
March 1996, since it would determine whether or not such
proceedings should continue or not.
31. During the hearing on 15 March 1996, however, respondent
[j]udge denied petitioner Osmeña's Urgent Motion for Resetting.
32. Again, with unusual dispatch, on 18 March 1996, respondent
[j]udge issued two (2) Orders, one granting the writ of preliminary
injunction prayed for by [R]espondent Malayan (Refer to Annex
"B" - Petition), and another one denying petitioner's Motion for
Reconsideration with Cautionary Notice — both issued even
before the hearing on the Motion for Reconsideration with
Cautionary Notice which was yet scheduled for 22 March 1996.
33. Hence, this petition for certiorari, questioning: (a) the validity
of the Orders of respondent [j]udge dated 22 February 1996
claiming it had the jurisdiction to entertain and issue a writ of
preliminary injunction against petitioners' government
infrastructure project, and the Order of 18 March 1996, granting
the writ of Preliminary injunction; and (b) the validity of the Order
of respondent [j]udge dated 12 March 1996, reconsidering his
earlier Order of voluntary inhibition, there being no other plain,
speedy and adequate remedy in the ordinary course of law. 5
Private Respondent's Version
On May 22, 1967, Proclamation No. 200-A was issued which
reserved for national improvement purposes, a certain parcel of
land of the [p]ublic [d]omain situated in the foreshore of the
District of San Nicolas, Pardo, Cebu City and Tangkey, Talisay,
Cebu. This area was transferred and relinquished by the President
of the Philippines to the Province of Cebu in behalf of the
[n]ational [g]overnment, subject to private rights, if any there be.
Copy of said proclamation was attached as Annex "4" to
respondents' Comment.
On January 11, 1973, Presidential Decree No. 3-A was issued which
decreed that the reclamation of land under water, whether
foreshore or inland, throughout the Philippines belong to and are
owned by and limited to the [n]ational [g]overnment or to any
person authorized by it under a proper contract.
On October 14, 1977, pursuant to and in accordance with the
above-said Proclamation No. 200-A and Sec. 1 of P.D. No. 3-A, the
Sangguniang Panlalawigan of Cebu and the then Cebu Provincial
Governor Eduardo R. Gullas granted, awarded and authorized
private respondent to undertake the actual and physical
reclamation and development works of the foreshore, submerged
and offshore areas of Three Hundred Fifty (350) hectares, more or
less, which is a portion of the approximate area of 5,386,800
square meters or 438.6800 hectares, as described in Proclamation
No. 200-A. Copy of said Award was attached as Annex "5" to the
Comment of respondents.
On October 31, 1977, a Contract of Reclamation and Development
was entered into, signed and executed by and between the
Province of Cebu, represented by then Governor Eduardo R.
Gullas, and private respondent. Copy of said Contract was attached
as Annex "6" to the Comment.
The said Contract of Reclamation and Development dated October
31, 1977 between Cebu Province and private respondent was
authorized by Resolution No. 475 dated October 4, 1977 of the
Sangguniang Bayan [sic] Panlalawigan of Cebu.
On September 15, 1978, the Sangguniang Panlalawigan of Cebu
and then Cebu Governor Eduardo R. Gullas considered and
approved the request of private respondent dated August 25, 1978
that the reclamation area of 350 hectares to 625 hectares, more or
less. Copy of said resolution was attached as Annex "7" to
respondent's Comment.
On October 7, 1978, the Second Supplemental Contract of
Reclamation and Development between the Province of Cebu and
private respondent was entered into, signed and execu[t]ed by
and between the Province of Cebu and private respondent. Copy
of said contract was attached as Annex "8" to the respondents'
Comment.
On January 15, 1979, a Contract of Reclamation and Port
Development was entered into, executed and signed by and
between private respondent and Amsterdam Ballast Dredging
Corporation (BALLAST) in connection with and regarding the
reclamation area of 625 hectares of the foreshore, submerged and
offshore areas from Pasil, Cebu City, to Tangke Talisay, Cebu to
Kawit Island and then to Pasil, Cebu City. Copy of said contract was
attached as Annex "9" to respondents' Comment.
On February 7, 1979, a Memorandum dated February 7, 1979
addressed to then President Marcos, was submitted by Province of
Cebu, represented and signed by then Governor Eduardo R. Gullas,
and the City of Mandaue, represented and signed by then City
Mayor Demetrio M. Cortes for final consideration and approval.
Copy of said memorandum was attached as Annex "10" to
respondents' Comment.
When the Province of Cebu and the City of Mandaue submitted to
the President the Cebu South Reclamation Project for approval per
memorandum dated February 7, 1979, attached as Annex "10" to
respondents' Comment it was premised on the following
consideration as stated in the first paragraph of said memo:
In our earnest desire to contribute our share to the program of
Your Excellency and of our government on industrialization,
industrial dispersal and regional development in the New Society,
the Province of Cebu and the City of Mandaue have authorized,
subject to your Excellency's reclamation of 625 and 360 hectares
of foreshore and offshore lands in South Cebu from Pasil, Cebu City
to Tangke, Talisay, Cebu by virtue of Presidential Proclamation No.
200-A, promulgated on May 22, 1967 (ANNEX "B"), which gives the
Province of Cebu the authority to administer these areas, within
the City of Cebu, and in Mandaue City, from Subangdaku to the
Cabahug Coastways, by virtue of Sec. 94 of Republic Act No. 5519,
which vests ownership and possession of all foreshore lands and
submerged lands of the public domain in the City of Mandaue
(ANNEX "C"), respectively, under contracts of Reclamation and
Port Development with Malayan Integrated Industries
Corporation, hereto attached as Annexes "D" and "E", which we
believe offer the most advantageous terms for the Province of
Cebu, and City of Mandaue and the [n]ational [g]overnment
because not a single centavo will be spent by the government in
return for its share in the reclaimed areas and the operation of the
international and domestic port facilities thereof, not to mention
the socio-economic impact that the projects will create in the
Visayas and Mindanao. (Emphasis ours)
On August 13, 1979, the Cebu South Reclamation Project was
presented by the Province of Cebu and Mandaue City, was
considered and approved in principle by then President E. Marcos,
as per Presidential Memorandum directive dated August 13, 1979
and a copy thereof is attached as Annex "Q" of the petition.
Among the salient provisions of said presidential approval are:
a. That within twelve (12) months after the issuance of
[p]residential directive authorizing the Project, a detailed and
integrated development plan on land use including technical,
economic, marketing and financial feasibility studies be submitted
to the President for approval, otherwise, project approval may be
deemed automatically revoked; to enable the PEA to exercise its
responsibilities as the representative of the [n]ational
[g]overnment as landowner, the person or entity chosen by the
contractor to undertake the detailed feasibility studies shall report
directly to the PEA;
xxx xxx xxx
d. That Cebu City and Mandaue City shall enter into contract with
Public Estates Authority for the reclamation project pursuant to
E.O. 525. The PEA is authorized to determine the terms and
conditions necessary for the implementation of the aforecited
conditions including specification of the sharing scheme and other
requirements of government entities on the reclaimed areas.
Furthermore, the PEA is authorized to review, modify, and approve
all contracts entered into or arising out of the reclamation project
consistent with existing government regulations and national
interests considerations. Finally, consideration of equity requires
that option rights of first refusal for a period as may be determined
by PEA, shall be granted to private entities which have made initial
investments on the project. (Emphasis ours)
In other words, herein private respondent was granted by said
[p]residential directive option rights of first refusal to undertake
the project because of the initial investments it made on the
project.
On August 1, 1980, as provided in Presidential Memorandum
directive dated August 13, 1979 to submit within twelve (12)
months after the issuance of the said Presidential Memorandum
directive the detailed feasibility study for approval and "to enable
the PEA to exercise its responsibilities as the representative of the
[n]ational [g]overnment as land owner, the person or entity
chosen by the contractor to undertake the detailed feasibility
studies shall report directly to the PEA", the Province of Cebu, the
City of Mandaue, the City of Lapulapu and the Municipality of
Cordova submitted said feasibility study to the President for
approval, copy of which was attached as Annex "12" to
respondents' Comment.
The Province of Cebu and private respondent entered into, signed
and executed a Confirmatory Agreement dated November 1979,
by virtue of which the services of MALAYAN was contracted to
undertake the preparation and making of the said Detailed and
Integrated Development Plan on Land use, etc., of the Cebu South
Reclamation Project at no cost to the Province of Cebu. Copy of
said Confirmatory Agreement was attached as Annex "13" to the
respondents' Comment.
The said Confirmatory Agreement acknowledged that it was the
private respondent which made initial investments in the Cebu
South Reclamation Project and the entity granted the right of first
refusal or option rights to undertake the project as follows:
WHEREAS, the Memorandum dated 13 August 1979 embodied the
proviso rights of first refusal shall be granted to private entities
who have made initial investments in the reclamation projects;
WHEREAS, the MALAYAN INTEGRATED INDUSTRIES
CORPORATION, which had made initial investments in the projects
and had, as a matter of fact, been previously bound by a contract
with the PROVINCE OF CEBU to undertake the reclamation project
in South Cebu evidenced by Document No. 145; Page No. 30; Book
No VI; Series of 1977 before Notary Public Justino K. Hermosisima,
by these presents have offered to undertake and prepare, for and
in behalf of the PROVINCE OF CEBU, the detailed feasibility study
for the reclamation of the areas in the Municipalities of Talisay and
Cordova, Province of Cebu, in conjunction and coordination with
the Cebu South and the Mandaue Reclamation Projects, and which
offer had been accepted by the PROVINCE OF CEBU as the
consequence of the Reclamation contract by and between the two
entities similarly reconfirmed in a communication dated October 4,
1979;
On January 4, 1980, a Confirmatory Agreement was entered into,
executed and signed by and between the City of Cebu, and private
respondent in which they confirmed, affirmed, approved and
agreed that the Cebu South Reclamation Project dated January 15,
1979 between MALAYAN and BALLAST which was approved by the
Province of Cebu and City of Mandaue and were approved in
principle by then President Ferdinand E. Marcos, that its
corresponding plan on land use, including technical, economic,
marketing and financial feasibility studies of the Project be
undertaken by the aforesaid Local Government units concerned
and to be submitted to the PEA and the President of the
Philippines within twelve (12) months after the issuance of the
Presidential Memorandum directive dated August 13, 1979, and in
compliance with the above-said requirements, the City of Cebu
hired, awarded, engaged and contracted the services of private
respondent to undertake and prepare in behalf of the City of Cebu
the detailed and integrated development plan on land use, etc., of
the Project covering the reclamation area of 400 to 625 hectares,
more or less, without any single expense, funding and at no cost
whatsoever to the City of Cebu. Copy of said Confirmatory
Agreemen[t] was attached as Annex "14" to the respondents'
Comment.
Again, the City of Cebu recognized the option right or right of first
refusal of private respondent to undertake the project as the
entity [which] had made initial investments in the project as
follows:
WHEREAS, the President also directed that option rights of first
refusal shall be granted to private entities which have made initial
investments in the reclamation projects;
WHEREAS, the MALAYAN INTEGRATED INDUSTRIES
CORPORATION, which has made initial investments on the project,
and in fact, was previously contracted by the Province of Cebu by
virtue of Proclamation No. 200-A, P.D. No. 3-A and Executive Order
No. 525 to undertake the reclamation project for and in the City of
Cebu and the Municipality of Talisay, Province of Cebu, and prior
to which MALAYAN INTEGRATED had already invested substantial
sums of money, time and effort in preparatory activities on said
reclamation projects, by these presents have offered to undertake
the detailed and integrated development plan on land use,
[including] feasibility studies as required by the President, and the
CITY OF CEBU has accepted the said offer of MALAYAN
INTEGRATED INDUSTRIES CORPORATION;
On January 24, 1980, the public Estates Authority (PEA) and the
City of Cebu entered into a Memorandum of Understanding which
recognized the pre-emptive right of plaintiff to undertake the
Project as recognized in the Presidential directive dated August 13,
1979.
6. Pursuant to the Presidential Directive dated August 13, 1979, to
accord pre-emptive rights for the actual prosecution of the
reclamation project to private entities which have made initial
investments on the project:
Copy of said Memorandum of Understanding was attached as
Annex "15" to respondents' Comment.
On August 11, 1980, on the basis of the Confirmatory Agreement
dated November 1979 between the Province of Cebu and private
respondent and the Confirmatory Agreement dated January 4,
1980 between the City of Cebu and the City of Cebu have awarded,
hired, engaged and contracted the services of private respondent
to undertake and prepare, in behalf of the Province of Cebu and
the City of Cebu without any single expense, funding and at no
cost to said Province of Cebu and City of Cebu, the detailed and
integrated development plan on land use, etc., of the Cebu South
Reclamation Project, the Province of Cebu thru then Eduardo R.
Gullas, the City of Cebu thru then City Mayor Florentino S. Solon,
the city of Mandaue thru then City Mayor Demetrio M. Cortes, the
City of Lapulapu thru then City Mayor Maximo V. Patalingjug, Jr.,
and the Municipality of Cordova, Cebu thru Municipal Mayor
Celedonio B. Sitoy, filed and submitted on August 1, 1980 the
corresponding Detailed and Integrated Development Plan on Land
use, including technical, economic, marketing and financial
feasibility studies of the Cebu South Reclamation Project for the
final consideration and approval by the Public Estates Authority
and the Office of the President and the President of the
Philippines. Copy of said document was attached as Annex "12" to
respondents' Comment.
On August 12, 1980, private respondent, for and in behalf of the
Province of Cebu, City of Cebu, City of Mandaue, City of Lapulapu,
Municipality of Talisay, Municipality of Cordova, in relation to the
above-said Memorandum dated in August 1, 1980 as required,
also filed and submitted to the Office of the President and the
President of the Philippines thru the PEA the additional copies of
the said complete Project Studies and the Detailed and Integrated
Development Plan on Land Use, etc., of the Metro Cebu
Reclamation and Development Project which includes the Cebu
South Reclamation Project. Copy of said document was attached as
Annex "16" to respondents' Comment.
On September 29, 1980, on the basis of the aforesaid
Memorandum dated August 1, 1980 the PEA, in its MEMO FOR
THE PRESIDENT dated September 29, 1980 indorsed and
recommended to the President the final consideration and
approval of the Detailed and Integrated Development Plan on Land
Use of the Cebu South Reclamation Project. Copy of said document
was hereto attached as Annex "17" to the respondents' Comment.
Since Septembe[r] 19, 1980, when the PEA approved the Metro
Cebu Reclamation and Development Project covering the
reclamation area of 4,910 hectares, which include the Cebu South
Reclamation Project covering 625 hectares, and its corresponding
detailed and integrated development plan on land use, etc., as per
MEMO FOR THE PRESIDENT dated September 29, 1980, the
President of the Philippines has not yet approved the detailed and
integrated development plan on land use, including technical,
economic, marketing and financial feasibility studies of the said
project.
On December 29, 1995, the Office of the President thru President
Staff Director Vicente A. Galang, issued 1st Indorsement to the
effect that the detailed and integrated development plan on land
use of the project is still pending final consideration and approval
by the [O]ffice of the President until now or at the present date.
Copy of said resolution was attached as Annex "18" to the
respondents' Comment.
On January 12, 1996, the Office of the President thru Presidential
Staff Director Vicente A. Galang, issued an official certification that
the Cebu South Reclamation Proj[e]ct covering 360 hectares, has
already long been considered and approved by the Office of the
President and the President of the Philippines as per Presidential
Memorandum directive dated August 13, 1979 but its
corresponding detailed and integrated development plan on land
use, including technical, economic, marketing and financial
feasibility studies of the project which was filed and submitted by
the Province of Cebu, City of Cebu, City of Mandaue, City of
Lapulapu and Municipality of Cordova with the PEA and the Office
of the President on August 1, 1980 per Memorandum dated
August 1, 1980 and approved by the PEA in favor of the above-
mentioned Local Government units concerned per MEMO FOR THE
PRESIDENT dated September 29, 1980, is still pending final
consideration and approval by the Office of the President. Copy of
said certification was attached as Annex "19" to respondents'
Comment.
When the Province of Cebu and the City of Mandaue submitted to
the President the Cebu South Reclamation Project for approval per
memorandum dated February 7, 1979, it was premised on the
following consideration as stated in the first paragraph of said
memo:
In our earnest desire to contribute our share to the program of
Your Excellency and of our government on industrialization,
industrial dispersal and regional development in the New Society,
the Province of Cebu and the City of Mandaue have authorized,
subject to your Excellency's approval, pursuant to PD 3-A (ANNEX
"A"), the reclamation of 625 and 360 hectares of foreshore and
offshore lands in South Cebu from Pasil, Cebu City to Tangke,
Talisay, Cebu by virtue of Presidential Proclamation No. 200-A,
promulgated on May 22, 1967 (ANNEX "B"), which gives the
province of Cebu the authority to administer these areas within
the City of Cebu, and, in Mandaue City, from Subangdaku to the
Cabahug Coastways, by virtue of Sec. 94 of Republic Act No. 5519,
which vests ownership and possession of all foreshore lands and
submerged lands of the public domain in the City of Mandaue
(ANNEX "C"), respectively, under contracts of Reclamation and
Port Development with Malayan Integrated Industries
Corporation, hereto attached as Annexes "D" and "E", which we
believe offer the most advantageous terms for the Province of
Cebu, and City of Mandaue and the National Government because
not a single centavo will be spent by the government in return for
its share in the reclaimed areas and the operation of the
international and domestic port facilities thereof, not to mention
the socio-economic impact that the projects will create in the
Visayas and Mindanao. (Emphasis ours)
This was so because under Executive Order No. 525 dated
February 14, 1979, all reclamation projects' are subject are subject
to approval by the President. After the reclamation project is
approved by the President, the project shall be undertaken by the
Public Estates Authority (PEA) or through a proper contract
executed by the PEA with any person or entity. This is so provided
in Section 1 of said Executive Order which reads as follows:
Sec. 1 — The Public Estates Authority (PEA) shall be primarily
responsible for integrating, directing, and coordinating all
reclamation projects for and on behalf of the National
Government. All reclamation projects shall be approved by the
President upon recommendation of the PEA, and shall be
undertaken by the PEA or through a proper contract executed by it
with any person or entity; provided, that, reclamation projects of
any National Government agency or entity authorized under its
Charter shall be undertaken in consultation with the PEA upon
approval of the President.
In other words, the President does not approve reclamation
contracts but approves only the reclamation project.
The President approved in principle the Cebu South Reclamation
Project on August 13, 1979 as shown by Exhibit "A-13". The
approval was in principle only pending submission and presidential
approval of a detailed and integrated feasibility study on the land
use of said project. What is unique in said presidential approval
was that it recognized the reclamation contracts earlier entered
into by plaintiff with the Province of Cebu and the City of Mandaue
by giving plaintiff option rights of first refusal to undertake the
project, when said presidential memorandum stated:
xxx xxx xxx
Finally, considerations of equity requires that option rights of first
refusal for a period as may be determined by PEA, shall be granted
to private entities which have made initial investments on the
project.
The presidential memorandum also directed the PEA, City of Cebu
and the City of Mandaue to enter into contracts with the PEA for
the Cebu South Reclamation Project and the Mandaue
Reclamation project, respectively.
Conformably, with said presidential directive the PEA and the City
of Cebu entered into a memorandum of understanding with
respect to the Cebu South Reclamation project wherein, paragraph
6 of its Section II, it [sic] provided that the City of Cebu was obliged
"to accord pre-emptive rights for the actual prosecution of the
reclamation project to private entities which have made initial
investments on the project", which entity is no other than herein
plaintiff. This option of first refusal or pre-emptive rights of plaintiff
to undertake the actual prosecution of the project has never been
cancelled, or rescinded.
The herein private respondent filed this case for injunction when
the respondents issued an invitation to bidders. Exhibit "A-21"
particularly section 3.2 thereof which provides "for the conduct of
tenders and subsequent evaluation of bids" for the Cebu South
Reclamation Project. In, other words, the petitioners were going to
entertain bids from private contractors for the undertaking of the
Cebu South Reclamation Project in violation of the preemptive
rights or right of first refusal of private respondent to prosecute
the project. 6
In a Resolution dated March 27, 1997, the Court granted
petitioners' prayer and issued a temporary restraining order
enjoining the trial judge from enforcing the assailed orders and
from conducting further proceedings in this
case. 7
The Issues
In their Memorandum dated July 30, 1997, petitioners summarized
the issues as follows: 8
I respondent judge specifically enjoined petitioners from
Whether or not respondent judge gravely abused his discretion in
issuing the orders dated 22 February 1996 and 18 March 1996, in
contumacious violation of Presidential Decree No. 1818, and
Supreme Court Administrative Circulars Nos. 13-93 and 68-94.
II
Whether or not, in grave abuse of discretion, the order dated 22
February 1996 and the order granting the writ of preliminary
injunction had the effect of practically deciding the case on the
merits.
III
Whether or not respondent judge acted with grave abuse of
discretion amounting to lack or excess of jurisdiction in granting
the writ of preliminary injunction, as the applicant, [R]espondent
Malayan, had no clear and unmistakable right to be protected by
the injunctive writ.
IV
Respondent judge gravely abused his discretion in not dismissing
the complaint outright, the alleged cause of action being
admittedly premature, and a mere expectancy, or having
otherwise been barred by Prescription and/or laches.
V principal party in that case.
Whether respondent judge gravely abused his discretion in issuing
the order dated 12 March 1996, reconsidering his earlier order of
voluntary inhibition, there being strong grounds — as respondent
judge himself admits — for his voluntary inhibition.
VI
Whether or not, as claimed by private respondent, the omnibus
motion to dismiss filed below by petitioners was a mere scrap of
paper.
VII
Whether or not, as claimed by private respondent, a motion for
reconsideration was necessary before the filing of the present
petition.
The first, second, third and fourth issues are closely related and
will be discussed together.
The Court's Ruling
The petition is meritorious.
First Issue:
Preliminary Injunction Void and Improper
Sec. 1 of PD 1818 distinctly provides that "[n]o court in the
Philippines shall have jurisdiction to issue any restraining order,
preliminary injunction, or preliminary mandatory injunction in any
case, dispute, or controversy involving an infrastructure project . . .
of the government, . . . to prohibit any person or persons, entity or
government official from proceeding with, or continuing the
execution or implementation of any such project, . . . or pursuing
any lawful activity necessary for such execution, implementation
or operation." 9 At the risk of being repetitious, we stress that the
foregoing statutory provision expressly deprives courts of
jurisdiction to issue injunctive writs against the implementation or
execution of an infrastructure project. 10
In the case at bar, the assailed March 18, 1996 Order of
implementing their Memorandum of Agreement dated September
11, 1995 11 (except as to the Cebu South Coastal Road), which
pertains to the implementation of the Metro Cebu Development
Project, Phase III, a major component of which is the Cebu South
Reclamation Project. The petitioners were also enjoined from
acting on or implementing all other contracts involving the said
reclamation project. The issuance of said writ of preliminary
injunction evidently constitutes a blatant violation of PD 1818. The
assailed Order is therefore void for being issued with grave abuse
of discretion and without jurisdiction. On this ground alone, the
Court may already grant the petition. Nonetheless, we will proceed
to discuss the other issues raised.
Reclamation Is an
Infrastructure Project
Private respondent claims that the Cebu South Reclamation
Project is not an infrastructure project. 12 This is erroneous and
misleading. In Malayan Integrated Industries Corporation vs. Court
of Appeals, 13 the Court unequivocally held that "the reclamation
of foreshore and submerged land along the coast of Mandaue City
up to the Cebu City boundary for the purpose of developing the
reclaimed area into an industrial and trading center with a modern
harbor and port facilities for both domestic and international
commerce" is an infrastructure project as contemplated under PD
1818. 14 Private respondent should know this not only because
everyone is presumed to know the law, but also because it was a
Cebu South Reclamation Project
Approved by the President
Private respondent further contends that, in spite of the
prohibition in PD 1818, the questioned injunctive writ may still
validly issue against petitioners, because the latter have not
sufficiently shown that (1) "[t]he City of Cebu has a contract with
the Public Estates Authority (PEA) to undertake the Cebu South
Reclamation Project under P.D. 3-A," (2) "[t]he PEA has favorably
endorsed the Cebu South Reclamation Project for approval by the
President pursuant to Executive Order No. 525," and (3) "[t]he
President has approved the Cebu South Reclamation Project
pursuant to P.D. 525." 15 The Court is not persuaded.
In the August 13, 1979 16 Memorandum on the Cebu South and
Mandaue Reclamation Project, the President of the Philippines
addressed this clear statement to the city mayors of Cebu and
Mandaue, the chairman of the PEA and others concerned:
"Pursuant to P.D. 3-A and E.O. 525, and upon recommendation of
the Public Estates Authority (PEA), the reclamation project
covering 985 ha.[,] more or less, of Cebu South and Mandaue
foreshore areas is hereby approved in principle; and the City of
Cebu and the City of Mandaue are hereby authorized to undertake
the reclamation of subject areas . . ." 17 Furthermore, even the
certification from the Office of the President dated January 12,
1996, 18 presented in evidence by respondent itself, certifies that
the Cebu South (and Mandaue) Reclamation Project "has been
previously considered and approved by the Office of the President
and by the President of the Philippines, then His Excellency
President Ferdinand E. Marcos, in favor of the Province of Cebu,
City of Cebu, City of Mandaue, the Public Estates Authority and
others concerned as the proponents . . ." 19 The approved
reclamation project is distinct from the reclamation contract itself.
Private Respondent Has No Vested
Right Violated by a Public Bidding
Private respondent argues that PD 1818 cannot be invoked to stop
the issuance of a preliminary injunction in this case, as the acts of
petitioners are tantamount to a violation of its vested rights. It
claims ". . . a right to seek judicial intervention and relief when
petitioners violated its right of first refusal by issuing invitations to
bid the project to other contractors, without affording private
respondent its right of first refusal." 20 We disagree.
Undisputed is the fact that the private respondent and the
government have not entered into any validly approved and
effective reclamation contract covering the Cebu South
Reclamation Project. The City of Cebu and private respondent's
Contract of Reclamation dated
October 31, 1977 21 was never approved by the President. Their
Confirmatory Agreement dated January 4, 1980 merely shows that
the City of Cebu engaged private respondent "to undertake and
prepare the detailed and integrated development plan on land
use, including technical, economic, marketing and financial
feasibility studies . . ." of the Cebu South Reclamation Project. 22
Incidentally, the aforementioned certification, issued by the Office
of the President on January 12, 1996, manifests that private
respondent's development plan and feasibility studies, submitted
pursuant to the said Confirmatory Agreement, are the items
pending final consideration and approval of the President.
Private respondent alleges that the injunctive writ merely
protected its alleged right of first refusal which arose from the
President's August 13, 1979 Memorandum addressed to the
concerned public officials, stating that "considerations of equity
[require] that option right of first refusal for a period as may be
determined by the PEA shall be granted to private entities which
have made initial investments on the project." 23 This
memorandum, however, must be construed in harmony with the
aforecited PD 1818 and PD 1594, 24 which prescribe the policies,
guidelines, rules and regulations for government infrastructure
contracts. Said memorandum certainly could not be construed as a
law authorizing a repeal of PD 1818 and PD 1594. Indeed, laws are
repealed only by subsequent ones, 25 whether expressly or
impliedly. There is no express repeal of said law, as they were not
even mentioned in the memorandum, either by number or by text.
Neither can there be an implied repeal, since was not
"convincingly and unambiguously demonstrated" that the mention
in the memorandum of a right of first refusal was so repugnant
and inconsistent with said laws as to defy harmonization. Basic is
the rule in statutory construction that implied repeals are not
favored. 26 In addition, the memorandum was merely an
expression of an executive directive to subordinates, not a
legislative enactment. Hence, it cannot obviate the operation of PD
1818 and PD 1594. Section 4 of PD 1594 provides:
Sec. 4. Bidding. — Construction projects shall generally be
undertaken by contract after competitive public bidding. Projects
may be undertaken by administration or force account or by
negotiated contract only in exceptional cases where time is of the
essence, or where there is lack of qualified bidders or contractors,
or where there is a conclusive evidence that greater economy and
efficiency would be achieved through this arrangement, and in
accordance with provision of laws and acts on the matter, subject
to the approval of the Ministry of Public Works, Transportation
and Communications, the Minister of Public Highways, or the
Minister of Energy, as the case may be, if the project cost is less
than P1 Million, and of the President of the Philippines, upon the
recommendation of the Minister, if the project cost is P1 Million or
more.
In the award of government contracts, the law requires a
competitive public bidding. This is reasonable because "[a]
competitive public bidding aims to protect the public interest by
giving the public the best possible advantages thru open
competition. It is a mechanism that enables the government
agency to avoid or preclude anomalies in the execution of public
contracts." 27 Lawful and laudable, therefore, is the petitioners'
Memorandum of Agreement mandating the City of Cebu to
conduct a competitive public bidding in implementing the Cebu
South Reclamation Project. The conduct of such public bidding is
not violative of private respondent's alleged vested right. In the
Court's viewpoint, the said right may be considered for the
purpose of awarding the contract of reclamation, only when the
latter's proposal are in all aspects equal to the bid of another
proponent. In this kind of situation, the private respondent's claim
to a right of first refusal indeed entitles it to priority in the award
of the contract. But this claimed right of first refusal cannot bar
another proponent from submitting a bid or proposal.
Note, however, that under Section 4 of PD 1594, a negotiated
contract may be allowed in exceptional circumstances enumerated
therein, subject to approval by the President. Executive Order No.
380, 28 which took effect November 27, 1989, also provided for
the President's approval of negotiated infrastructure contracts, the
cost of which, for the Department of Transportation and
Communications, amounts to P100 million and, for other
departments and government corporations, P50 million. Since the
project cost of the Cebu South Reclamation Project is over 4 billion
pesos, 29 it is ineluctable that the President's approval is required.
Consequently untenable is private respondent's contention that its
right or first refusal ipso facto entitles it to a contract of
reclamation, because it fails to take into consideration the legal
requirement that negotiated infrastructure contracts with costs
beyond the specified ceiling must be approved by the President.
Private respondent has no legal basis to claim that, because of its
initial expenses in preparing its proposed plans and feasibility
studies, it could dispense with or, worse, arrogate unto itself the
President's power to ultimately decide or approve a contract of
reclamation. In Malayan Integrated Industries Corporation vs.
Court of Appeals, 30 the Court recognized the President's authority
to disapprove the reclamation contract proposed by private
respondent despite the latter's initial investments; in that case, the
President approved, instead, the contract between the City of
Mandaue and F.F. Cruz, Inc. et al. 31
Issuance of Writ of Preliminary
Injunction Unjustified
From the foregoing discussion, it is clear that the respondent judge
gravely abused his discretion in issuing the Writ of Preliminary
Injunction. Section 3, Rule 58 of the Rules of Court, enumerates
the grounds for the issuance of a preliminary injunction. Although
private respondent alleged these grounds, 32 respondent judge
had the duty to take judicial notice 33 of PD 1818 and PD 1594.
These laws, based on the foregoing discussion, ineludibly show
that private respondent had no right to the relief it sought. It is
well-settled that, "before a writ of preliminary injunction may be
issued, there must be a clear showing, by the complaint that there
exists a right to be protected, and that the acts against which the
writ is to be directed are violative of the said right." 34 In
hindsight, the respondent judge's grant of the writ is truly
regrettable, as it unnecessarily delayed the implementation of an
important infrastructure project, a delay which had far-reaching
consequences on the economic development and interest of Cebu,
as well as the nation.
Second Issue:
Respondent Judge's Voluntary Inhibition
Petitioners 35 contend that the respondent judge gravely abused
his discretion, when he made a volte face on his previous Order
dated February 26, 1996 36 inhibiting himself from hearing the
case. In issuing said Order, Judge Burgos noted that Petitioner
Tomas Osmeña's Motion for Inhibition raised the ground of
"prejudgment" on the basis of statements made in his Order dated
February 22, 1996. Judge Burgos disposed as follows:
WHEREFORE, premises considered, the motion is granted, and
accordingly, in order to disabuse the mind of the movant and to
further faithfully serve the cause of justice, the Presiding Judge of
this Court hereby voluntarily inhibits himself from further sitting in
the present case with instruction to the Branch Clerk of Court to
send the records to the Office of the Clerk of Court for approval by
the Honorable Executive Judge Priscila S. Agana for final re-raffling.
The scheduled hearing for February 26, 1996 is cancelled.
SO ORDERED. 37
However, respondent judge reversed his voluntary inhibition, 38
meekly stating in his Order dated March 12, 1996 that "[t]he
allegation of prejudgment and partiality is so bare and empty as
movant Osmeña failed to present sufficient ground or proof for the
Presiding Judge to disqualify himself. The Judge realized the
mistake in granting the motion for inhibition when defendant
Osmeña misled the Court in asserting that on the same day
February 26, 1996, he would be filling an administrative case
against the judge for violation of PD 1818 and Supreme Court
Circulars issued in relation to said decree . . . . In that eventuality,
Osmeña said, the Judge would be bias[ed] and partial to him
because he [was] the complainant in the pending administrative
case." 39
We find merit in petitioners' contention. Judge Burgos inhibited
himself on the basis of Petitioner Osmeña's allegation of
prejudgment. In reversing his voluntary inhibition, respondent
judge nebulously branded Osmeña's allegations as "so bare and
empty." Judge Burgos' claim that the was misled by Osmeña's
threat of an administrative case is obviously a mere afterthought
that does not inspire belief. Although inhibition is truly
discretionary 40 on the part of the judge, the flimsy reasons
proffered above are insufficient to justify reversal of his previous
voluntary inhibition. As aptly pointed out by petitioners in their
Memorandum,
". . . a judge may not rescind his action and reassume jurisdiction
where good cause exists for the disqualification. Furthermore,
because a presumption arises, by reason of the judge's prior order
of disqualification, of the existence of the factual reason for such
disqualification, where the regular judge who has been disqualified
revokes the order of disqualification, and objection is made to such
revocation, it is not sufficient for the judge to enter an order
merely saying that he or she is not disqualified; the record should
clearly reveal the facts upon which the revocation is made." (46
Am Jur 2d § 234, p. 321) 41
We deem it important to point out that a judge must preserve the
trust and faith reposed in him by the parties as an impartial and
objective administrator of justice. When he exhibits actions that
give rise, fairly or unfairly, to perceptions of bias, such faith and
confidence are eroded, and he has no choice but to inhibit himself
voluntarily. It is basic that "[a] judge may not be legally prohibited
from sitting in a litigation, but when circumstances appear that will
induce doubt [on] his honest actuations and probity in favor of
either party, or incite such state of mind, he should conduct a
careful self-examination. He should exercise his discretion on in a
way that the people's faith in the courts of justice is not impaired.
The better course for the judge is to disqualify himself." 42
Third Issue:
Omnibus Motion Ineffective
Private respondent insists that the petitioners' Omnibus Motion 43
dated February 14, 1996 is a mere scrap of paper, as it contained a
notice of hearing addressed only to the clerk of court with no
proof of its service to the opposing counsel. 44 Private respondent
is clutching at straws. The petitioners' Omnibus Motion was filed
pursuant to the trial court's own order to show cause why the
injunction should not issue. It actually partakes of a brief or
memorandum showing the trial court's lack of jurisdiction to issue
the preliminary injunction. The Omnibus Motion raised a very
important matter which the court itself could have ruled on, even
motu proprio, considering that a jurisdictional question may be
raised at any time, even for the first time on appeal. 45 Moreover,
as expressed by petitioners, the issue is now moot, since the
private respondent filed an Amended Complaint giving petitioner
another fifteen days to file a responsive pleading. Within the said
period, "petitioners filed a Manifestation and Motion dated 7
March 1996, adopting the Omnibus Motion of 14 February 1996
and the Motion for Reconsideration with Cautionary Notice against
the Amended Complaint and the application for writ of preliminary
injunction therein contained." 46
Fourth Issue: Motion for Reconsideration Actually Filed
Finally, private respondent alleges that the petition should be
dismissed on the ground that petitioners did not file a motion for
reconsideration. 47 This allegation is negated by the simple fact
that a Motion for Reconsideration with Cautionary Notice, 48
although denied by the trial court, was actually filed by petitioners
within the prescribed period.
Epilogue
Litigants, lawyers and judges sometimes forget that they share the
responsibility of unclogging the dockets of the judiciary. As a
lamentable consequence, this Court is compelled to resolve cases
which are utterly bereft of merit. This is one of those cases.
Private Respondent Malayan Integrated Industries Corporation
("Malayan," for brevity) was the petitioner in Malayan Integrated
Industries Corp. vs. Court of Appeals, et al., 49 in which this Court,
citing PD 1818, held that no writ of injunction may be issued to
prevent the implementation of the reclamation project along the
coast of Mandaue City, which was deemed an infrastructure
project. In the present case, Private Respondent Malayan
nevertheless sought again the issuance of an injunctive writ to
restrain the implementation of a similar reclamation project in
adjacent Cebu City. In initiating the present proceedings, private
respondent evidently ignored our earlier pronouncement and
unnecessarily clogged the dockets of our courts.
The respondent trial judge, on the other hand, abetted Malayan's
brazen disregard of this Court's earlier ruling. Worse, he ruled that
the earlier case did not apply, because "E.O. No. 380 was not
presented by the parties for consideration by the High Court." 50
He maintained that EO 380, dated November 27, 1989, did not
include reclamation projects in the definition of infrastructure
projects.
As earlier stated, the ruling of the trial court is lamentable. We
note that, in the first place, EO 380 did not purport to be an
exclusive enumeration of infrastructure projects. Moreover, the
Supreme Court itself held — after the effectivity of EO 380 — that
reclamation projects are deemed infrastructure projects, thereby
resolving the present question with finality. It is unfortunate that
the trial court cavalierly contravened a categorical ruling of the
Supreme Court. But even more deplorable, it insinuated that this
Court did not take into account all applicable extant laws. To
propound such view is to undermine the people's trust and
confidence in the judiciary. This we cannot countenance. It is
opportune to remind judges of their sworn duty to follow the
doctrines and rulings of this Court.
In issuing writs of injunction, judges should observe the
admonition of the Court in Olalia vs. Hizon: 51

It has been consistently held that there is no power the exercise of
which is more delicate, which, requires greater caution,
deliberation and sound discretion, or more dangerous in a
doubtful case, than the issuance of an injunction. It is the strong
arm of equity that should never be extended unless to cases of
great injury, where courts of law cannot afford an adequate or
commensurate remedy in damages.
Every court should remember that an injunction is a limitation
upon the freedom of action of the defendant and should not be
granted lightly or precipitately. It should be granted only when the
court is fully satisfied that the law permits it and the emergency
demands it.
WHEREFORE, the petition is hereby GRANTED. The Orders of the
Regional Trial Court in Civil Case No. CEB-18292, dated February
22, 1996, March 12, 1996 and March 18, 1996, are REVERSED and
SET ASIDE. The temporary restraining order earlier issued is MADE
PERMANENT. Respondent judge is ordered to INHIBIT himself from
further hearing this case. Let Civil Case No. CEB-18292 be re-raffled
and the proceedings therein proceed with all deliberate dispatch.
SO ORDERED.
THIRD DIVISION
[G.R. No. 82586. September 11, 1992.]
HON. SALVADOR M. MISON, Commissioner of Customs, and
CARLOS L. RAZO, Collector of Customs of the Subport of Clark,
Petitioners, v. HON. ELI G.C. NATIVIDAD, Presiding Judge of the
Regional Trial Court, Branch XLVIII, San Fernando, Pampanga, and
CESAR SONNY CARLOS/CVC TRADING, Respondents.
Cruz, Durian, Agabin, Atienza, Alday & Tuason for Private
Respondent.
SYLLABUS
1. TAXATION; TARIFF AND CUSTOMS CODE; COLLECTOR OF
CUSTOMS HAS EXCLUSIVE ORIGINAL JURISDICTION OVER THE RES
SUBJECT OF THE WARRANT OF SEIZURE AND DETENTION TO THE
EXCLUSION OF THE REGIONAL TRIAL COURT. — The court a quo
has no jurisdiction over the res subject of the warrant of seizure
and detention. The respondent Judge, therefore, acted arbitrarily
and despotically in issuing the temporary restraining order,
granting the writ of preliminary injunction and denying the motion
to dismiss, thereby removing the res from the control of the
Collector of Customs and depriving him of his exclusive original
jurisdiction over the controversy. Respondent Judge exercised a
power he never had and encroached upon the exclusive original
jurisdiction of the Collector of Customs. By express provision of
law, amply supported by well-settled jurisprudence, the Collector
of Customs has exclusive jurisdiction over seizure and forfeiture
proceedings and regular courts cannot interfere with his exercise
thereof or stifle or put it to naught.
2. ISSUANCE OF WARRANT OF SEIZURE AND DETENTION
PRECLUDES INTERFERENCE OF THE REGIONAL TRIAL COURT;
ILLEGALITY OF THE WARRANT CANNOT JUSTIFY REGIONAL TRIAL
COURT’S INTERFERENCE; OWNERSHIP OF GOODS OR LEGALITY OF
THEIR ACQUISITION CAN BE RAISED IN SEIZURE PROCEEDINGS. —
A warrant of seizure and detention having already been issued,
presumably in the regular course of official duty, the Regional Trial
Court of Pampanga was indisputably precluded from interfering in
the said proceedings. That in his complaint in Civil Case No. 8109
private respondent alleges ownership over several vehicles which
are legally registered in his name, having paid all the taxes and
corresponding licenses incident thereto, neither divests the
Collector of Customs of such jurisdiction nor confers upon the said
trial court regular jurisdiction over the case. Ownership of goods or
the legality of its acquisition can be raised as defenses in a seizure
proceeding; if this were not so, the procedure carefully delineated
by law for seizure and forfeiture cases may easily be thwarted and
set to naught by scheming parties. Even the illegality of the
warrant of seizure and detention cannot justify the trial court’s
interference with the Collector’s jurisdiction. In the first place,
there is a distinction between the existence of the Collector’s
power to issue it and the regularity of the proceeding taken under
such power. In the second place, even if there be such an
irregularity in the latter, the Regional Trial Court does not have the
competence to review, modify or reverse whatever conclusions
may result therefrom.
DECISION
DAVIDE, JR., J.:
This is a petition for certiorari and prohibition filed on 6 April 1988
to annul, for having been issued without jurisdiction or with grave
abuse of discretion, the 26 February 1988 Resolution of
respondent Judge — denying petitioners’ motion to dismiss Civil
Case No. 8109 pending before Branch 48 of the Regional Trial
Court (RTC) of Pampanga and granting private respondent’s
motion therein for the issuance of a writ of preliminary injunction
— and to enjoin respondent Judge from proceeding further in said
case. It resurrects a long-settled issue of the jurisdiction of the
Regional Trial Court over actions involving articles subject to
seizure proceedings under the Tariff and Customs
Code.chanrobles.com.ph : virtual law library
In the Resolution of 18 April 1988, this Court required the
respondents to comment on the petition and issued a Temporary
Restraining Order restraining the respondent Judge from further
proceeding with the aforementioned Civil Case No. 8109 or from
enforcing and/or carrying out his Resolution of 26 February 1988.
1
Private respondent subsequently filed his Comment 2 to the
petition, to which petitioners filed a Reply. 3 Private respondent
then filed a Rejoinder 4 to the latter.
This Court gave due course to the petition and required the parties
to submit their respective Memoranda. 5 Both manifested that
they have sufficiently expounded on the relevant issues in their
respective Memoranda, which the Court noted and granted.
The factual antecedents disclosed in the petition are as
follows:chanrob1es virtual 1aw library
In a sworn letter 6 dated 7 February 1988 and addressed to the
Commissioner of Customs, one Butch Martinez informed the
former of the existence of both "assembled and disassembled"
knocked-down vehicles, particularly Toyota Lite Aces, at the
compound CVC Trading, which is owned by a certain Mr. Castro
and located at St. Jude Avenue, St. Jude Village, San Fernando,
Pampanga. Martinez requested for an immediate investigation
thereon and prosecution for the violation of customs laws.
On the basis thereof, Gen. Benjamin C. Cruz, Acting Director of the
National Customs Police, formed a team composed of National
Customs Police (NCP) and Customs Intelligence and Investigation
Division (CIID) members, issuing the same a Mission Order 7 on 11
February 1988. The team proceeded to San Fernando, Pampanga
on the same day, giving due notice of their presence to the PC
Region III Command and the PC-INP Station at San Fernando,
Pampanga.
Upon arrival at the place pinpointed by Mr. Martinez at around
11:00 p.m., the team found a fenced area containing twenty (20)
units of fully and partly assembled Toyota Lite Ace vans. It
immediately took possession and control of the motor vehicles by
cordoning off the enclosure. Thereafter, at about 11:30 p m., two
(2) members of the team were designated to secure a warrant of
seizure and detention from the Collector of Customs of the
Subport of Clark, 8 herein petitioner Carlos L. Razo. The latter
instituted seizure proceedings against the abovementioned
vehicles (Seizure Identification No. CAB-01-88), entitled "Republic
of the Philippines versus Twenty (20) units Toyota Lite-Ace, CVC
Trading St. Jude Ave., Dolores Homesite, San Fernando, Pampanga,
OWNER/CLAIMANT", for the violation of "Section 2530 (f) and (1)-
1 & 5" of the Tariff and Customs Code, in relation to Central Bank
regulations. Accordingly, at about 8:00 a.m. on 12 February 1988,
he issued a Warrant of Seizure and Detention. 9
Since receipt of the warrant was refused by the owner/claimant or
any of his representatives, the same was served by substituted
service through the posting of a copy thereof on one of the subject
motor vehicles found near the gate of the stockyard. An inventory
of the vehicles was conducted and a copy thereof was attached to
the return of the warrant made to the issuing authority.
At about 11:00 a.m. on 12 February 1988, when the team was
about to haul the motor vehicles away, two (2) Regional Trial Court
sheriffs arrived with a temporary restraining order issued on that
date by the respondent Judge, as Executive Judge of the Regional
Trial Court of San Fernando, Pampanga; the order was issued in
connection with Civil Case No. 8109, entitled "Sonny Carlos,
plaintiff, versus Bureau of Customs and/or Customs Police from
seizing or confiscating the vehicles until further ordered, and
directed the defendants to attend the raffle of the case on 26
February 1988 at 9:00 o’clock in the morning and show cause why
a writ of preliminary injunction should not be issued against them.
It further required plaintiff to submit within twenty four (24) hours
from that date the list of vehicles in question and "not to dispose
any (sic) of them pending further order of the court." 10
In his Complaint 11 in the above-entitled case, private respondent
alleges that he is the owner of several vehicles which are legally
registered in his name and that he has paid all the taxes and
"corresponding licenses" therefor; he further avers that elements
of the defendant Bureau of Customs and/or Customs Police have
surrounded his residence threatening to take possession of the
vehicles. He finally prays that the latter be enjoined from doing so
and that they be ordered to pay damages in the sum of
P50,000.00.
By virtue of the restraining order, the physical transfer of the
vehicles was deferred, however, elements of the National Customs
Police and the PC Regional Command remained deployed in the
area to assert possession and control over the seized motor
vehicles by the Bureau of Customs.chanrobles virtualawlibrary
chanrobles.com:chanrobles.com.ph
On 16 February 1988, lawyers of the Bureau of Customs filed a
Motion to Dismiss 12 Civil Case No. 8109 alleging therein (a) the
lack of jurisdiction of the Regional Trial Court over the subject
vehicles in view of the exclusive jurisdiction of the Collector of
Customs over seizure and forfeiture cases, and (b) the failure of
the plaintiff to exhaust administrative remedies.
On 17 February 1988, the private respondent filed an
Oppositions/Comment on the Motion to Dismiss 13 alleging,
among others, that the Warrant of Seizure and Detention did not
comply with the requirements for a valid search warrant under the
Constitution, and that taxes for the vehicles have been paid to the
Bureau of Internal Revenue (BIR).
The Motion to Dismiss was heard on 19 February 1988 by the
respondent Judge, to whose branch the case was raffled off. After
said hearing, the private respondent’s motion and application for
preliminary injunction were deemed submitted for resolution.
On 22 February 1988, private respondent filed an Amended
Complaint 14 changing his name from "Sonny Carlos" to "CESAR
SONNY CARLOS" and naming as defendants, in place of the
"BUREAU OF CUSTOMS AND/OR CUSTOMS POLICE", "ATTY.
CARLOS L. RAZO, in his capacity as Collector of Customs; LOUIE
ROMERO, BILLY BIBIT, their authorized deputies and JOHN DOES."
In this Amended Complaint, private respondent assails the subject
warrant for being patently "illegal and fatally defective" and void
of any virtue; reiterates his willingness to post a bond "in an
amount the Court may fix conditioned upon the damages that the
defendants may suffer as a consequence of the issuance of the
injunction;" and asks for P500,000.00 as actual damages,
P100,000.00 as exemplary and corrective damages, P50,000.00 as
moral damages and P50,000.00 as attorney’s fees.
In the meantime, the hearing of Seizure Identification No. CAB-01-
88 was set for 18 and 19 February 1988, per Notice of Hearing
dated 15 February 1988 and issued by petitioner Collector of
Customs. Since the owner/claimant CVC Trading refused to accept
a copy of the said notice, a follow-up notice of hearing was
transmitted to it thru a telegram; the latter replied also by
telegram,15 declaring that:jgc:chanrobles.com.ph
"We are the legal possessors/owners (sic) of the vehicles in our
compound there can be no forfeiture since a case has been lodged
before the civil courts hearing on Feb. 19, 1988 the courts have
assumed jurisdiction to your exclusion.
Moreover elementary due process requires service of documents
complaint. There can be no service of summon’s (sic) or notice of
hearing thru telegrams."cralaw virtua1aw library
At the hearing on 18 February 1988, Attys. Napoleon Gatmaitan
and Conrado Unlayao, CIID, Bureau of Customs, appeared for the
Government. No appearance was entered for the owner/claimant.
Thus, the Government was allowed to present evidence ex-parte.
On 26 February 1988, petitioner Collector of Customs rendered a
Decision 16 in the said seizure proceedings, the dispositive portion
of which reads:chanrobles virtual lawlibrary
"WHEREOF, by authority of law vested in the undersigned, it is
hereby ordered that the Twenty (20) Units Toyota Lite Ace covered
by this seizure case be, as they are hereby, declared forfeited in
favor of the Government to be disposed of in the manner provided
for by law.
Let copies of this Decision be furnished all parties and office (sic)
concerned, with a copy thereof posted in the Bulletin Board of this
Customhouse, for their information guidance and appropriate
action."cralaw virtua1aw library
On the same date, the respondent Judge issued a Resolution 17 in
Civil Case No. 8109 denying the motion to dismiss and granting the
application for a writ of preliminary injunction. The pertinent
portions thereof read:jgc:chanrobles.com.ph
"I. Resolution on the Motion to Dismiss with Prayer to Lift
Restraining Order
x x x
A reading of the complaint will show that it was alleged that the
plaintiff is the owner of the subject vehicles. He is in actual and
physical possession of the same. Plaintiff enjoys the presumption
of ownership, to (sic) which he has to protect.
x x x
It is to be noted that the subject matter of the complaint is the
legal ownership of the vehicles and damages being asked by
plaintiff, thus, this Court can assume jurisdiction over the case. The
mere allegation of the defendants that the subject vehicles were
smuggled based on ‘reliable information’ will not divest this Court
of jurisdiction.

x x x Instance, when exercised in an action for recovery of personal
In this particular case, there is no showing that plaintiff is an
importer who imported dutiable goods, in entering the port of
Clark Air Base, imported thru that port. The goods are in private
(sic) place owned by plaintiff, and not in the possession of the
collector of customs.
x x x
The numerous Supreme Court decisions cited by movant in his
motion to dismiss have very remote pertinence at the case at car.
In the cited cases, dutiable imported goods or articles were seized
while on vessels and/or customs zone (sic), and the alleged owners
filed cases of replevin or recovery of personal properties.
II. Resolution in the Issuance of Writ of Preliminary Injunction
x x x to conclude that the legislators intended to divest the Court of
Having substantiated the said allegations, in his complaint with
Annexes and considering the oral arguments of the parties, it is
hereby ordered and directed that after the plaintiff filed (sic) the
bond in the amount of P100,000.00 as fixed by this Court, all the
defendants and any other persons acting under their command, or
for (sic) in their behalf, to (sic) desist and refrain from guarding the
area of the plaintiff and from seizing or confiscating the vehicles
involved in this case pending termination of this litigation and/or
unless a contrary order is issued by this Court. Thus, the
defendants is (sic) hereby inhibited for the meantime to guard the
area or commit trespass of plaintiffs’ premises in any manner
restrain (sic) the movement of herein plaintiff and his
representatives or employees, considering that there is standing
(sic) of this Court that pending the termination of this case, the
said vehicles should not be disposed of."cralaw virtua1aw library
Hence, this petition which We find to be meritorious. It should be
granted.chanroblesvirtualawlibrary
The court a quo jurisdiction over the res subject of the warrant of
seizure and detention. The respondent Judge, therefore, acted
arbitrarily and despotically in issuing the temporary restraining
order, granting the writ of preliminary injunction and denying the
motion to dismiss, thereby removing the res from the control of
the Collector of Customs and depriving him of his exclusive original
jurisdiction over the controversy. Respondent Judge exercised a
power he never had and encroached upon the exclusive original
jurisdiction of the Collector of Customs. By express provision of
law, amply supported by well-settled jurisprudence, the Collector
of Customs has exclusive jurisdiction over seizure and forfeiture
proceedings and regular courts cannot interfere with his exercise
thereof or stifle or put it to naught.
In the 1966 case of Pacis v. Averia, 18 this Court, speaking through
Mr. Justice J.P. Bengzon, held that:jgc:chanrobles.com.ph
"The Tariff and Customs Code, in Section 2530 thereof, lists the
kinds of property subject to forfeiture. At the same time, in Part 2
of Title VI thereof, it provides for the procedure in seizure and
forfeiture cases and vests in the Collector of Customs the authority
to hear and decide said cases. [Section 2312, R.A. 1937] The
Collector’s decision is appealable to the Commissioner of Customs
Section 2313, R.A. 1937] whose decision is in turn appealable to
the Court of Tax Appeals. [Section 2402, R.A. 1937, Sections 7 and
11, R.A. 1125]. An aggrieved party may appeal from a judgment of
the Court of Tax Appeals directly to this Court [Section 18, R.A.
1125; Rule 44, Rules of Court]. On the other hand, Section 44(c) of
the Judiciary Act of 1948 [As amended by R.A. 3828] lodges in the
Court of First Instance original jurisdiction in all cases in which the
value of the property in controversy amounts to more than ten
thousand pesos. This original jurisdiction of the Court of First
property which is a subject of a forfeiture proceeding in the
Bureau of Customs, tends to encroach upon, and to render futile,
the jurisdiction of the Collector of Customs in seizure and
forfeiture proceedings. This is precisely what took place in this
case. The seizure and forfeiture proceedings against the M/B
‘Bukang Liwayway’ before the Collector of Customs of Manila, was
stifled by the issuance of a writ of replevin by the Court of First
Instance of Cavite.
Should Section 44(c) of the Judiciary Act of 1948 give way to the
provisions of the Tariff and Customs Code. or vice versa? In Our
opinion, in this particular case, the Court of First Instance should
yield to the jurisdiction of the Collector of Customs. The
jurisdiction of the Collector of Customs is provided for in Republic
Act 1937 which took effect on July 1, 1957, much later than the
Judiciary Act of 1948. It is axiomatic that a later law prevails over a
prior statute [Herman v. Radio Corporation of the Philippines, 50
Phil. 490; Pampanga Sugar Mills v. Trinidad, 279 U.S. 211, 73 L. ed.
665]. Moreover, on grounds of public policy, it is more reasonable
First Instance of the prerogative to replevin a property which is a
subject of a seizure and forfeiture proceedings for violation of the
Tariff and Customs Code. Otherwise, actions for forfeiture of
property for violation of Customs laws could easily be undermined
by the simple device of replevin.chanrobles.com.ph : virtual law
library
Furthermore, Section 2303 of the Tariff and Customs Code
requires the Collector of Customs to give to the owner of the
property sought to be forfeited written notice of the seizure and to
give him the opportunity to be heard in his defense. This provision
clearly indicates the intention of the law to confine in the Bureau
of Customs the determination of all questions affecting the
disposal of property proceeded against in a seizure and forfeiture
case. The judicial recourse of the property owner is not in the
Court of First Instance but in the Court of Tax Appeals, and only
after exhausting administrative remedies in the Bureau of
Customs."cralaw virtua1aw library
In De Joya v. Lantin, 19 this Court, speaking again through Mr.
Justice J.P. Bengzon, declared:jgc:chanrobles.com.ph
"The goods in question are imported articles entered at the Port of
Cebu. Should they be found to have been released irregularly from
Customs custody in Cebu City, they are subject to seizure and
forfeiture, the proceedings for which comes within the jurisdiction
of the Bureau of Customs pursuant, to Republic Act 1937.
Said proceedings should be followed; the owner of the goods may
set up defenses therein (Pacis v. Averia, L-22526, Nov. 29, 1966).
From the decision of the Commissioner of Customs appeal lies to
the Court of Tax Appeals, as provided in Sec. 2402 of Republic Act
1937 and Sec. 11 of Republic Act 1125. To permit recourse to the
Court of First Instance in cases of seizure of imported goods would
in effect render ineffective the power of the Customs authorities
under the Tariff Code and deprive the Court of Tax Appeals of one
of its exclusive appellate jurisdiction. As this Court has ruled in
Pacis v. Averia, supra, Republic Acts 1937 and 1125 vest
jurisdiction over seizure and forfeiture proceedings exclusively
upon the Bureau of Customs and the Court of Tax Appeals. Such
law being special in nature, while the Judiciary Act defining the
jurisdiction of Courts of First Instance is a general legislation, not
to mention that the former are later enactments, the Court of First
Instance should yield to the jurisdiction of the Customs
authorities."cralaw virtua1aw library
This rule was subsequently reiterated in Romualdez v. Arca, 20 De
Joya v. David, 21 Diosamito v. Balanque, 22 Lopez v. Commissioner
of Customs,23 Ponce Enrile v. Vinuya, 24 Collector of Customs v.
Torres, 25 Pacis v. Geronimo 26 and De la Fuente v. De Veyra. 27
The language of the foregoing rule is simple, clear and leaves no
doubt as to the Regional Trial Court’s lack of jurisdiction over the
res which has already been made the subject of seizure and
forfeiture proceedings. Frankly, this Court is unable to understand
why the respondent Judge misread the same; perhaps, he simply
chose to ignore it. At any rate, such behavior is highly
condemnable.cralawnad
A warrant of seizure and detention having already been issued,
presumably in the regular course of official duty, 28 the Regional
Trial Court of Pampanga was indisputably precluded from
interfering in the said proceedings. That in his complaint in Civil
Case No. 8109 private respondent alleges ownership over several
vehicles which are legally registered in his name, having paid all
the taxes and corresponding licenses incident thereto, neither
divests the Collector of Customs of such jurisdiction nor confers
upon the said trial court regular jurisdiction over the case.
Ownership of goods or the legality of its acquisition can be raised
as defenses in a seizure proceeding; 29 if this were not so, the
procedure carefully delineated by law for seizure and forfeiture
cases may easily be thwarted and set to naught 30 by scheming
parties. Even the illegality of the warrant of seizure and detention
cannot justify the trial court’s interference with the Collector’s
jurisdiction. In the first place, there is a distinction between the
existence of the Collector’s power to issue it and the regularity of
the proceeding taken under such power. In the second place, even
if there be such an irregularity in the latter, the Regional Trial
Court does not have the competence to review, modify or reverse
whatever conclusions may result therefrom. In Ponce Enrile v.
Vinuya, 31 this Court had the occasion to
state:jgc:chanrobles.com.ph
"2. Respondents, however, notwithstanding the compelling force
of the above doctrines, would assert that respondent Judge could
entertain the replevin suit as the seizure is illegal, allegedly
because the warrant issued is invalid and the seizing officer
likewise was devoid of authority. This is to lose sight of the
distinction, as earlier made mention of, between the existence of
the power and the regularity of the proceeding taken under it. The
governmental agency concerned, the Bureau of Customs, is vested
with exclusive authority. Even if it be assumed that in the exercise
of such exclusive competence a taint of illegality may be correctly
imputed, the most that can be said is that under certain
circumstances the grave abuse of discretion conferred may oust it
of such jurisdiction. It does not mean however that
correspondingly a court of first instance is vested with competence
when clearly in the light of the above decisions the law has not
seen fit to do so. The proceeding before the Collector of Customs
is not final. An appeal lies to the Commissioner of Customs and
thereafter to the Court of Tax Appeals. It may even reach this
Court through the appropriate petition for review. The proper
ventilation of the legal issues raised is thus indicated. Certainly a
court of first instance is not therein included. It is devoid of
jurisdiction."cralaw virtua1aw library
WHEREFORE, the Resolution of respondent Judge of 26 February
1988 in Civil Case No. 8109 before Branch 48 of the Regional Trial
Court of Pampanga, and all proceedings had therein, are
NULLIFIED and SET ASIDE and the said case is hereby ordered
DISMISSED.chanroblesvirtualawlibrary
The temporary restraining order issued by this Court on 18 April
1988 is hereby made permanent.
SO ORDERED.
FIRST DIVISION
[G.R. No. 102998. July 5, 1996.]
BA FINANCE CORPORATION, Petitioner, v. HON. COURT OF
APPEALS and ROBERTO M. REYES, Respondents.
DECISION
VITUG, J.:
The case at bar is a suit for replevin and damages. The petition for
review on certiorari assails the decision of the Court of Appeals 1
in CA-G.R. CV No. 23605 affirming that of the Regional Trial Court
of Manila, Branch XX, 2 which has disposed of its Civil Case No. 87-
42270 in this wise:jgc:chanrobles.com.ph
"WHEREFORE, the case against defendant-spouses (sic) Reynaldo
Manahan is hereby dismissed without prejudice, for failure to
prosecute. Plaintiff having failed to show the liability of defendant
John Doe in the person of Roberto M. Reyes, the case against the
latter should likewise be dismissed. Moreover, plaintiff is hereby
directed to return the vehicle seized by virtue of the order of
seizure issued by this Court with all its accessories to the said
Roberto M. Reyes." 3
The decisions of both the appellate court and the court a quo are
based on a like finding of the facts hereinafter briefly narrated.
The spouses Reynaldo and Florencia Manahan executed, on 15
May 1980, a promissory note 4 binding themselves to pay
Carmasters, Inc., the amount of P83,080.00 in thirty-six monthly
installments commencing 01 July 1980. To secure payment, the
Manahan spouses executed a deed of chattel mortgage 5 over a
motor vehicle, a Ford Cortina 1.6 GL. with motor and serial number
CUBFWE-801010. Carmasters later assigned 6 the promissory note
and the chattel mortgage to petitioner BA Finance Corporation
with the conformity of the Manahans. When the latter failed to
pay the due installments, petitioner sent demand letters. The
demands not having been heeded, Petitioner, on 02 October 1987,
filed a complaint for replevin with damages against the spouses, as
well as against a John Doe, praying for the recovery of the vehicle
with an alternative prayer for the payment of a sum of money
should the vehicle not be returned. Upon petitioner’s motion and
the filing of a bond in the amount of P169, 161.00 the lower court
issued a writ of replevin. The court, however, cautioned petitioner
that should summons be not served on the defendants within
thirty (30) days from the writ’s issuance, the case would be
dismissed to failure to prosecute. 7 The warning was based on
what the court perceived to be the deplorable practice of some
mortgagees of "freezing (the) foreclosure or replevin cases" which
they would so "conveniently utilize as a leverage for the collection
of unpaid installments on mortgaged chattels." 8
The service of summons upon the spouses Manahan was caused to
be served by petitioner at No. 35 Lantana St., Cubao, Quezon City.
The original of the summons had the name and the signature of
private respondent Roberto M. Reyes indicating that he received,
on 14 October 1987, a copy of the summons and the complaint. 9
Forthwith, Petitioner, through its Legal Assistant, Danilo E. Solano,
issued a certification to the effect that it had received from Orson
R. Santiago, the deputy sheriff of the Regional Trial Court of
Manila, Branch 20, the Ford Cortina seized from private
respondent Roberto M. Reyes, the John Doe referred to in the
complaint, 10 in Sorsogon, Sorsogon. 11 On 20 October 19871 the
lower court came out with an order of seizure.
Alleging possession in good faith, private respondent filed, on 26
October 1987, a motion for an extension of time within which to
file his answer and/or a motion for intervention. The court granted
the motion.
A few months later, or on 18 February 1988, the court issued an
order which, in part, stated:jgc:chanrobles.com.ph
"Perusal of the record shows that an order for the seizure of
personal property was issued on October 20, 1987 in pursuance to
a previous order of the Court dated October 13, 1987. However, to
date, there is no showing that the principal defendants were
served with summons inspite of the lapse of four (4) months.
"Considering, this is a replevin case and to forestall the evils that
arise from this practice, plaintiff failing to heed the Order dated
October 13, 1987, particularly second paragraph thereof, the
above-entitled case is hereby ordered DISMISSED for failure to
prosecute and further ordering the plaintiff to return the property
seized with all its accessories to defendant John Doe in the person
of Roberto M. Reyes.
"SO ORDERED." 12
On 26 February 1988, petitioner filed a notice of dismissal of the
case "without prejudice and without pronouncement as to costs,
before service of Summons and Answer, under Section 1, Rule 17,
of the Rules of Court." 13 It also sought in another motion the
withdrawal of the replevin bond. In view of the earlier dismissal of
the case (for petitioner’s failure to prosecute), the court, on 02
March 1988, merely noted the notice of dismissal and denied the
motion to withdraw the replevin bond considering that the writ of
replevin had meanwhile been implemented. 14
On 09 March 1988, private respondent filed a motion praying that
petitioner be directed to comply with the court order requiring
petitioner to return the vehicle to him. In turn, petitioner filed, on
14 March 1988, a motion for the reconsideration of the orders of
18 February 1988 and 02 March 1988 contending that: (a) the
dismissal of the case was tantamount to adjudication on the merits
that thereby deprived it with the remedy to enforce the
promissory note, the chattel mortgage and the deed of
assignment, under Section 3, Rule 117, of the Rules of Court; (b)
the order to return the vehicle to private respondent was a
departure from jurisprudence recognizing the right of the
mortgagor to foreclose the property to respond to the unpaid
obligation secured by the chattel mortgage, and (c) there were no
legal and factual bases for the court’s view that the filing of the
replevin case was "characterized (by) evil practices." 15
On 20 April 1988, the court granted petitioner’s motion for
reconsideration and accordingly recalled the order directing the
return of the vehicle to private respondent, set aside the order
dismissing the case, directed petitioner "to cause the service of
summons together with a copy of the complaint on the principal
defendants within five (5) days from receipt" 16 thereof at
petitioners expense, and ordered private respondent to answer
the complaint.
A few months later, or on 02 August 1988, petitioner filed a
motion to declare private respondent in default. The court granted
the motion on that same day and declared private respondent "in
default for his failure to file the . . . answer within the
reglementary period." 17 The court likewise granted petitioner’s
motion to set the case for the presentation, ex parte of evidence.
Petitioner, thereupon, submitted the promissory note, the deed of
chattel mortgage, the deed of assignment, a statement of account
in the name of Florencia Manahan and two demand letters.
On 27 February 1989, the trial court rendered a decision dismissing
the complaint against the Manahans for failure of petitioner to
prosecute the case against them. It also dismissed the case against
private respondent for failure of petitioner to show any legal basis
for said respondent’s liability. The court
ratiocinated:jgc:chanrobles.com.ph
". . . Roberto M. Reyes is merely ancillary debtor in this case. The
defendant spouses Manahan being the principal debtor(s) and as
there is no showing that the latter has been brought before the
jurisdiction of this court, it must necessarily follow that the plaintiff
has no cause of action against said Roberto M. Reyes herein before
referred to as defendant John Doe. Under the circumstances, it is
incumbent upon the plaintiff to return the seized vehicle unto the
said Roberto M. Reyes." 18
In its appeal to the Court of Appeals, petitioner has asserted that a
suit for replevin aimed at the foreclosure of the chattel is an action
quasi in rem which does not necessitate the presence of the
principal obligors as long as the court does not render any
personal judgment against them. This argument did not persuade
the appellate court, the latter holding that —
". . . In action quasi in rem an individual is named as defendant and
the purpose of the proceeding is to subject his interest therein to
the obligation or lien burdening the property, such as proceedings
having for their sole object the sale or disposition of the property
of the defendant, whether by attachment, foreclosure, or other
form of remedy (Sandejas v. Robles, 81 Phil. 421). In the case at
bar, the court cannot render any judgment binding on the
defendants spouses for having allegedly violated the terms and
conditions of the promissory note and the contract of chattel
mortgage on the ground that the court has no jurisdiction over
their persons, no summons having been served on them. That
judgment, it rendered, is void for having denied the defendants
spouses due process of law which contemplates notice and
opportunity to be heard before judgment is rendered, affecting
one’s person or property (Macabingkil v. Yatco, 26 SCRA 150. 157).
"It is next contended by appellant that as between appellant, as
mortgagee, and John Doe, whose right to possession is dubious if
not totally non-existent, it is the former which has the superior
right of possession.
‘We cannot agree.
"It is an undisputed fact that the subject motor vehicle was taken
from the possession of said Roberto M. Reyes, a third person with
respect to the contract of chattel mortgage between the appellant
and the defendants spouses Manahan.
"The Civil Code expressly provides that every possessor has a right
to be respected in his possession (Art. 539, New Civil Code); that
good faith is always presumed, and upon him who alleges bad faith
on the part of a possessor rests the burden of proof (Art. 527,
ibid.); and that the possession of movable property acquired in
good faith is equivalent to a title; nevertheless, one who has lost
any movable or has been unlawfully deprived thereof, may recover
it from the person in possession of the same (Art. 559, ibid.). Thus,
it has been held that a possessor in good faith is entitled to be
respected and protected in his possession as if he were the true
owner thereof until a competent court rules otherwise (Chus Hai v.
Kapunan, 104 Phil. 110; Yu, Et. Al. v. Hon. Honrado, etc., Et Al., 99
SCRA 237). In the case at bar, the trial court did not err in holding
that the complaint does not state any cause of action against
Roberto M. Reyes, and in ordering the return of the subject chattel
to him." 19
The appellate court, subsequently, denied petitioner’s motion for
reconsideration.
In the instant appeal, petitioner insists that a mortgagee can
maintain an action for replevin against any possessor of the object
of a chattel mortgage even if the latter were not a party to the
mortgage.
Replevin, broadly understood, is both a form of principal remedy
and of a provisional relief. It may refer either to the action itself,
i.e., to regain the possession of personal chattels being wrongfully
detained from the plaintiff by another, or to the provisional
remedy that would allow the plaintiff to retain the thing during the
pendency of the action and hold it pendente lite. 20 The action is
primarily possessory in nature and generally determines nothing
more than the right of possession. Replevin is so usually described
as a mixed action, being partly in rem and partly in personam-in
rem insofar as the recovery of specific property is concerned, and
in personam as regards to damages involved. As an "action in rem,
the gist of the replevin action is the right of the plaintiff to obtain
possession of specific personal property by reason of his being the
owner or of his having a special interest therein. 21 Consequently,
the person in possession of the property sought to be replevied is
ordinarily the proper and only necessary party defendant, and the
plaintiff is not required to so join as defendants other persons
claiming a right on the property but not in possession thereof. Rule
60 of the Rules of Court allows an application for the immediate
possession of the property but the plaintiff must show that he has
a good legal basis, i.e., a clear title thereto, for seeking such
interim possession.
Where the right of the plaintiff to the possession of the specific
property is so conceded or evident, the action need only be
maintained against him who so possesses the property. In rem
actio est per quam rem nostram quae ab alio possidetur petimus
et semper adversus eum est qui rem possidet. In Northern Motors,
Inc. v. Herrera, 22 the Court has said:jgc:chanrobles.com.ph
"There can be no question that persons having a special right of
property in the goods the recovery of which is sought, such as a
chattel mortgagee, may maintain an action for replevin therefor.
Where the mortgage authorizes the mortgagee to take possession
of the property on default, he may maintain an action to recover
possession of the mortgaged chattels from the mortgagor or from
any person in whose hands he may find them." 23
In effect then, the mortgagee, upon the mortgagor’s default, is
constituted an attorney-in-fact of the mortgagor enabling such
mortgagee to act for and in behalf of the owner. Accordingly, that
the defendant is not privy to the chattel mortgage should be
inconsequential. By the fact that the object of replevin is traced to
his possession, one properly can be a defendant in an action for
replevin. It is here assumed that the plaintiffs right to possess the
thing is not or cannot be disputed.
In case the right of possession on the part of the plaintiff, or his
authority to claim such possession or that of his principal, is put to
great doubt (a contending party might contest the legal bases for
plaintiffs cause of action or an adverse and independent claim of
ownership or right of possession is raised by that party), it could
become essential to have other persons involved and accordingly
impleaded for a complete determination and resolution of the
controversy. For instance, in Servicewide Specialists, Inc. v. Court
of Appeals, Et Al., G.R. No. 103301, 08 December 1995 this Court
ruled:jgc:chanrobles.com.ph
"While, in its present petition for review on certiorari, Servicewide
has raised a number of points, the crucial issue still remains,
however, to be whether or not an action filed by the mortgagee
for replevin to effect a foreclosure of the property covered by the
chattel mortgage would require that the mortgagor be so
impleaded as an indispensable party thereto.
"Rule 60 of the Rules of Court allows a plaintiff, in an action for the
recovery of possession of personal property, to apply for a writ of
replevin if it can be shown that he is the owner of the property
claimed . . . or is entitled to the possession thereof.’ The plaintiff
need not be the owner so long as he is able to specify his right to
the possession of the property and his legal basis therefor. The
question then, insofar as the matter finds relation to the instant
case, is whether or not the plaintiff (herein petitioner) who has
predicated his right on being the mortgagee of a chattel mortgage
should implead the mortgagor in his complaint that seeks to
recover possession of the encumbered property in order to effect
its foreclosure.
"The answer has to be in the affirmative. In a suit for replevin, a
clear right of possession must be established. A foreclosure under
a chattel mortgage may properly be commenced only once there is
default on the part of the mortgagor of his obligation secured by
the mortgage. The replevin in the instant case has been sought to
pave the way for the foreclosure of the object covered by the
chattel mortgage. The conditions essential for that foreclosure
would be to show, firstly, the existence of the chattel mortgage
and, secondly, the default of the mortgagor. These requirements
must be established since the validity of the plaintiff’s exercise of
the right of foreclosure are inevitably dependent thereon. It would
thus seem, considering particularly an adverse and independent
claim of ownership by private respondent that the lower court
acted improvidently when it granted the dismissal of the complaint
against Dollente, albeit on petitioner’s (then plaintiff) plea, on the
ground that the ‘non-service of summons upon Ernesto Dollente
(would) only delay the determination of the merits of the case, to
the prejudice of the parties.’ In Imson v. Court of Appeals, we have
explained:jgc:chanrobles.com.ph
". . . An indispensable party is one whose interest will be affected
by the court’s action in the litigation, and without whom no final
determination of the case can be had. The party’s interest in the
subject matter of the suit and in the relief sought are so
inextricably intertwined with the other parties’ that his legal
presence as a party to the proceeding is an absolute necessity. In
his absence there cannot be a resolution of the dispute of the
parties before the court which is effective, complete, or equitable.
"Conversely, a party is not indispensable to the suit if his interest
in the controversy or subject matter is distinct and divisible from
the interest of the other parties and will not necessarily be
prejudiced by a judgment which does complete justice to the
parties in court. He is not indispensable if his presence would
merely permit complete relief between him and those already
parties to the action or will simply avoid multiple litigation."cralaw
virtua1aw library
"Without the presence of indispensable parties to a suit or
proceeding, a judgment of a court cannot attain real finality"
(Footnotes omitted.)
A chattel mortgagee, unlike a pledgee, need not be in, nor entitled
to the possession of the property unless and until the mortgagor
defaults and the mortgagee thereupon seeks to foreclose thereon.
Since the mortgagee’s right of possession is conditioned upon the
actual fact of default which itself may be controverted, the
inclusion of other parties, like the debtor or the mortgagor himself,
may be required in order to allow a full and conclusive
determination of the case. When the mortgagee seeks a replevin
in order to effect the eventual foreclosure of the mortgage, it is
not only the existence of, but also the mortgagor’s default on, the
chattel mortgage that, among other things, can properly uphold
the right to replevy the property. The burden to establish a valid
justification for that action lies with the plaintiff. An adverse
possessor, who is not the mortgagor, cannot just be deprived of
his possession, let alone be bound by the terms of the chattel
mortgage contract, simply because the mortgagee brings up an
action for replevin.
The appellate court, accordingly, acted well in arriving at its now
questioned judgment.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED. No
costs.
SO ORDERED.
SECOND DIVISION
G.R. No. 183018 August 3, 2011
ADVENT CAPITAL AND FINANCE CORPORATION, Petitioner,
vs.
ROLAND YOUNG, Respondent.
DECISION
CARPIO, J.:
The Case
This petition for review1 assails the 28 December 2007 Decision2
and 15 May 2008 Resolution3 of the Court of Appeals in CA-G.R. SP
No. 96266. The Court of Appeals set aside the 24 March 2006 and
5 July 2006 Orders4 of the Regional Trial Court of Makati City,
Branch 147, and directed petitioner Advent Capital and Finance
Corporation to return the seized vehicle to respondent Roland
Young. The Court of Appeals denied the motion for
reconsideration.
The Antecedents
The present controversy stemmed from a replevin suit instituted
by petitioner Advent Capital and Finance Corporation (Advent)
against respondent Roland Young (Young) to recover the
possession of a 1996 Mercedes Benz E230 with plate number
UMN-168, which is registered in Advent’s name.5
Prior to the replevin case, or on 16 July 2001, Advent filed for
corporate rehabilitation with the Regional Trial Court of Makati
City, Branch 142 (rehabilitation court).6
On 27 August 2001, the rehabilitation court issued an Order (stay
order) which states that "the enforcement of all claims whether
for money or otherwise, and whether such enforcement is by
court action or otherwise, against the petitioner (Advent), its
guarantors and sureties not solidarily liable with it, is stayed."7
On 5 November 2001, Young filed his Comment to the Petition for
Rehabilitation, claiming, among others, several employee benefits
allegedly due him as Advent’s former president and chief executive
officer.
On 6 November 2002, the rehabilitation court approved the
rehabilitation plan submitted by Advent. Included in the inventory
of Advent’s assets was the subject car which remained in Young’s
possession at the time.
Young’s obstinate refusal to return the subject car, after repeated
demands, prompted Advent to file the replevin case on 8 July
2003. The complaint, docketed as Civil Case No. 03-776, was
raffled to the Regional Trial Court of Makati City, Branch 147 (trial
court).
After Advent’s posting of ₱3,000,000 replevin bond, which was
double the value of the subject car at the time, through Stronghold
Insurance Company, Incorporated (Stronghold), the trial court
issued a Writ of Seizure8 directing the Sheriff to seize the subject
car from Young. Upon receipt of the Writ of Seizure, Young turned
over the car to Advent,9 which delivered the same to the
rehabilitation receiver.10
Thereafter, Young filed an Answer alleging that as a former
employee of Advent, he had the option to purchase the subject car
at book value pursuant to the company car plan and to offset the
value of the car with the proceeds of his retirement pay and stock
option plan. Young sought the (1) execution of a deed of sale over
the subject car; and (2) determination and payment of the net
amount due him as retirement benefits under the stock option
plan.
Advent filed a Reply with a motion to dismiss Young’s
counterclaim, alleging that the counterclaim did not arise from or
has no logical relationship with the issue of ownership of the
subject car.
After issues have been joined, the parties entered into pre-trial on
2 April 2004, which resulted in the issuance of a pre-trial order of
even date reciting the facts and the issues to be resolved during
the trial.
On 28 April 2005, the trial court issued an Order dismissing the
replevin case without prejudice for Advent’s failure to prosecute.
In the same order, the trial court dismissed Young’s counterclaim
against Advent for lack of jurisdiction. The order pertinently reads:
It appears that as of July 28, 2003, subject motor vehicle has been
turned over to the plaintiff, thru its authorized representative, and
adknowledged by the parties’ respective counsels in separate
Manifestations filed. To date, no action had been taken by the
plaintiff in the further prosecution of this case. Accordingly, this
case is ordered dismissed without prejudice on the ground of
failure to prosecute.
Anent plaintiff’s Motion to Dismiss defendant Young’s
counterclaim for benefits under the retirement and stock purchase
plan, the Court rules as follows: The only issue in this case is who is
entitled to the possession of the subject motor vehicle. This issue
may have a connection, but not a necessary connection with
defendant’s rights under the retirement plan and stock purchase
plan as to be considered a compulsory counterclaim.
xxx
Notably, defendant’s claim is basically one for benefits under and
by virtue of his employment with the plaintiff, and the subject
vehicle is merely an incident in that claim. Said claim is properly
ventilated, as it is resolvable by, the Rehabilitation Court which has
jurisdiction and has acquired jurisdiction, to the exclusion of this
Court. Accordingly, plaintiff’s Motion To Dismiss defendant
Young’s counterclaim is granted.11
On 10 June 2005, Young filed a motion for partial reconsideration
of the dismissal order with respect to his counterclaim.
On 8 July 2005, Young filed an omnibus motion, praying that
Advent return the subject car and pay him ₱1.2 million in damages
"(f)or the improper and irregular seizure" of the subject car, to be
charged against the replevin bond posted by Advent through
Stronghold.
On 24 March 2006, the trial court issued an Order denying Young’s
motion for partial reconsideration, viz:
In the instant case, defendant, in his counterclaim anchored her
[sic] right of possession to the subject vehicle on his alleged right
to purchase the same under the company car plan. However,
considering that the Court has already declared that it no longer
has jurisdiction to try defendant’s counterclaim as it is now part of
the rehabilitation proceedings before the corporate court
concerned, the assertions in the Motion for Reconsiderations (sic)
will no longer stand.
On the other hand, the plaintiff did not file a Motion for
Reconsideration of the same Order, dismissing the complaint for
failure to prosecute, within the reglementary period. Hence, the
same has attained finality.
Defendant alleged that the dismissal of the case resulted in the
dissolution of the writ. Nonetheless, the Court deems it proper to
suspend the resolution of the return of the subject vehicle. In this
case, the subject vehicle was turned over to plaintiff by virtue of a
writ of replevin validly issued, the latter having sufficiently shown
that it is the absolute/registered owner thereof. This was not
denied by the defendant. Plaintiff’s ownership includes its right of
possession. The case has been dismissed without a decision on the
merits having been rendered. Thus, to order the return of the
vehicle to one who is yet to prove his right of possession would not
be proper.
Accordingly, the Motion for Partial Reconsideration is denied.12
On 8 June 2006, Young filed a motion to resolve his omnibus
motion.
In an Order dated 5 July 2006, the trial court denied the motion to
resolve, to wit:
In the instant case, the Court suspended the resolution of the
return of the vehicle to defendant Roland Young. It should be
noted that the writ of replevin was validly issued in favor of the
plaintiff and that it has sufficiently established ownership over the
subject vehicle which includes its right to possess. On the other
hand, the case (Olympia International vs. Court of Appeals) cited
by defendant finds no application to this case, inasmuch as in the
former the Court has not rendered judgment affirming plaintiff’s
(Olympia) right of possession on the property seized. Moreover,
the Court, in the Order dated April 28, 2005, has already denied
defendant’s counterclaim upon which he based his right of
possession on the ground of lack of jurisdiction. Accordingly, the
Court reiterates its previous ruling that to order the return of the
subject vehicle to defendant Young, who is yet to prove his right of
possession before the Rehabilitation Court would not be proper.
WHEREFORE, there being no new and substantial arguments
raised, the Motion to Resolve is denied.13
Young filed a petition for certiorari and mandamus with the Court
of Appeals seeking to annul the trial court’s Orders of 24 March
2006 and 5 July 2006.
The Court of Appeals’ Ruling
In his petition before the Court of Appeals, Young argued mainly
that the trial court committed grave abuse of discretion amounting
to lack or excess of jurisdiction in (1) not directing the return of the
subject vehicle to him; (2) refusing to hold a hearing to determine
the damages to be recovered against the replevin bond; and (3)
dismissing his counterclaim.
The Court of Appeals ruled in favor of Young and annulled the
assailed rulings of the trial court. The Court of Appeals held:
It is noteworthy that the case was dismissed by the court a quo for
failure of Advent to prosecute the same. Upon dismissal of the
case, the writ of seizure issued as an incident of the main action
(for replevin) became functus officio and should have been
recalled or lifted. Since there was no adjudication on the merits of
the case, the issue of who between Advent and petitioner has the
better right to possess the subject car was not determined. As
such, the parties should be restored to their status immediately
before the institution of the case.
The Supreme Court’s ruling in Olympia International, Inc. vs. Court
of Appeals (supra) squarely applies to the present controversy, to
wit:
"Indeed, logic and equity demand that the writ of replevin be
cancelled. Being provisional and ancillary in character, its existence
and efficacy depended on the outcome of the case. The case
having been dismissed, so must the writ’s existence and efficacy be
dissolved. To let the writ stand even after the dismissal of the case
would be adjudging Olympia as the prevailing party, when
precisely, no decision on the merits had been rendered. The case
having been dismissed, it is as if no case was filed at all and the
parties must revert to their status before the litigation."
Indeed, as an eminent commentator on Remedial Law expounds:
"The plaintiff who obtains possession of the personal property by a
writ of replevin does not acquire absolute title thereto, nor does
the defendant acquire such title by rebonding the property, as
they only hold the property subject to the final judgment in the
action." (I Regalado, Remedial Law Compendium, Eighth Revised
Edition, p. 686)
Reversion of the parties to the status quo ante is the consequence
ex proprio vigore of the dismissal of the case. Thus, in Laureano vs.
Court of Appeals (324 SCRA 414), it was held:
"(A)lthough the commencement of a civil action stops the running
of the statute of prescription or limitations, its dismissal or
voluntary abandonment by plaintiff leaves the parties in exactly
the same position as though no action had been commenced at
all."
By the same token, return of the subject car to petitioner pending
rehabilitation of Advent does not constitute enforcement of claims
against it, much more adjudication on the merits of petitioner’s
counterclaim. In other words, an order for such return is not a
violation of the stay order, which was issued by the rehabilitation
court on August 27, 2001. x x x
Corollarily, petitioner’s claim against the replevin bond has no
connection at all with the rehabilitation proceedings. The claim is
not against the insolvent debtor (Advent) but against bondsman,
Stronghold. Such claim is expressly authorized by Sec. 10, Rule 60,
in relation to Sec. 20, Rule 57, id., x x x14
The dispositive portion of the Court of Appeals’ decision reads:
WHEREFORE, premises considered, the instant petition is PARTLY
GRANTED. The orders of the Regional Trial Court dated March 24,
2006 and July 5, 2006 are ANNULLED and SET ASIDE in so far as
they suspended resolution of petitioner’s motion for, and/or
disallowed, the return of the subject car to petitioner. Accordingly,
respondent Advent Capital and Finance Corporation is directed to
return the subject car to petitioner.
The Regional Trial Court of Makati City (Branch 147) is directed to
conduct a hearing on, and determine, petitioner’s claim for
damages against the replevin bond posted by Stronghold
Insurance Co.
SO ORDERED.15
Advent filed a motion for reconsideration, which was denied by
the Court of Appeals in a Resolution dated 15 May 2008.
The Issue
The main issue in this case is whether the Court of Appeals
committed reversible error in (1) directing the return of the seized
car to Young; and (2) ordering the trial court to set a hearing for
the determination of damages against the replevin bond.
The Court’s Ruling
The petition is partially meritorious.
On returning the seized vehicle to Young
We agree with the Court of Appeals in directing the trial court to
return the seized car to Young since this is the necessary
consequence of the dismissal of the replevin case for failure to
prosecute without prejudice. Upon the dismissal of the replevin
case for failure to prosecute, the writ of seizure, which is merely
ancillary in nature, became functus officio and should have been
lifted. There was no adjudication on the merits, which means that
there was no determination of the issue who has the better right
to possess the subject car. Advent cannot therefore retain
possession of the subject car considering that it was not adjudged
as the prevailing party entitled to the remedy of replevin.
Contrary to Advent’s view, Olympia International Inc. v. Court of
Appeals16 applies to this case. The dismissal of the replevin case
for failure to prosecute results in the restoration of the parties’
status prior to litigation, as if no complaint was filed at all. To let
the writ of seizure stand after the dismissal of the complaint would
be adjudging Advent as the prevailing party, when precisely no
decision on the merits had been rendered. Accordingly, the parties
must be reverted to their status quo ante. Since Young possessed
the subject car before the filing of the replevin case, the same
must be returned to him, as if no complaint was filed at all.
Advent’s contention that returning the subject car to Young would
constitute a violation of the stay order issued by the rehabilitation
court is untenable. As the Court of Appeals correctly concluded,
returning the seized vehicle to Young is not an enforcement of a
claim against Advent which must be suspended by virtue of the
stay order issued by the rehabilitation court pursuant to Section 6
of the Interim Rules on Corporate Rehabilitation (Interim Rules).17
The issue in the replevin case is who has better right to possession
of the car, and it was Advent that claimed a better right in filing
the replevin case against Young. In defense, Young claimed a
better right to possession of the car arising from Advent’s car plan
to its executives, which he asserts entitles him to offset the value
of the car against the proceeds of his retirement pay and stock
option plan.
Young cannot collect a money "claim" against Advent within the
contemplation of the Interim Rules. The term "claim" has been
construed to refer to debts or demands of a pecuniary nature, or
the assertion to have money paid by the company under
rehabilitation to its creditors.18 In the replevin case, Young cannot
demand that Advent pay him money because such payment, even
if valid, has been "stayed" by order of the rehabilitation court.
However, in the replevin case, Young can raise Advent’s car plan,
coupled with his retirement pay and stock option plan, as giving
him a better right to possession of the car. To repeat, Young is
entitled to recover the subject car as a necessary consequence of
the dismissal of the replevin case for failure to prosecute without
prejudice.
On the damages against the replevin bond
Section 10, Rule 60 of the Rules of Court19 governs claims for
damages on account of improper or irregular seizure in replevin
cases. It provides that in replevin cases, as in receivership and
injunction cases, the damages to be awarded upon the bond "shall
be claimed, ascertained, and granted" in accordance with Section
20 of Rule 57 which reads:
Sec. 20. Claim for damages on account of improper, irregular or
excessive attachment. - An application for damages on account of
improper, irregular or excessive attachment must be filed before
the trial or before appeal is perfected or before the judgment
becomes executory, with due notice to the attaching obligee or his
surety or sureties, setting forth the facts showing his right to
damages and the amount thereof. Such damages may be awarded
only after proper hearing and shall be included in the judgment on
the main case. e
damages against the replevin bond. It was only on 8 July 2005 that
Young filed an omnibus motion seeking damages against the
replevin bond, after the dismissal order had already become final
for Advent’s non-appeal of such order. In fact, in his omnibus
motion, Young stressed the finality of the dismissal order.23 Thus,
Young is barred from claiming damages against the replevin bond.
In Jao v. Royal Financing Corporation,24 the Court held that
defendant therein was precluded from claiming damages against
the surety bond since defendant failed to file the application for
damages before the termination of the case, thus:
The dismissal of the case filed by the plaintiffs-appellees on July
11, 1959, had become final and executory before the defendant-
appellee corporation filed its motion for judgment on the bond on
September 7, 1959. In the order of the trial court, dismissing the
complaint, there appears no pronouncement whatsoever against
the surety bond. The appellee-corporation failed to file its proper
application for damages prior to the termination of the case
against it. It is barred to do so now. The prevailing party, if such
would be the proper term for the appellee-corporation, having
failed to file its application for damages against the bond prior to
the entry of final judgment, the bondsman-appellant is relieved of
further liability thereunder.
Since Young is time-barred from claiming damages against the
replevin bond, the dismissal order having attained finality after the
application for damages, the Court of Appeals erred in ordering
the trial court to set a hearing for the determination of damages
against the replevin bond.
WHEREFORE, the Court GRANTS the petition IN PART. The Court
SETS ASIDE the portion in the assailed decision of the Court of
Appeals in CA-G.R. SP No. 96266 ordering the trial court to set a
hearing for the determination of damages against the replevin
bond.
SO ORDERED.

If the judgment of the appellate court be favorable to the party

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

Nothing herein contained shall prevent the party against whom

the attachment was issued from recovering in the same action the
damages awarded to him from any property of the attaching
obligee not exempt from execution should the bond or deposit
given by the latter be insufficient or fail to fully satisfy the award.

The above provision essentially allows the application to be filed at

any time before the judgment becomes executory.20 It should be
filed in the same case that is the main action,21 and with the court
having jurisdiction over the case at the time of the application.22

In this case, there was no application for damages against

Stronghold resulting from the issuance of the writ of seizure
before the finality of the dismissal of the complaint for failure to
prosecute. It appears that Young filed his omnibus motion claiming
damages against Stronghold after the dismissal order issued by the
trial court on 28 April 2005 had attained finality. While Young filed
a motion for partial reconsideration on 10 June 2005, it only
concerned the dismissal of his counterclaim, without any claim for