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Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 141853 February 7, 2001

TERESITA V. IDOLOR, petitioner,


vs.
HON. COURT OF APPEALS, SPS. GUMERSINDO DE GUZMAN and ILUMINADA DE GUZMAN and HON.
PRUDENCIO A. CASTILLO, JR., Presiding Judge, Regional Trial Court, National Capital Judicial Region,
Branch 220, Quezon City, respondents.

GONZAGA-REYES, J.:

This is a petition for review on certiorari filed by petitioner Teresita Idolor which seeks to set aside the decision1 of the
respondent Court of Appeals which reversed the Order2 of the Regional Trial Court of Quezon City3 granting Idolor's
prayer for the issuance of a writ of preliminary injunction and the resolution denying petitioner's motion for
reconsideration.4

On March 21, 1994, to secure a loan of P520,000.00, petitioner Teresita Idolor executed in favor of private
respondent Gumersindo De Guzman a Deed of Real Estate Mortgage with right of extra-judicial foreclosure upon
failure to redeem the mortgage on or before September 20, 1994. The object of said mortgage is a 200-square meter
property with improvements located at 66 Ilocos Sur Street, Barangay Ramon Magsaysay, Quezon City covered by
TCT No. 25659.

On September 21, 1996, private respondent Iluminada de Guzman, wife of Gumersindo de Guzman, filed a
complaint against petitioner Idolor before the Office of the Barangay Captain of Barangay Ramon Magsaysay,
Quezon City, which resulted in a "Kasunduang Pag-aayos" which agreement is quoted in full5:

"Kami, ang (mga) may sumbong at (mga) ipinagsusumbong sa usaping binabanggit sa itaas, ay
nagkakasundo sa pamamagitan nito na ayusin ang aming alitan gaya ng sumusunod:

Na ako si Teresita V. Idolor of legal age ay nakahiram ng halagang P520,000.00 noong September 20, 1994.

Na ang nasabing halaga ay may nakasanlang titulo ng lupa (TCT No. 25659) under Registry receipt 3420
dated July 15, 1996.

Na ako si Teresita V. Idolor ay humihingi ng 90 days palugit (grace period) to settle the said amount.

Failure to settle the above account on or before December 21, 1996, I agree to execute a deed of sale with
the agreement to repurchase without interest within one year.

Total amount of P1,233,288.23 inclusive of interest earned.

At nangangako kami na tutupad na tunay at matapat sa mga katakdaan ng pag-aayos na inilahad sa itaas."

Petitioner failed to comply with her undertaking; thus private respondent Gumersindo filed a motion for execution
before the Office of the Barangay captain who subsequently issued a certification to file action.
On March 21, 1997, respondent Gumersindo De Guzman filed an extra judicial foreclosure of the real estate
mortgage pursuant to the parties agreement set forth in the real estate mortgage dated March 21, 1994.

On May 23, 1997, the mortgaged property was sold in a public auction to respondent Gumersindo, as the highest
bidder and consequently, the Sheriff's Certificate of Sale was registered with the Registry of Deeds of Quezon City on
June 23, 1997.

On June 25, 1998, petitioner filed with the Regional Trial Court of Quezon City, Branch 220, a complaint for
annulment of Sheriff's Certificate of Sale with prayer for the issuance of a temporary restraining order (TRO) and a
writ of preliminary injunction against private respondents, Deputy Sheriffs Marino Cachero and Rodolfo Lescano and
the Registry of Deeds of Quezon City alleging among others alleged irregularity and lack of notice in the extra-judicial
foreclosure proceedings subject of the real estate mortgage. In the meantime, a temporary restraining order was
issued by the trial court.
1wphi1.nt

On July 28, 1998, the trial court issued a writ of preliminary injunction enjoining private respondents, the Deputy
Sheriffs and the Registry of Deeds of Quezon City from causing the issuance of a final deed of sale and consolidation
of ownership of the subject property in favor of the De Guzman spouses. The trial court denied the motion for
reconsideration filed by the de Guzman spouses.

Spouses de Guzman filed with the respondent Court of Appeals a petition for certiorari seeking annulment of the trial
court's order dated July 28, 1998 which granted the issuance of a preliminary injunction.

On September 28, 1999, the respondent court granted the petition and annulled the assailed writ of preliminary
injunction. Teresita Idolor filed her motion for reconsideration which was denied in a resolution dated February 4,
2000.

Hence this petition for review on certiorari filed by petitioner Teresita V. Idolor. The issues raised by petitioner are:
whether or not the respondent Court of Appeals erred in ruling (1) that petitioner has no more proprietary right to the
issuance of the writ of injunction, (2) that the "Kasunduang Pag-aayos" did not ipso facto result innovation of the real
estate mortgage, (3) that the "Kasunduang Pag-aayos" is merely a promissory note of petitioner to private respondent
spouses; and (4) that the questioned writ of preliminary injunction was issued with grave abuse of discretion.

The core issue in this petition is whether or not the respondent Court erred in finding that the trial court committed
grave abuse of discretion in enjoining the private and public respondents from causing the issuance of a final deed of
sale and consolidation of ownership of the subject parcel of land in favor of private respondents.

Petitioner claims that her proprietary right over the subject parcel of land was not yet lost since her right to redeem
the subject land for a period of one year had neither lapsed nor run as the sheriff's certificate of sale was null and
void; that petitioner and the general public have not been validly notified of the auction sale conducted by respondent
sheriffs; that the newspaper utilized in the publication of the notice of sale was not a newspaper of general circulation.

We do not agree.

Injunction is a preservative remedy aimed at protecting substantive rights and interests.6 Before an injunction can be
issued, it is essential that the following requisites be present: 1) there must be aright in esse or the existence of a
right to be protected; 2) the act against which the injunction is to be directed is a violation of such right.7Hence the
existence of a right violated, is a prerequisite to the granting of an injunction. Injunction is not designed to protect
contingent or future rights. Failure to establish either the existence of a clear and positive right which should be
judicially protected through the writ of injunction or that the defendant has committed or has attempted to commit any
act which has endangered or tends to endanger the existence of said right, is a sufficient ground for denying the
injunction.8 The controlling reason for the existence of the judicial power to issue the writ is that the court may thereby
prevent a threatened or continuous irremediable injury to some of the parties before their claims can be thoroughly
investigated and advisedly adjudicated.9 It is to be resorted to only when there is a pressing necessity to avoid
injurious consequences which cannot be remedied under any standard of compensation.10

In the instant case, we agree with the respondent Court that petitioner has no more proprietary right to speak of over
the foreclosed property to entitle her to the issuance of a writ of injunction. It appears that the mortgaged property
was sold in a public auction to private respondent Gumersindo on May 23, 1997 and the sheriff's certificate of sale
was registered with the Registry of Deeds of Quezon City on June 23, 1997. Petitioner had one year from the
registration of the sheriff's sale to redeem the property but she failed to exercise her right on or before June 23, 1998,
thus spouses de Guzman are now entitled to a conveyance and possession of the foreclosed property. When
petitioner filed her complaint for annulment of sheriff's sale against private respondents with prayer for the issuance
of a writ of preliminary injunction on June 25, 1998, she failed to show sufficient interest or title in the property sought
to be protected as her right of redemption had already expired on June 23, 1998, i.e. two (2) days before the filing of
the complaint. It is always a ground for denying injunction that the party seeking it has insufficient title or interest to
sustain it, and no claim to the ultimate relief sought - in other words, that she shows no equity.11 The possibility of
irreparable damage without proof of actual existing right is not aground for an injunction.12

Petitioner's allegation regarding the invalidity of the sheriff's sale dwells on the merits of the case; We cannot rule on
the same considering that the matter should be resolved during the trial on the merits.

Petitioner next contends that the execution of the "Kasunduang Pag-aayos" dated September 21, 1996 between her
and spouses de Guzman before the Office of the Lupon Tagapamayapa showed the express and unequivocal
intention of the parties to novate or modify the real estate mortgage; that a comparison of the real estate mortgage
dated March 21, 1994 and the "Kasunduang Pag-aayos" dated September 21, 1996 revealed the irreconciliable
incompatibility between them, i.e., that under the first agreement, the amount due was five hundred twenty thousand
(P520,000) pesos only payable by petitioner within six (6) months, after which it shall earn interest at the legal rate
per annum and non-payment of which within the stipulated period, private respondents have the right to extra-
judicially foreclose the real estate mortgage while under the second agreement, the amount due was one million two
hundred thirty three thousand two hundred eighty eight and 23/100 (P1,233,288.23) inclusive of interest, payable
within 90 days and in. case of non payment of the same on or before December 21, 1996, petitioner should execute a
deed of sale with right to repurchase within one year without interest; that the second agreement "Kasunduang Pag-
aayos" was a valid new contract as it was duly executed by the parties and it changed the principal conditions of
petitioner's original obligations. Petitioner insists that the "Kasunduang Pag-aayos" was not a mere promissory note
contrary to respondent court's conclusion since it was entered by the parties before the Lupon Tagapamayapa which
has the effect of a final judgment.13

We are not persuaded.

Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one
which terminates it, either by changing its objects or principal conditions, or by substituting a new debtor in place of
the old one, or by subrogating a third person to the rights of the creditor.14 Under the law, novation is never presumed.
The parties to a contract must expressly agree that they are abrogating their old contract in favor of a new
one.15 Accordingly, it was held that no novation of a contract had occurred when the new agreement entered into
between the parties was intended to give life to the old one.16

A review of the "Kasunduang Pag-aayos" which is quoted earlier does not support petitioner's contention that it
novated the real estate mortgage since the will to novate did not appear by express agreement of the parties nor the
old and the new contracts were incompatible in air points. In fact, petitioner expressly recognized in the Kasunduan
the existence and the validity of the old obligation where she acknowledged her long overdue account since
September 20, 1994 which was secured by a real estate mortgage and asked for a ninety (90) days grace period to
settle her obligation on or before December 21, 1996 and that upon failure to do so, she will execute a deed of sale
with a right to repurchase without interest within one year in favor of private respondents. Where the parties to the
new obligation expressly recognize the continuing existence and validity of the old one, where, in other words, the
parties expressly negated the lapsing of the old obligation, there can be no novation.17 We find no cogent reason to
disagree with the respondent court's pronouncement as follows:

"In the present case. there exists no such express abrogation of the original undertaking. The agreement
adverted to (Annex 2 of Comment, p.75 Rollo) executed by the parties on September 21, 1996 merely gave
life to the March 21, 1994 mortgage contract which was then more than two years overdue. Respondent
acknowledged therein her total indebtedness in the sum of P1,233,288.23 including the interests due on the
unpaid mortgage loan which amount she promised to liquidate within ninety (90) days or until December 21,
1996, failing which she also agreed to execute in favor of the .mortgagee a deed of sale of the mortgaged
property for the same amount w1thout interest. Evidently, it was executed to facilitate easy compliance by
respondent mortgagor with her mortgage obligation. It (the September 21, 1996 agreement) is not
incompatible and can stand together with the mortgage contract of March 21, 1994.

A compromise agreement clarifying the total sum owned by a buyer with the view that he would find it easier
to comply with his obligations under the Contract to Sell does not novate said Contract to Sell (Rillo v.
Court of Appeals, 274 SCRA 461 [1997]).

Respondent correctly argues that the compromise agreement has the force and effect of a final judgment.
That precisely is the reason why petitioner resorted to the foreclosure of the mortgage on March 27, 1997,
after her failure to comply with her obligation which expired on December 21, 1996.

Reliance by private respondent upon Section 417 of the New Local Government Code of 1991, which
requires the lapse of six (6) months before the amicable settlement may be, enforced, is misplaced. The
instant case deals with extra judicial foreclosure governed by ACT No. 3135 as amended."

Notably, the provision in the "Kasunduang Pag-aayos" regarding the execution of a deed of sale with right to
repurchase within one year would have the same effect as the extra-judicial foreclosure of the real estate mortgage
wherein petitioner was given one year from the registration of the sheriff's sale in the Registry of property to redeem
the property, i.e., failure to exercise the right of redemption would entitle the purchaser to possession of the property.
It is not proper to consider an obligation novated by. unimportant modifications which do not alter its essence.18 It
bears stress that the period to pay the total amount of petitioner's indebtedness inclusive of interest amounted to
P1,233,288.23 expired on December 21, 1996 and petitioner failed to execute a deed of sale with right to repurchase
on the said date up to the time private respondents filed their petition for extra-judicial foreclosure of real estate
mortgage. The failure of petitioner to comply with her undertaking in the "kasunduan" to settle her obligation
effectively delayed private respondents' right to extra-judicially foreclose the real estate mortgage which right accrued
as far back as 1994. Thus, petitioner has not shown that she is entitled to the equitable relief of injunction.
1wphi1.nt

WHEREFORE, the petition is DENIED. The decision of the respondent Court of Appeals dated September 28, 1999
is hereby AFFIRMED.

SO ORDERED.

Melo, Vitug, Panganiban, and Sandoval-Gutierrez, JJ., concur.


SECOND DIVISION

[A.M. No. MTJ-00-1250. February 28, 2001]

RIMEO S. GUSTILO, complainant, vs. HON. RICARDO S. REAL, SR.,


Presiding Judge, 2nd Municipal Circuit Trial Court of Victorias-
Manapla, Negros Occidental, respondent.

R E S O LUTIO N

QUISUMBING, J.:

In a verified complaint[1] dated June 15, 1997, Rimeo S. Gustilo charged


respondent Judge Ricardo S. Real, Sr., of the Municipal Circuit Trial Court of
Victorias-Manapla, Negros Occidental with gross misconduct, gross incompetence,
gross ignorance of the law, and violation of the Anti-Graft and Corrupt Practices Act
relative to Civil Case No. 703-M entitled Weddy C. Libo-on v. Rimeo S. Gustilo, et
al. for recounting of ballots of Precinct Nos. 27 and 27-A, Barangay Punta Mesa,
Manapla, Negros Occidental.

Complainant avers that he was a candidate for punong barangay of Barangay


Punta Mesa, Manapla, Negros Occidental in the May 12, 1997 elections. His lone
opponent was Weddy C. Libo-on, then the incumbent punong barangay and the
representative of the Association of Barangay Captains (ABC) to the Sangguniang
Bayan of Manapla and the Sangguniang Panlalawigan of Negros Occidental. Both
complainant and Libo-on garnered eight hundred nineteen (819) votes during the
elections, resulting in a tie. The breaking of the tie by the Board of Canvassers was in
complainants favor and he was proclaimed duly elected punong barangay of Punta
Mesa, Manapla.[2]

On May 20, 1997, his opponent filed an election protest case, docketed as Civil
Case No. 703-M, before the MCTC of Victorias-Manapla, Negros Occidental. Libo-
on sought the recounting of ballots in two precincts, preliminary prohibitory
injunction, and damages.

On May 21, 1997, respondent ordered the issuance of summons to the parties and
set the hearing on June 6, 1997.[3]
On May 27, 1997, however, Libo-on filed a motion to advance the hearing to May
29 and 30, 1997.

The next day, respondent granted Libo-ons motion. The hearing was advanced to
May 29 and 30, 1997 cancelling the hearing for June 6, 1997. [4] Complainant avers that
he was not furnished a copy of this Order dated May 28, 1997.

On May 29, 1997, respondent judge issued a temporary restraining order (TRO)
and annulled the proclamation of complainant as the duly elected punong barangay of
Punta Mesa, Manapla.[5] Complainant declares that no copy of this Order dated May
29, 1997 was served on him. That same day, however, he was able to secure copies of
the orders of respondent dated May 28 and May 29, 1997 from the COMELEC
Registrar of Manapla, Negros Occidental and the Department of Interior and Local
Government (DILG). Moreover, it was only in the afternoon of May 29, 1997 that
complainant received a copy of Libo-ons petition in Civil Case No. 703-M and
respondents Order dated May 21, 1997.

On May 30, 1997, complainant took his oath of office as punong barangay.[6] That
same day, he also filed a petition for certiorari before the Regional Trial Court of Silay
City, Negros Occidental, Branch 69 docketed as Special Civil Action No. 1936-69.

On June 5, 1997, the RTC lifted the TRO issued by respondent and declared as
null and void the order nullifying complainants proclamation as duly elected punong
barangay.[7]

Believing that respondent could not decide Civil Case No. 703-M impartially,
complainant moved for his inhibition.

On June 11, 1997, respondent denied complainants motion for inhibition and after
hearing Libo-ons motion for permanent injunction, issued a second TRO to maintain
the status quo between the contending parties.[8]

Complainant argues that by issuing the second TRO, respondent reversed the
order of the RTC of Silay City dated June 5, 1997. He also claims that by preventing
him from assuming office, he was excluded by the DILG from participating in the
election of the Liga ng Mga Barangay on June 14, 1997.
In his Comment, respondent denied the allegations. He claimed that when Libo-on
filed his motion to advance the hearing of the prayer for injunction on May 27, 1997
in Civil Case No. 703-M, complainant was served a copy by registered mail as shown
by the registry receipts attached to said motion. Considering the urgency of the matter
and since there was substantial compliance with due process, he issued the Order of
May 28, 1997 which cancelled the hearing set for June 6, 1997 and advanced it to
May 29 and 30, 1997.

Respondent claims that on May 29, 1997, Libo-on and his counsel appeared but
complainant did not, despite due notice. The hearing then proceeded, with Libo-on
presenting his evidence. As a result, he issued the TRO prayed for and annulled
complainants proclamation. Respondent admits that the Order of May 29, 1997,
particularly the annulment of complainants proclamation, was outside the jurisdiction
of his court. But since the COMELEC ignored Libo-ons petition for correction of
erroneous tabulation and Libo-on had no other remedy under the law, he was
constrained to annul complainants proclamation, which from the very beginning was
illegal. He justified his action by our rulings in Bince, Jr. v. COMELEC, 312 Phil. 316
(1995) and Tatlonghari v. COMELEC, 199 SCRA 849 (1991), which held that a faulty
tabulation cannot be the basis of a valid proclamation.

Respondent also faults the RTC of Silay City for issuing the Order dated June 5,
1997, which lifted the TRO he issued and declared void his nullification of
complainants proclamation. Respondent contends that complainant should first have
exhausted all remedies in his court before resorting to the special civil action
for certiorari with the RTC. The latter court, in turn, should have dismissed the action
for certiorari for failure to exhaust judicial remedies.

With respect to his Order of June 11, 1997, respondent explains that it was never
meant to reverse the Order of the RTC of Silay City dated June 5, 1997. He points out
that both parties in Civil Case No. 703-M were present during the hearing after due
notice. After receiving their evidence, he found that unless a TRO was issued, Libo-on
would suffer a grave injustice and irreparable injury. He submits that absent fraud,
dishonesty, or corruption, his acts, even if erroneous, are not the subject of
disciplinary action.

In its evaluation and recommendation report dated November 29, 1999, the Office
of the Court Administrator (OCA) found that respondents errors were not honest
mistakes in the performance of his duties. Rather, his actions showed a bias in favor of
Libo-on and evinced a pattern to prevent the complainant from assuming office as the
duly elected punong barangay despite his having been proclaimed as such by the
Board of Canvassers. The OCA recommends that respondent be fined P20,000.00 and
warned that a repetition of similar acts in the future will be dealt with more severely.

Supreme Court Administrative Circular No. 20-95 provides:

2. The application for a TRO shall be acted upon only after all parties are heard in
a summary hearing conducted within twenty-four (24) hours after the records are
transmitted to the branch selected by raffle. The records shall be transmitted
immediately after raffle (Emphasis supplied).

xxx

4. With the exception of the provisions which necessarily involve multiple-sala


stations, these rules shall apply to single-sala stations especially with regard to
immediate notice to all parties of all applications for TRO.

The foregoing clearly show that whenever an application for a TRO is filed, the
court may act on the application only after all parties have been notified and heard in a
summary hearing. In other words, a summary hearing may not be dispensed with. [9] In
the instant case, respondent admits that he issued the injunctive writ sought on May
29, 1997 after receiving the applicants evidence ex parte. His failure to abide by
Administrative Circular No. 20-95 in issuing the first TRO is grave abuse of authority,
misconduct, and conduct prejudicial to the proper administration of justice.

Worse, he compounded the infraction by annulling complainants proclamation as


the duly elected punong barangay of Punta Mesa, Manapla and prohibiting him from
assuming office. Respondent admits that his court was not vested with the power or
jurisdiction to annul the proclamation, but seeks to justify his action on the ground
that the proclamation was void ab initio. In so doing, respondent wantonly usurped a
power exclusively vested by law in the COMELEC. [10] A judge is expected to know the
jurisdictional boundaries of courts and quasi-judicial bodies like the COMELEC as
mapped out by the Constitution and statutes and to act only within said limits. A judge
who wantonly arrogates unto himself the authority and power vested in other agencies
not only acts in oppressive disregard of the basic requirements of due process, but also
creates chaos and contributes to confusion in the administration of justice.
Respondent, in transgressing the jurisdictional demarcation lines between his court
and the COMELEC, clearly failed to realize the position that his court occupies in the
interrelation and operation of the countrys justice system. He displayed a marked
ignorance of basic laws and principles. Rule 3.01 of the Code of Judicial Conduct
provides that a judge shall be faithful to the law and maintain professional
competence. By annulling complainants proclamation as the duly elected punong
barangay, despite being aware of the fact that his court had no power to do so, not
only is respondent guilty of grave abuse of authority, he also manifests unfaithfulness
to a basic legal rule as well as injudicious conduct.

Moreover, in willfully nullifying complainants proclamation despite his courts


want of authority, respondent knowingly issued an unjust order.

Note that the RTC of Silay City corrected respondents errors by declaring null and
void his Order dated May 29, 1997. Nonetheless, he compounded his previous errors
of judgment by proceeding to hear Libo-ons motion for permanent injunction and
issuing a second TRO on June 11, 1997 on the ground that extreme urgency and grave
injustice and irreparable injury will arise if no injunctive remedy were granted.
Respondent insists that his act did not reverse the Order of the RTC in Special Civil
Action No. 1936-69, since the second TRO he issued satisfied the notice and hearing
requirements of Circular No. 20-95.

Before an injunctive writ can be issued, it is essential that the following requisites
be present: (1) there must be a right in esse or the existence of a right to be protected;
and (2) the act against which injunction to be directed is a violation of such right.
[11]
The onus probandi is on movant to show that there exists a right to be protected,
which is directly threatened by the act sought to be enjoined. Further, there must be a
showing that the invasion of the right is material and substantial and that there is an
urgent and paramount necessity for the writ to prevent a serious damage. [12] In this
case, complainant had been duly proclaimed as the winning candidate for punong
barangay. He had taken his oath of office. Unless his election was annulled, he was
entitled to all the rights of said office. We do not see how the complainants exercise of
such rights would cause an irreparable injury or violate the right of the losing
candidate so as to justify the issuance of a temporary restraining order to maintain
the status quo. We see no reason to disagree with the finding of the OCA that the
evident purpose of the second TRO was to prevent complainant from participating in
the election of the Liga ng mga Barangay. Respondent must be held liable for
violating Rule 3.02 of the Code of Judicial Conduct which provides that, In every
case, a judge shall endeavor diligently to ascertain the facts and the applicable law
unswayed by partisan interests, public opinion, or fear of criticism.

In a similar case, a judge was fined P5,000.00 for failure to observe the
requirements of Administrative Circular No. 20-95 when he issued a TRO enjoining a
duly proclaimed barangay captain from participating in the elections of officers of the
ABC of Taft, Eastern Samar.[13] Note, however, that in the instant case, the respondents
infractions are not limited to the mere issuance of a restraining order without
conducting the summary conference required by Administrative Circular No. 20-95.
He also annulled the proclamation of the complainant knowing very well that he had
no such authority. When his first restraining order was set aside and nullification of
complainants proclamation was declared null and void by the RTC of Silay City, a
superior court, he again issued a TRO, which showed his partiality to complainants
political rival. Respondent is thus guilty of violating Rules 3.01 and 3.02 of the Code
of Judicial Conduct; knowingly rendering an unjust order; gross ignorance of the law
or procedure; as well as bias and partiality. All of the foregoing are serious charges
under Rule 140, Section 3 of the Rules of Court. We agree with the sanction
recommended by the OCA, finding it to be in accord with Rule 140, Section 10 (A) of
the Rules of Court.

WHEREFORE, this COURT finds respondent judge GUILTY of violating Rules


3.01 and 3.02 of the Code of Judicial Conduct, knowingly rendering an unjust order,
gross ignorance of the law and procedure, and bias and partiality. Accordingly, a fine
of Twenty Thousand Pesos (P20,000.00) is hereby imposed upon respondent with a
STERN WARNING that a repetition of the same or similar acts will be dealt with
more severely.

SO ORDERED.

Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.


SECOND DIVISION

MICHAEL J. LAGROSAS, G.R. No. 168637


Petitioner,

Present:
- versus -
QUISUMBING, J., Chairperson,
CARPIO MORALES,
BRISTOL-MYERS SQUIBB (PHIL.), TINGA,
INC./MEAD JOHNSON PHIL., VELASCO, JR., and
RICHARD SMYTH as General BRION, JJ.
Manager and FERDIE SARFATI, as
Medical Sales Director,
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - -x

BRISTOL-MYERS SQUIBB (PHIL.), G.R. No. 170684


INC./MEAD JOHNSON PHIL.,
Petitioner,

- versus -

COURT OF APPEALS and Promulgated:


MICHAEL J. LAGROSAS,
Respondents. September 12, 2008
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION
QUISUMBING, J.:

Before this Court are two consolidated petitions. The first petition, docketed
as G.R. No. 168637, filed by Michael J. Lagrosas, assails the
Decision[1] dated January 28, 2005 and the Resolution[2] datedJune 23, 2005 of the
Court of Appeals in CA-G.R. SP No. 83885. The second petition, docketed as G.R.
No. 170684, filed by Bristol-Myers Squibb (Phil.), Inc./Mead Johnson Phil., assails
the Resolutions[3]dated August 12, 2005 and October 28, 2005 of the Court of
Appeals in CA-G.R. SP No. 83885.

The facts are undisputed.

Michael J. Lagrosas was employed by Bristol-Myers Squibb (Phil.),


Inc./Mead Johnson Phil. from January 6, 1997 until March 23, 2000 as Territory
Manager in its Medical Sales Force Division.[4]

On February 4, 2000, Ma. Dulcinea S. Lim, also a Territory Manager and


Lagrosas former girlfriend, attended a district meeting of territory managers at
McDonalds Alabang Town Center. After the meeting, she dined out with her
friends. She left her car at McDonalds and rode with Cesar R. Menquito, Jr. When
they returned to McDonalds, Lim saw Lagrosas car parked beside her car. Lim told
Menquito not to stop his car but Lagrosas followed them and slammed Menquitos
car thrice. Menquito and Lim alighted from the car. Lagrosas approached them and
hit Menquito with a metal steering wheel lock. When Lim tried to intervene,
Lagrosas accidentally hit her head.

Upon learning of the incident, Bristol-Myers required Lagrosas to explain in


writing why he should not be dismissed for assaulting a co-employee outside of
business hours. While the offense is not covered by the Code of Discipline for
Territory Managers, the Code states that other infractions not provided for herein
shall be penalized in the most appropriate manner at the discretion of management.
[5]
In his memo, Lagrosas admitted that he accidentally hit Lim when she tried to
intervene. He explained that he did not intend to hit her as shown by the fact that
he never left the hospital until he was assured that she was all right.[6]

In the disciplinary hearing that followed, it was established that Lagrosas


and Lim had physical confrontations prior to the incident. But Lagrosas denied
saying that he might not be able to control himself and hurt Lim and her boyfriend
if he sees them together.

On March 23, 2000, Bristol-Myers dismissed Lagrosas effective


immediately.[7] Lagrosas then filed a complaint[8] for illegal dismissal, non-payment
of vacation and sick leave benefits, 13 th month pay, attorneys fees, damages and
fair market value of his Team Share Stock Option Grant.
On February 28, 2002, Labor Arbiter Renaldo O. Hernandez rendered a
Decision[9] in NLRC NCR Case No. 00-03-02821-99, declaring the dismissal
illegal. He noted that while Lagrosas committed a misconduct, it was not connected
with his work. The incident occurred outside of company premises and office
hours. He also observed that the misconduct was not directed against a co-employee
who just happened to be accidentally hit in the process. Nevertheless, Labor Arbiter
Hernandez imposed a penalty of three months suspension or forfeiture of pay to
remind Lagrosas not to be carried away by the mindless dictates of his
passion. Thus, the Arbiter ruled:
WHEREFORE, premises considered, judgment is hereby [rendered]
finding that respondent company illegally dismissed complainant
thus, ORDERING it:

1) [t]o reinstate him to his former position without loss of seniority rights,
privileges and benefits and to pay him full backwages reckoned from [the] date of
his illegal dismissal on 23 March 2000 including the monetary value of his
vacation/sick leave of 16 days per year reckoned from July 1, 2000 until actually
reinstated, less three (3) months salary as penalty for his infraction;

2) to pay him the monetary equivalent of his accrued and unused


combined sick/vacation leaves as of June 30, 2000 of 16 days x 3 years and 4
months 10 days x P545.45 = P23,636.16 and the present fair market value of his
Team Share stock option grant for eight hundred (800) BMS common shares of
stock listed in the New York Stock Exchange which vested in complainant as of
01 July 1997, provisionally computed as 90% (800 shares x US$40.00 per share x
P43.20/US$ = P1,244,160.00).

3) to pay him Attorneys fee of 10% on the entire computable amount.

All other claims of complainant are dismissed for lack of merit.

SO ORDERED.[10]

On appeal, the National Labor Relations Commission (NLRC) set aside the
Decision of Labor Arbiter Hernandez in its Decision[11] dated September 24,
2002. It held that Lagrosas was validly dismissed for serious misconduct in hitting
his co-employee and another person with a metal steering wheel lock. The gravity
and seriousness of his misconduct is clear from the fact that he deliberately waited
for Lim and Menquito to return to McDonalds. The NLRC also ruled that the
misconduct was committed in connection with his duty as Territory Manager since
it occurred immediately after the district meeting of territory managers.
Lagrosas moved for reconsideration. On May 7, 2003, the NLRC issued a
Resolution[12] reversing its earlier ruling. It ratiocinated that the incident was not
work-related since it occurred only after the district meeting of territory
managers. It emphasized that for a serious misconduct to merit dismissal, it must
be connected with the employees work. The dispositive portion of the Resolution
states:
WHEREFORE, premises considered, We find this time no reason to alter
the Labor Arbiters Decision of February 28, 2002 and hereby affirm the same in
toto. We vacate our previous Decision of September 24, 2002.

SO ORDERED.[13]

Bristol-Myers filed a motion for reconsideration which the NLRC denied in


an Order dated February 4, 2004 in NLRC NCR Case No. 00-03-02821-99 (NLRC
NCR CA No. 031646-02).[14] Later, Labor Arbiter Hernandez issued a writ of
execution.[15] Notices of garnishment were then served upon the Philippine British
Assurance Co., Inc. for the supersedeas bond posted by Bristol-Myers and the
Bank of the Philippine Islands for the balance of the judgment award.[16]

Bristol-Myers moved to quash the writ of execution contending that it timely


filed a petition for certiorari with the Court of Appeals. The appellate court gave
due course to Bristol-Myers petition and issued a temporary restraining order
(TRO)[17] enjoining the enforcement of the writ of execution and notices of
garnishment. Upon the expiration of the TRO, the appellate court issued a writ of
preliminary injunction dated September 17, 2004.[18]

Bristol-Myers then moved to discharge and release the TRO cash bond. It
argued that since it has posted an injunction cash bond, the TRO cash bond should
be legally discharged and released.

On January 28, 2005, the appellate court rendered the following Decision:
WHEREFORE, the petition is GRANTED. The Resolution of May 7,
2003 and the Order of February 4, 2004 in NLRC NCR Case No. [00-03-02821-
99] (NLRC NCR CA No. [031646-02]), are REVERSED and SET ASIDE. The
public respondent NLRCs Decision dated September 24, 2002 which reversed the
Labor Arbiters decision and in effect sustained the legality of the private
respondents termination and the dismissal of his claim for the fair market value of
the [Team Share] stock option grant
is REINSTATED and AFFIRMED, with MODIFICATION that the petitioner
shall pay the private respondent the monetary equivalent of his accrued and
unused combined sick/vacation leave plus ten (10%) percent thereof, as attorneys
fees. The injunction bond and the TRO bond previously posted by the petitioner
are DISCHARGED.

SO ORDERED.[19]

The appellate court considered the misconduct as having been committed in


connection with Lagrosas duty as Territory Manager since it occurred immediately
after the district meeting of territory managers. It also held that the gravity and
seriousness of the misconduct cannot be denied. Lagrosas employed such a degree
of violence that caused damage not only to Menquitos car but also physical injuries
to Lim and Menquito.

Lagrosas filed a motion for reconsideration which the appellate court denied.

In the meantime, Bristol-Myers moved to release the TRO cash bond and
injunction cash bond in view of the Decision dated January 28, 2005. On August
12, 2005, the appellate court denied the motion as premature since the decision is
not yet final and executory due to Lagrosas appeal to this Court.[20]

Bristol-Myers filed a motion for reconsideration. On October 28, 2005, the


appellate court resolved:
WHEREFORE, the petitioners Motion [f]or
Reconsideration dated September 6, 2005 is PARTIALLY GRANTED and the
Resolution of August 12, 2005 is RECONSIDERED and SET ASIDE. The
temporary restraining order cash bond in the amount of SIX HUNDRED
THOUSAND PESOS (P600,000.00) which was posted by the petitioners on July
19, 2004 is ordered DISCHARGED and RELEASED to the petitioners.

SO ORDERED.[21]

The appellate court held that upon the expiration of the TRO, the cash bond
intended for it also expired. Thus, the discharge and release of the cash bond for
the expired TRO is proper. But the appellate court disallowed the discharge of the
injunction cash bond since the writ of preliminary injunction was
issued pendente lite. Since there is a pending appeal with the Supreme Court, the
Decision dated January 28, 2005 is not yet final and executory.

Hence, the instant petitions.


In G.R. No. 168637, Lagrosas assigns the following errors:
I.
THE HONORABLE COURT OF APPEALS IN DECLARING THAT THE
TERMINATION OF EMPLOYMENT OF THE PETITIONER-APPELLANT
WAS LEGAL HAD DECIDED A QUESTION OF SUBSTANCE IN A WAY
NOT IN ACCORD WITH THE LABOR LAWS AND JURISPRUDENCE AND
DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS, AS TO CALL FOR THE EXERCISE OF THIS HONORABLE
COURTS POWER OF REVIEW AND/OR SUPERVISION.

II.
THE HONORABLE COURT OF APPEALS IN IMPOSING THE PENALTY OF
DISMISSAL, BEING A PENALTY TOO HARSH IN THIS CASE, DECIDED A
QUESTION OF SUBSTANCE IN A WAY NOT IN ACCORD WITH THE
LABOR LAWS AND JURISPRUDENCE AND DEPARTED FROM THE
ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS, AS TO
CALL FOR THE EXERCISE OF THIS HONORABLE COURTS POWER OF
REVIEW AND/OR SUPERVISION.[22]

In G.R. No. 170684, Bristol-Myers raises the following issue:


[WHETHER OR NOT THE HONORABLE] COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR EXCESS OF JURISDICTION IN DISALLOWING THE RELEASE AND
DISCHARGE OF PETITIONERS INJUNCTION BOND.[23]

Simply put, the basic issues in the instant petitions are: (1) Did the Court of
Appeals err in finding the dismissal of Lagrosas legal? and (2) Did the Court of
Appeals err in disallowing the discharge and release of the injunction cash bond?

On the first issue, serious misconduct as a valid cause for the dismissal of an
employee is defined simply as improper or wrong conduct. It is a transgression of
some established and definite rule of action, a forbidden act, a dereliction of duty,
willful in character, and implies wrongful intent and not mere error of
judgment. To be serious within the meaning and intendment of the law, the
misconduct must be of such grave and aggravated character and not merely trivial
or unimportant. However serious such misconduct, it must, nevertheless, be in
connection with the employees work to constitute just cause for his separation. The
act complained of must be related to the performance of the employees duties such
as would show him to be unfit to continue working for the employer.[24]
Thus, for misconduct or improper behavior to be a just cause for dismissal, it
(a) must be serious; (b) must relate to the performance of the employees duties;
and (c) must show that the employee has become unfit to continue working for the
employer.[25]

Tested against the foregoing standards, it is clear that Lagrosas was not
guilty of serious misconduct. It may be that the injury sustained by Lim was
serious since it rendered her unconscious and caused her to suffer cerebral
contusion that necessitated hospitalization for several days. But we fail to see how
such misconduct could be characterized as work-related and reflective of Lagrosas
unfitness to continue working for Bristol-Myers.

Although we have recognized that fighting within company premises may


constitute serious misconduct, we have also held that not every fight within
company premises in which an employee is involved would automatically warrant
dismissal from service.[26] More so, in this case where the incident occurred outside
of company premises and office hours and not intentionally directed against a co-
employee, as hereafter explained.

First, the incident occurred outside of company premises and after office
hours since the district meeting of territory managers which Lim attended at
McDonalds had long been finished. McDonalds may be considered an extension of
Bristol-Myers office and any business conducted therein as within office hours, but
the moment the district meeting was concluded, that ceased too. When Lim dined
with her friends, it was no longer part of the district meeting and considered
official time. Thus, when Lagrosas assaulted Lim and Menquito upon their return,
it was no longer within company premises and during office hours. Second,
Bristol-Myers itself admitted that Lagrosas intended to hit Menquito only. In the
Memorandum[27] dated March 23, 2000, it was stated that You got out from your
car holding an umbrella steering wheel lock and proceeded to hit Mr.
Menquito. Dulce tried to intervene, but you accidentally hit her on the head,
knocking her unconscious.[28] Indeed, the misconduct was not directed against a co-
employee who unfortunately got hit in the process. Third, Lagrosas was not
performing official work at the time of the incident. He was not even a participant
in the district meeting. Hence, we fail to see how his action could have reflected
his unfitness to continue working for Bristol-Myers.

In light of Bristol-Myers failure to adduce substantial evidence to prove that


Lagrosas was guilty of serious misconduct, it cannot use this ground to justify his
dismissal. Thus, the dismissal of Lagrosas employment was without factual and
legal basis.

On the second issue, it is settled that the purpose of a preliminary injunction


is to prevent threatened or continuous irremediable injury to some of the parties
before their claims can be thoroughly studied and adjudicated. Its sole aim is to
preserve the status quo until the merits of the case can be heard fully.[29]

A preliminary injunction may be granted only when, among other things, the
applicant, not explicitly exempted, files with the court where the action or
proceeding is pending, a bond executed to the party or person enjoined, in an
amount to be fixed by the court, to the effect that the applicant will pay such party
or person all damages which he may sustain by reason of the injunction or
temporary restraining order if the court should finally decide that the applicant was
not entitled thereto. Upon approval of the requisite bond, a writ of preliminary
injunction shall be issued.[30]

The injunction bond is intended as a security for damages in case it is finally


decided that the injunction ought not to have been granted. Its principal purpose is
to protect the enjoined party against loss or damage by reason of the injunction,
and the bond is usually conditioned accordingly.[31]

In this case, the Court of Appeals issued the writ of preliminary injunction to
enjoin the implementation of the writ of execution and notices of garnishment
pending final resolution of this case or unless the [w]rit is sooner lifted by the
Court.[32]

By its Decision dated January 28, 2005, the appellate court disposed of the
case by granting Bristol-Myers petition and reinstating the Decision
dated September 24, 2002 of the NLRC which dismissed the complaint for
dismissal. It also ordered the discharge of the TRO cash bond and injunction cash
bond. Thus, both conditions of the writ of preliminary injunction were satisfied.

Notably, the appellate court ruled that Lagrosas had no right to the monetary
awards granted by the labor arbiter and the NLRC, and that the implementation of
the writ of execution and notices of garnishment was properly enjoined. This in
effect amounted to a finding that Lagrosas did not sustain any damage by reason of
the injunction. To reiterate, the injunction bond is intended to protect Lagrosas
against loss or damage by reason of the injunction only. Contrary to Lagrosas
claim, it is not a security for the judgment award by the labor arbiter.[33]

Considering the foregoing, we hold that the appellate court erred in


disallowing the discharge and release of the injunction cash bond.

WHEREFORE, the two consolidated petitions are GRANTED. In G.R.


No. 168637, filed by Michael J. Lagrosas, the Decision dated January 28, 2005,
and the Resolution dated June 23, 2005 of the Court of Appeals in CA-G.R. SP No.
83885 are REVERSED. The Resolution dated May 7, 2003, and the Order
dated February 4, 2004 of the NLRC in NLRC NCR Case No. 00-03-02821-99
(NLRC NCR CA No. 031646-02) are REINSTATED and hereby AFFIRMED.

In G.R. No. 170684, filed by Bristol-Myers Squibb (Phil.), Inc./Mead


Johnson Phil., the Resolutions dated August 12, 2005 and October 28, 2005 of the
Court of Appeals in CA-G.R. SP No. 83885 areREVERSED. The injunction cash
bond in the amount of SIX HUNDRED THOUSAND PESOS (P600,000) which
was posted by Bristol-Myers Squibb (Phil.), Inc./Mead Johnson Phil. on September
17, 2004is hereby ordered DISCHARGED and RELEASED to it.

No pronouncement as to costs.

SO ORDERED.
SECOND DIVISION

NELSON JENOSA and his son NIO G.R. No. 172138


CARLO JENOSA, SOCORRO
CANTO and her son PATRICK Present:
CANTO, CYNTHIA
APALISOKand her CARPIO, J., Chairperson,
daughter CYNDY NACHURA,
APALISOK, EDUARDO PERALTA,
VARGASand his son CLINT ABAD, and
EDUARD VARGAS, and NELIA MENDOZA, JJ.
DURO and her son NONELL
GREGORY DURO,
Petitioners,

- versus -

REV. FR. JOSE RENE C.


DELARIARTE, O.S.A., in his
capacity as the incumbent Principal of
the High School Department of the
University of San Agustin, and Promulgated:
theUNIVERSITY OF SAN
AGUSTIN, herein represented by its September 8, 2010
incumbent President REV. FR.
MANUEL G. VERGARA, O.S.A.,
Respondents.
x--------------------------------------------------x

DECISION

CARPIO, J.:

The Case

This is a petition for review[1] of the 16 June 2005 Decision[2] and 22 March
2006[3] Resolution of the Court of Appeals in CA-G.R. SP No. 78894. In its 16
June 2005 Decision, the Court of Appeals granted the petition of respondents
University of San Augustin (University), represented by its incumbent President
Rev. Fr. Manuel G. Vergara, O.S.A. (University President), and Rev. Fr. Jose Rene
C. Delariarte, O.S.A. (Principal), in his capacity as the incumbent Principal of the
High School Department of the University (respondents) and ordered the dismissal
of Civil Case Nos. 03-27460 and 03-27646 for lack of jurisdiction over the subject
matter. In its 22 March 2006 Resolution, the Court of Appeals denied the motion
for reconsideration of petitioners Nelson Jenosa and his son Nio Carlo Jenosa,
Socorro Canto and her son Patrick Canto, Cynthia Apalisok and her daughter
Cyndy Apalisok, Eduardo Vargas and his son Clint Eduard Vargas, and Nelia Duro
and her son Nonell Gregory Duro (petitioners).

The Facts

On 22 November 2002, some students of the University, among them petitioners


Nio Carlo Jenosa, Patrick Canto, Cyndy Apalisok, Clint Eduard Vargas, and Nonell
Gregory Duro (petitioner students), were caught engaging in hazing outside the
school premises. The hazing incident was entered into the blotter of the Iloilo City
Police.[4]

Thereafter, dialogues and consultations were conducted among the school


authorities, the apprehended students and their parents. During the 28 November
2002 meeting, the parties agreed that, instead of the possibility of being charged
and found guilty of hazing, the students who participated in the hazing incident as
initiators, including petitioner students, would just transfer to another school, while
those who participated as neophytes would be suspended for one month. The
parents of the apprehended students, including petitioners, affixed their signatures
to the minutes of the meeting to signify their conformity.[5]In view of the
agreement, the University did not anymore convene the Committee on Student
Discipline (COSD) to investigate the hazing incident.

On 5 December 2002, the parents of petitioner students (petitioner parents) sent a


letter to the University President urging him not to implement the 28 November
2002 agreement.[6] According to petitioner parents, the Principal, without
convening the COSD, decided to order the immediate transfer of petitioner
students.

On 10 December 2002, petitioner parents also wrote a letter to Mrs. Ida B.


Endonila, School Division Superintendent, Department of Education (DepEd),
Iloilo City, seeking her intervention and prayed that petitioner students be allowed
to take the home study program instead of transferring to another school. [7] The
DepEd asked the University to comment on the letter.[8] The University replied and
attached the minutes of the 28 November 2002 meeting.[9]

On 3 January 2003, petitioners filed a complaint for injunction and damages with
the Regional Trial Court, Branch 29, Iloilo City (trial court) docketed as Civil Case
No. 03-27460.[10] Petitioners assailed the Principals decision to order the immediate
transfer of petitioner students as a violation of their right to due process because
the COSD was not convened.

On 5 February 2003, the trial court issued a writ of preliminary injunction and
directed respondents to admit petitioner students during the pendency of the case.
[11]
The 5 February 2003 Order reads:

WHEREFORE, let [a] Writ of Preliminary Mandatory Injunction


issue. The defendants are hereby directed to allow the plaintiffs minor
children to attend their classes during the pendency of this case, without
prejudice to any disciplinary proceeding to which any or all of them may
be liable.

SO ORDERED.[12]

Respondents filed a motion for reconsideration and asked for the dissolution of the
writ. The trial court denied respondents motion. Respondents complied but with
reservations.

On 25 March 2003, respondents filed a motion to dismiss. Respondents alleged


that the trial court had no jurisdiction over the subject matter of the case and that
petitioners were guilty of forum shopping. On 19 May 2003, the trial court denied
respondents motion. Respondents filed a motion for reconsideration.

On 21 April 2003, petitioners wrote the DepEd and asked that it direct the
University to release the report cards and other credentials of petitioner students.
[13]
On 8 May 2003, the DepEd sent a letter to the University advising it to release
petitioner students report cards and other credentials if there was no valid reason to
withhold the same.[14] On 14 May 2003, the DepEd sent another letter to the
University to follow-up petitioners request.[15] On 20 May 2003, the University
replied that it could not release petitioner students report cards due to their pending
disciplinary case with the COSD.[16]
On 28 May 2003, petitioners filed another complaint for mandatory injunction
praying for the release of petitioner students report cards and other credentials
docketed as Civil Case No. 03-27646.[17]

The trial court consolidated the two cases.[18]

On 17 June 2003, the trial court issued a writ of preliminary injunction and
directed the University to release petitioner students report cards and other
credentials.[19] Respondents filed a motion for reconsideration. Respondents alleged
that they could not comply with the writ because of the on-going disciplinary case
against petitioner students.

On 26 June 2003, the COSD met with petitioners for a preliminary conference on
the hazing incident. On 7 July 2003, the University, through the COSD, issued its
report finding petitioner students guilty of hazing. The COSD also recommended
the exclusion of petitioner students from its rolls effective 28 November 2002.

On 14 July 2003, the trial court issued an Order denying both motions for
reconsideration.[20]

On 1 September 2003, respondents filed a special civil action for certiorari with the
Court of Appeals. Respondents insisted that the trial court had no jurisdiction
over the subject matter of Civil Case Nos. 03-27460 and 03-27646. Respondents
also alleged that petitioners were guilty of forum shopping.

The Ruling of the Court of Appeals

In its 16 June 2005 Decision, the Court of Appeals granted respondents petition
and ordered the trial court to dismiss Civil Case Nos. 03-27460 and 03-27646 for
lack of jurisdiction over the subject matter because of petitioners failure to exhaust
administrative remedies or for being premature. According to the Court of Appeals,
petitioners should have waited for the action of the DepEd or of the University
President before resorting to judicial action. The Court of Appeals held:

From the foregoing, it is clear that the court a quo committed grave [abuse]
of discretion amounting to LACK OF JURISDICTION in
INTERFERING, pre-maturely, with the exclusive and inherent authority of
educational institutions to discipline.
In directing herein petitioners [respondents in this case] to re-admit herein
private respondents [petitioners in this case] and eventually, to release the
report cards and other school credentials, prior to the action of the
President of USA and of the recommendation of the COSD, the court a
quo is guilty of improper judicial intrusion by encroaching into the
exclusive prerogative of educational institutions. [21]

Petitioners filed a motion for reconsideration.[22] In its 22 March 2006 Resolution,


the Court of Appeals denied petitioners motion for lack of merit.

The Issues

Petitioners raise the following issues:


1. Was the Court of Appeals correct in holding that Branch 29 of the
Regional Trial Court of Iloilo City in Civil Case Nos. 03-27460 and
03-27646 did not acquire jurisdiction over the subject matter of this
case for failure of petitioners to exhaust administrative remedies?
2. Was the recommendation/report/order of the Committee on Student
Discipline dated 7 July 2003 valid, and did it justify the order of
exclusion of petitioner students retroactive to 28 November 2002?[23]
The Ruling of the Court

The petition has no merit.

Discipline in education is specifically mandated by the 1987 Constitution which


provides that all educational institutions shall teach the rights and duties of
citizenship, strengthen ethical and spiritual values, develop moral character and
personal discipline.[24] Schools and school administrators have the authority to
maintain school discipline[25] and the right to impose appropriate and reasonable
disciplinary measures.[26] On the other hand, students have the duty and the
responsibility to promote and maintain the peace and tranquility of the school by
observing the rules of discipline.[27]

In this case, we rule that the Principal had the authority to order the immediate
transfer of petitioner students because of the 28 November 2002 agreement.
[28]
Petitioner parents affixed their signatures to the minutes of the 28 November
2002 meeting and signified their conformity to transfer their children to another
school. Petitioners Socorro Canto and Nelia Duro even wrote a letter to inform the
University that they would transfer their children to another school and requested
for the pertinent papers needed for the transfer.[29] In turn, the University did not
anymore convene the COSD. The University agreed that it would no longer
conduct disciplinary proceedings and instead issue the transfer credentials of
petitioner students. Then petitioners reneged on their agreement without any
justifiable reason. Since petitioners present complaint is one for injunction, and
injunction is the strong arm of equity, petitioners must come to court with clean
hands. In University of the Philippines v. Hon. Catungal, Jr.,[30] a case involving
student misconduct, this Court ruled:
Since injunction is the strong arm of equity, he who must apply for it
must come with equity or with clean hands. This is so because among the
maxims of equity are (1) he who seeks equity must do equity, and (2) he
who comes into equity must come with clean hands. The latter is a
frequently stated maxim which is also expressed in the principle that he
who has done inequity shall not have equity. It signifies that a litigant
may be denied relief by a court of equity on the ground that his conduct
has been inequitable, unfair and dishonest, or fraudulent, or deceitful as
to the controversy in issue.[31]

Here, petitioners, having reneged on their agreement without any justifiable reason,
come to court with unclean hands. This Court may deny a litigant relief if his
conduct has been inequitable, unfair and dishonest as to the controversy in issue.

Since petitioners have come to court with inequitable and unfair conduct, we deny
them relief. We uphold the validity of the 28 November 2002 agreement and rule
that the Principal had the authority to order the immediate transfer of petitioner
students based on the 28 November 2002 agreement.

WHEREFORE, we DENY the petition. We AFFIRM the 16 June 2005 Decision


and the 22 March 2006 Resolution of the Court of Appeals.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 179665 April 3, 2013

SOLID BUILDERS, INC. and MEDINA FOODS INDUSTRIES, INC., Petitioners,


vs.
CHINA BANKING CORPORATION, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

This petition for review on certiorari1 assails the Decision2 dated April 16, 2007 and the Resolution3 dated September
18, 2007 of the Court of Appeals in CA-G.R. SP No. 81968.

During the period from September 4, 1992 to March 27, 1996, China Banking Corporation (CBC) granted several
loans to Solid Builders, Inc. (SBI), which amounted to P139,999,234.34, exclusive of interests and other charges. To
secure the loans, Medina Foods Industries, Inc. (MFII) executed in CBCs favor several surety agreements and
contracts of real estate mortgage over parcels of land in the Loyola Grand Villas in Quezon City and New Cubao
Central in Cainta, Rizal.4

Subsequently, SBI proposed to CBC a scheme through which SBI would sell the mortgaged properties and share the
proceeds with CBC on a 50-50 basis until such time that the whole obligation would be fully paid. SBI also proposed
that there be partial releases of the certificates of title of the mortgaged properties without the burden of updating
interests on all loans.5

In a letter dated March 20, 2000 addressed to CBC, SBI requested the restructuring of its loans, a reduction of
interests and penalties and the implementation of a dacion en pago of the New Cubao Central property.6

The letter reads:

March 20, 2000

CHINA BANKING CORPORATION


Dasmarinas cor. Juan Luna Sts.
Binondo, Manila

Attn: Mr. George Yap


Account Officer

Dear Mr. Yap,

This is to refer to our meeting held at your office last March 10, 2000.

In this regard, please allow us to call your attention on the following important matters we have discussed:

1. With respect to the penalties, we are requesting for a reduction in the rates as we find it onerous
considering the big amount of our loan (P218,540,648.00). The interest together with the penalties
that you are imposing is similar to the ones being charged by private lending institutions, i.e.,
4.5%/month total.
2. As I had discussed with you regarding Dacion en Pago, which you categorically stated that it
could be a possibility, we are considering putting our New Cubao Central (NCC) on Dacion and
restructuring our loan with regards to our Loyola Grand Villas.

Considering that you had stated that our restructuring had not been finalized, we find it timely to raise these urgent
matters and possibly agree on a realistic and workable scheme that we can incorporate on our final agreement.

Thank you and we strongly hope for your prompt consideration on our request.

Very truly yours,

V. BENITO R. SOLIVEN (Sgd.)


President7

In response, CBC sent SBI a letter dated April 17, 2000 stating that the loans had been completely restructured
effective March 1, 1999 in the amount of P218,540,646.00. On the aspect of interests and charges, CBC suggested
the updating of the obligation to avoid paying interests and charges.8 The relevant portion of the letter dated April 17,
2000 reads:

First of all, to clarify, the loans restructuring has been finalized and completed on 3/01/99 with the booking of the
Restructured loan of P218,540,646. Only two Amendments of Real Estate Mortgages remain to be registered to date.
Certain documents that we requested from your company since last year, that could facilitate this amendment have
not yet been forwarded to us until now. Nevertheless, this does not change the fact that the restructuring of the loan
has been done with and finalized.

This in turn is with regards to statement[s] no. 1 & 2 of your letter, referring to the interest rates and penalties. As per
our records, the rates are actually the prevailing bank interest rates. In addition, penalty charges are imposed in the
event of non-payment. To avoid experiencing having to pay more due to the penalty charges, updating of obligations
is necessary. Thus, we advise updating of your obligations to avoid penalty charges. However, should you be able to
update both interest and penalty through a "one-time" payment, we shall present your request to Senior Management
for possible reduction in penalty charges.

Concerning statement no. 3 containing your request for the possible Dacion en Pago of your NCC properties, as was
discussed already in the meeting, it is a concern that has to be discussed with Senior Management and approved by
the Executive Committee before we can commit to you on the matter. We suggest that your company, Solid Builders,
exhaust all possibilities to sell the NCC properties yourselves because, being a real estate company, Solid has better
ways and means of selling the properties.9

This was followed by another communication from CBC to SBI reiterating, among others, that the loan has been
restructured effective March 1, 1999 upon issuance by SBI of promissory notes in favor of CBC. The relevant portion
of that letter dated May 19, 2000 reads:

Again, in response to your query with regards the issue of the loans restructuring, to reiterate, the loan restructuring
has been finalized and completed on 3/01/99 with the booking of the Restructured loan ofP231,716,646. The
Restructured Loan was effective ever since the new Promissory Note was signed on the said date.

The interest rates for the loans are actually rates booked since the new Promissory Notes were effective. Any move
1wphi1

of changing it or "re-pricing" the interest is only possible every 90 days from the booking date, which represents the
interest amortization payment dates. No change or "re-pricing" in interest rates is possible since interest
payment/obligations have not yet been paid.

With regards to the possible Dacion en Pago of your NCC properties, as was discussed already in the meeting, it is a
concern that has to be discussed with Senior Management and approved by the Executive Committee before we can
commit to you on the matter. We suggest that your company, Solid Builders, exhaust all possibilities to sell the NCC
properties yourselves because, being a real estate company, Solid has better ways and means of selling the
properties.10
Subsequently, in a letter dated September 18, 2000, CBC demanded SBI to settle its outstanding account within ten
days from receipt thereof. The letter dated September 18, 2000 reads:

September 18, 2000

SOLID BUILDERS, INC.


V.V. Soliven Bldg., I
EDSA, San Juan, Metro Manila
1wphi1

PN NUMBER O/S BALANCE DUE DATE INTEREST


PN-MK-TS-342924 PHP 89,700,000.00 03/01/2004 04/13/1999
PN-MK-TS-342931 19,350,000.00 03/01/2004 08/05/1999
PN-MK-TS-342948 35,888,000.00 03/01/2004 ---------------
PN-MK-TS-342955 6,870,000.00 03/01/2004 ---------------
PN-MK-TS-342962 5,533,646.00 03/01/2004 07/26/1999
PN-MK-TS-342979 21,950,000.00 03/01/2004 ---------------
PN-MK-TS-342986 3,505,000.00 03/01/2004 08/09/1999
PN-MK-TS-342993 19,455,000.00 03/01/2004 ---------------
PN-MK-TS-343002 4,168,000.00 03/01/2004 ---------------
PN-MK-TS-343026 12,121,000.00 03/01/2004 ---------------
PHP218,540,646.00
================

Greetings!

We refer again to the balances of the abovementioned Promissory Notes amounting to PHP218,540,646.00
excluding interest, penalties and other charges signed by you jointly and severally in our favor, which remains unpaid
up to this date despite repeated demands for payment.

In view of the strict regulations of Bangko Sentral ng Pilipinas on past due accounts, we regret that we cannot hold
these accounts further in abeyance. Accordingly, we are reiterating our request that arrangements to have these
accounts settled within ten (10) days from receipt hereof, otherwise, we shall be constrained to refer the matter to our
lawyers for collection.

We enclose a Statement of Account as of September 30, 2000 for your reference and guidance.

Very truly yours,

MERCEDES E. GERMAN (Sgd.)


Manager

Loans & Discounts Department H.O.11

On October 5, 2000, claiming that the interests, penalties and charges imposed by CBC were iniquitous and
unconscionable and to enjoin CBC from initiating foreclosure proceedings, SBI and MFII filed a Complaint "To
Compel Execution of Contract and for Performance and Damages, With Prayer for Writ of Preliminary Injunction and
Ex-Parte Temporary Restraining Order" in the Regional Trial Court (RTC) of Pasig City. The case was docketed as
Civil Case No. 68105 and assigned to Branch 264.12
In support of their application for the issuance of writ of preliminary injunction, SBI and MFII alleged:

IV. APPLICATION FOR PRELIMINARY INJUNCTION WITH EX- PARTE TEMPORARY RESTRAINING ORDER

A. GROUNDS FOR PRELIMINARY INJUNCTION

1. That SBI and MFII are entitled to the reliefs demanded, among which is enjoining/restraining the
commission of the acts complained of, the continuance of which will work injustice to the plaintiffs; that such
acts are in violation of the rights of plaintiffs and, if not enjoined/restrained, will render the judgment sought
herein ineffectual.

2. That under the circumstances, it is necessary to require, through preliminary injunction, CBC to refrain
from immediately enforcing its letters dated April 17, 2000 and May 19, 2000 and September 18, 2000
during the pendency of this complaint, and

3. That SBI and MFII submit that they are exempt from filing of a bond considering that the letters dated April
17, 2000, May 19, 2000 and September 18, 2000 are a patent nullity, and in the event they are not, they are
willing to post such bond this Honorable Court may determine and under the conditions required by Section
4, Rule 58.13

In its Answer and Opposition to the issuance of the writ of preliminary injunction, CBC alleged that to implement the
agreed restructuring of the loan, SBI executed ten promissory notes stipulating that the interest rate shall be at 18.5%
per annum. For its part, MFII executed third party real estate mortgage over its properties in favor of CBC to secure
the payment of SBIs restructured loan. As SBI was delinquent in the payment of the principal as well as the interest
thereon, CBC demanded settlement of SBIs account.14

After hearing the parties, the trial court issued an Order dated December 14, 2000 granting the application of SBI and
MFII for the issuance of a writ of preliminary injunction. The trial court held that SBI and MFII were able to sufficiently
comply with the requisites for the issuance of an injunctive writ:

It is well-settled that to be entitled to an injunctive writ, a party must show that: (1) the invasion of right sought to be
protected is material and substantial; (2) the right of complainant is clear and unmistakable; and, (3) there is an
urgent and paramount necessity for the writ to prevent serious damage.

The Court opines that the above-mentioned requisites have been sufficiently shown by plaintiffs in this case,
accordingly, a writ of preliminary injunction is in order.

The three subject letters, particularly the letter dated September 18, 2000, indicate that the promissory notes
executed by Benito Soliven as President of plaintiff SBI amounted to P218,540,646.00, excluding interest, penalties
and other charges remained unpaid, and demand that the account be settled within ten days, else defendant bank
shall refer the latter to its lawyers for collection.

The message in the letter is clear: If the account is not settled within the grace period, defendant bank will resort to
foreclosure of mortgage on the subject properties.

The actual or imminent damage to plaintiffs is likewise clear. Considering the number of parcels of land and area
involved, if these are foreclosed by defendant bank, plaintiffs properties and source of income will be effectively
diminished, possibly to the point of closure.

The only issue remaining is whether or not plaintiffs have the right to ask for an injunctive writ in order to prevent
defendant bank from taking over their properties.

Plaintiffs argued that the interest and penalties charged them in the subject letters and attached statements of
account increased during a seven-month period to an amount they described as "onerous", "usurious" ad "greedy".
They likewise asserted that there were on-going talks between officers of the corporations involved to treat or
restructure the contracts to a dacion en pago, as there was a proposed plan of action by representatives of plaintiffs
during the meetings.

Defendant, on the other hand, sought to explain the increase in the interest as contained in the promissory notes
which were voluntarily and willingly signed by Soliven, therefore, binding on plaintiffs and that the proposed plan of
action is merely an oral contract still in the negotiation stage and not binding.

The condition on the interest payments as contained in the promissory notes are as follows:

"Interest for the first quarter shall be @ 18.5% P.A. Thereafter, it shall be payable quarterly in arrears based on three
months average rate."

In its Memorandum, defendant bank tried to show that the questioned increase in the interests was merely in
compliance with the above condition. To this Court, the explanation is insufficient. A more detailed rationalization is
required to convince the court of the fairness of the increase in interests and penalties.

However, the coming explanation may probably be heard only during trial on the merits, and by then this pending
incident or the entire case, may already be moot and academic if the injunctive writ is not issued.15

The dispositive portion of the trial courts Order dated December 14, 2000 reads:

WHEREFORE, premises considered, the application for issuance of writ of preliminary injunction is GRANTED.

Defendant CHINA BANKING CORPORATION, its representatives, agents and all persons working in its behalf are
hereby enjoined from enforcing the contents of its letters to plaintiffs dated April 17, 2000, May 19, 2000 and
September 18, 2000, particularly the banks legal department or other counsel commencing collection proceedings
against plaintiffs in the amount stated in the letters and statements of account.

The Writ of Preliminary Injunction shall be issued upon plaintiffs posting of a bond executed to defendant in the
amount of Two Million Pesos (P2,000,000.00) to the effect [that] the plaintiffs will pay defendant all damages which
the latter may sustain by reason of the injunction if it be ultimately decided that the injunction is unwarranted.16

CBC sought reconsideration but the trial court denied it in an Order17 dated December 10, 2001.

Subsequently, CBC filed a "Motion to Dissolve Injunction Order" but this was denied in an Order18 dated November
10, 2003. The trial court ruled that the motion was in the nature of a mere belated second motion for reconsideration
of the Order dated December 14, 2000. It also declared that CBC failed to substantiate its prayer for the dissolution of
the injunctive writ.

Aggrieved, CBC filed a Petition for Certiorari docketed as CA-G.R. SP No. 81968 in the Court of Appeals where it
claimed that the Orders dated December 14, 2000 (granting the application of petitioners SBI and MFII for the
issuance of writ of preliminary injunction), December 10, 2001 (denying reconsideration of the order dated December
14, 2000), and November 10, 2003 (denying the CBCs motion to dissolve injunction order) were all issued with grave
abuse of discretion amounting to lack of jurisdiction.19

In a Decision dated April 16, 2007, the Court of Appeals found that, on its face, the trial courts Order dated December
14, 2000 granting the application of SBI and MFII for the issuance of a writ of preliminary injunction had no basis as
there were no findings of fact or law which would indicate the existence of any of the requisites for the grant of an
injunctive writ. It appeared to the Court of Appeals that, in ordering the issuance of a writ of injunction, the trial court
simply relied on the imposition by CBC of the interest rates to the loans obtained by SBI and MFII. According to the
Court of Appeals, however, the records do not reveal a clear and unmistakable right on the part of SBI and MFII that
would entitle them to the protection of a writ of preliminary injunction. Thus, the Court of Appeals granted the petition
of CBC, set aside the Orders dated December 14, 2000, December 10, 2001, and November 10, 2003 and dissolved
the injunctive writ issued by the RTC of Pasig City.20
SBI and MFII filed a motion for reconsideration but it was denied by the Court of Appeals in a Resolution dated
September 18, 2007.

Hence, this petition.

SBI and MFII assert that the Decision dated April 16, 2007 of the Court of Appeals is legally infirm as its conclusions
are contrary to the judicial admissions of CBC. They allege that, in its Answer, CBC admitted paragraphs 25 and 26 of
the Complaint regarding the interests and charges amounting to P35,093,980.14 andP80,614,525.15, respectively,
which constituted more than 50% of the total obligation of P334,249,151.29 as of February 15, 2000. For SBI and
MFII, CBCs admission of paragraphs 25 and 26 of the Complaint is an admission that the interest rate imposed by
CBC is usurious, exorbitant and confiscatory. Thus, when the Court of Appeals granted the petition of CBC and
ordered the lifting of the writ of preliminary injunction it effectively disposed of the main case, Civil Case No. 68105,
without trial on the merits and rendered moot and academic as it enabled CBC to foreclose on the mortgages despite
the usurious, exorbitant and confiscatory interest rates.21

SBI and MFII also claim that the Court of Appeals either overlooked or disregarded undisputed and admitted facts
which, if properly considered, would have called for the maintenance and preservation of the preliminary injunction
issued by the trial court. They argue that the Court of Appeals did not even consider Article 1229 of the Civil Code
which provides:

Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly
complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if
it is iniquitous or unconscionable.

For SBI and MFII, the failure of the Court of Appeals to take into account Article 1229 of the Civil Code and its act of
lifting the preliminary injunction "would definitely pave the way for CBCs unbridled imposition of illegal rates of
interest and immediate foreclosure" of the properties of SBI and MFII "without the benefit of a full blown trial."22

For its part, CBC assails the petition contending that it is not allowed under Rule 45 of the Rules of Court because it
simply raises issues of fact and not issues of law. CBC further asserts that the Decision of the Court of Appeals is an
exercise of sound judicial discretion as it is in accord with the law and the applicable provisions of this Court.23

The petition fails.

This Court has recently reiterated the general principles in issuing a writ of preliminary injunction in Palm Tree
Estates, Inc. v. Philippine National Bank24:

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

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

A writ of preliminary injunction is an extraordinary event which must be granted only in the face of actual and existing
substantial rights. The duty of the court taking cognizance of a prayer for a writ of preliminary injunction is to
determine whether the requisites necessary for the grant of an injunction are present in the case before it.25 In this
connection, a writ of preliminary injunction is issued to preserve the status quo ante, upon the applicants showing of
two important 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. It must be proven that the violation sought to be prevented would cause an
irreparable injury.26

Here, SBI and MFII basically claim a right to have their mortgaged properties shielded from foreclosure by CBC on
the ground that the interest rate and penalty charges imposed by CBC on the loans availed of by SBI are iniquitous
and unconscionable. In particular, SBI and MFII assert:

There is therefore an urgent necessity for the issuance of a writ of preliminary injunction or at least a status quo
[order], otherwise, respondent bank will definitely foreclose petitioners properties without awaiting the trial of the main
case on the merits, with said usurious and confiscatory rates of interest as basis.27

and

There is therefore no legal justification for the Honorable Court of Appeals to lift/dissolve the injunction issued by the
trial court, otherwise, respondent bank on the basis of this illegal imposition of interest can already foreclose the
properties of petitioners and render the whole case (sans trial on the merits) moot and academic.28

On this matter, the Order dated December 14, 2000 of the trial court enumerates as the first argument raised by SBI
and MFII in support of their application for the issuance of a writ of preliminary injunction:

1. Their rights basically are for the protection of their properties put up as collateral for the loans extended by
defendant bank to them.29

As debtor-mortgagors, however, SBI and MFII do not have a right to prevent the creditor-mortgagee CBC from
foreclosing on the mortgaged properties simply on the basis of alleged "usurious, exorbitant and confiscatory rate of
interest."30 First, assuming that the interest rate agreed upon by the parties is usurious, the nullity of the stipulation of
usurious interest does not affect the lenders right to recover the principal loan, nor affect the other terms
thereof.31 Thus, in a usurious loan with mortgage, the right to foreclose the mortgage subsists, and this right can be
exercised by the creditor upon failure by the debtor to pay the debt due.32

Second, even the Order dated December 14, 2000 of the trial court, which granted the application for the issuance of
a writ of preliminary injunction, recognizes that the parties still have to be heard on the alleged lack of "fairness of the
increase in interests and penalties" during the trial on the merits.33 Thus, the basis of the right claimed by SBI and
MFII remains to be controversial or disputable as there is still a need to determine whether or not, upon consideration
of the various circumstances surrounding the agreement of the parties, the interest rates and penalty charges are
unconscionable. Therefore, such claimed right cannot be considered clear, actual and subsisting. In the absence of a
clear legal right, the issuance of the injunctive writ constitutes grave abuse of discretion.34

The Order dated December 10, 2001 also shows the reasoning of the trial court which betrays that its grant of the
application of SBI and MFII for the issuance of a writ of preliminary injunction was not based on a clear legal right.
Said the trial court:

It was likewise shown that plaintiffs SBI and MFII had the clear right and urgency to ask for injunction because of the
issue of validity of the increase in the amount of the loan obligation.35 (Emphasis supplied.)

At most, the above finding of the trial court that the validity of the increase in the amount of the loan obligation is in
issue simply amounted to a finding that the rights of SBI and MFII vis--vis that of CBC are disputed and debatable.
In such a case where the complainant-movants right is doubtful or disputed, the issuance of an injunctive writ is not
proper.36

Even assuming that SBI and MFII are correct in claiming their supposed right, it nonetheless disintegrates in the face
of the ten promissory notes in the total amount of P218,540,648.00, exclusive of interest and penalties, issued by SBI
in favor of CBC on March 1, 1999 which until now remain unpaid despite the maturity of the said notes on March 1,
2004 and CBCs repeated demands for payment.37 Foreclosure is but a necessary consequence of nonpayment of
mortgage indebtedness.38 As this Court held in Equitable PCI Bank, Inc. v. OJ-Mark Trading, Inc.39:

Where the parties stipulated in their credit agreements, mortgage contracts and promissory notes that the mortgagee
is authorized to foreclose the mortgaged properties in case of default by the mortgagors, the mortgagee has a clear
right to foreclosure in case of default, making the issuance of a Writ of Preliminary Injunction improper. x x x. (Citation
omitted.)

In addition, the default of SBI and MFII to pay the mortgage indebtedness disqualifies them from availing of the
equitable relief that is the injunctive writ. In particular, SBI and MFII have stated in their Complaint that they have
made various requests to CBC for restructuring of the loan.40 The trial courts Order dated December 14, 2000 also
found that SBI wrote several letters to CBC "requesting, among others, for a reduction of interests and penalties and
restructuring of the loan."41 A debtors various and constant requests for deferment of payment and restructuring of
loan, without actually paying the amount due, are clear indications that said debtor was unable to settle his
obligation.42 SBIs default or failure to settle its obligation is a breach of contractual obligation which tainted its hands
and disqualified it from availing of the equitable remedy of preliminary injunction.

As SBI is not entitled to the issuance of a writ of preliminary injunction, so is MFII. The accessory follows the
principal. The accessory obligation of MFII as accommodation mortgagor and surety is tied to SBIs principal
obligation to CBC and arises only in the event of SBIs default.

Thus, MFIIs interest in the issuance of the writ of preliminary injunction is necessarily prejudiced by SBIs wrongful
conduct and breach of contract.

Even Article 1229 of the Civil Code, which SBI and MFII invoke, works against them. Under that provision, the
equitable reduction of the penalty stipulated by the parties in their contract will be based on a finding by the court that
such penalty is iniquitous or unconscionable. Here, the trial court has not yet made a ruling as to whether the penalty
agreed upon by CBC with SBI and MFII is unconscionable. Such finding will be made by the trial court only after it
has heard both parties and weighed their respective evidence in light of all relevant circumstances. Hence, for SBI
and MFII to claim any right or benefit under that provision at this point is premature.

As no clear right that warrants the extraordinary protection of an injunctive writ has been shown by SBI and MFII to
exist in their favor, the first requirement for the grant of a preliminary injunction has not been satisfied. In the absence
of any requisite, and where facts are shown to be wanting in bringing the matter within the conditions for its issuance,
the ancillary writ of injunction must be struck down for having been rendered in grave abuse of discretion.43 Thus, the
Court of Appeals did not err when it granted the petition for certiorari of CBC and ordered the dissolution of the writ of
preliminary injunction issued by the trial court.

Neither has there been a showing of irreparable injury. An injury is considered irreparable if it is of such constant and
frequent recurrence that no fair or reasonable redress can be had therefor in a court of law, or where there is no
standard by which their amount can be 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.44

In the first place, any injury that SBI and MFII may suffer in case of foreclosure of the mortgaged properties will be
purely monetary and compensable by an appropriate judgment in a proper case against CBC. Moreover, where there
is a valid cause to foreclose on the mortgages, it cannot be correctly claimed that the irreparable damage sought to
be prevented by the application for preliminary injunction is the loss of the mortgaged properties to auction sale.45 The
alleged entitlement of SBI and MFII to the "protection of their properties put up as collateral for the loans" they
procured from CBC is not the kind of irreparable injury contemplated by law. Foreclosure of mortgaged property is not
an irreparable damage that will merit for the debtor-mortgagor the extraordinary provisional remedy of preliminary
injunction. As this Court stated in Philippine National Bank v. Castalloy Technology Corporation46:

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 to receive 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. (Citation omitted.)

The En Banc Resolution in A.M. No. 99-10-05-0, Re: Procedure in Extrajudicial or Judicial Foreclosure of Real Estate
Mortgages, further stacks the odds against SBI and MFII. Issued on February 20, 2007, or some two months before
the Court of Appeals promulgated its decision in this case, the resolution embodies the additional guidelines intended
to aid courts in foreclosure proceedings, specifically limiting the instances, and citing the conditions, when a writ
against foreclosure of a mortgage may be issued, to wit:

(1) No temporary restraining order or writ of preliminary injunction against the extrajudicial foreclosure of real
estate mortgage shall be issued on the allegation that the loan secured by the mortgage has been paid or is
not delinquent unless the application is verified and supported by evidence of payment.

(2) No temporary restraining order or writ of preliminary injunction against the extrajudicial foreclosure of real
estate mortgage shall be issued on the allegation that the interest on the loan is unconscionable, unless the
debtor pays the mortgagee at least twelve percent per annum interest on the principal obligation as stated in
the application for foreclosure sale, which shall be updated monthly while the case is pending.

(3) Where a writ of preliminary injunction has been issued against a foreclosure of mortgage, the disposition
of the case shall be speedily resolved. To this end, the court concerned shall submit to the Supreme Court,
through the Office of the Court Administrator, quarterly reports on the progress of the cases involving ten
million pesos and above.

(4) All requirements and restrictions prescribed for the issuance of a temporary restraining order/writ of
preliminary injunction, such as the posting of a bond, which shall be equal to the amount of the outstanding
debt, and the time limitation for its effectivity, shall apply as well to a status quo order.47

The guidelines speak of strict exceptions and conditions.48 To reverse the decision of the Court of Appeals and
reinstate the writ of preliminary injunction issued by the trial court will be to allow SBI and MFII to circumvent the
guidelines and conditions provided by the En Banc Resolution in A.M. No. 99-10-05-0 dated February 20, 2007 and
prevent CBC from foreclosing on the mortgaged properties based simply on the allegation that the interest on the
loan is unconscionable. This Court will not permit such a situation. What cannot be done directly cannot be done
indirectly.49

All told, the relevant circumstances in this case show that there was failure to satisfy the requisites for the issuance of
a writ of preliminary injunction. The injunctive writ issued by the trial court should therefore be lifted and dissolved.
That was how the Court of Appeals decided. That is how it should be.

WHEREFORE, the petition is hereby DENIED.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 172909 March 5, 2014

SPOUSES SILVESTRE O. PLAZA AND ELENA Y. PLAZA, Petitioners,


vs.
GUILLERMO LUSTIVA, ELEODORA VDA. DE MARTINEZ AND VICKY SAYSON GOLOSENO, Respondents.

DECISION

BRION, J.:

Through a petition for review on certiorari, filed under Rule 45 of the Rules of Court, the petitioners, spouses
1

Silvestre O. Plaza and Elena Y. Plaza, seek the reversal of the decision dated October 24, 2005 and the
2

Resolution dated April 6, 2006 of the Court of Appeals (CA) in CA-G.R. SP No. 59859.
3

THE FACTS

On August 28, 1997, the CA ruled that among the Plaza siblings, namely: Aureliano, Emiliana, Vidal, Marciano, and
4

Barbara, Barbara was the owner of the subject agricultural land. The decision became final and executory and
Barbara's successors, respondents Guillermo Lustiva, Eleodora Vda. de Martinez and Vicky Sayson Goloseno, have
continued occupying the property.

On September 14, 1999, Vidals son and daughter-in-law, the petitioners, filed a Complaint for Injunction, Damages,
Attorneys Fees with Prayer for the Issuance of the Writ of Preliminary Injunction and/or Temporary Restraining Order
against the respondents and the City Government of Butuan. They prayed that the respondents be enjoined from
unlawfully and illegally threatening to take possession of the subject property. According to the petitioners, they
acquired the land from Virginia Tuazon in 1997; Tuazon was the sole bidder and winner in a tax delinquency sale
conducted by the City of Butuan on December 27, 1996.

In their answer, the respondents pointed out that they were never delinquent in paying the land taxes and were in fact
not aware that their property had been offered for public auction. Moreover, Tuazon, being a government employee,
was disqualified to bid in the public auction, as stated in Section 89 of the Local Government Code of 1991. As5

Tuazons participation in the sale was void, she could have not transferred ownership to the petitioners. Equally
important, the petitioners merely falsified the property tax declaration by inserting the name of the petitioners father,
making him appear as a co-owner of the auctioned land. Armed with the falsified tax declaration, the petitioners, as
heirs of their father, fraudulently redeemed the land from Tuazon. Nonetheless, there was nothing to redeem as the
land was not sold. For these irregularities, the petitioners had no right to the Writ of Preliminary Injunction and/or
Temporary Restraining Order prayed for against them.

THE RTCS RULING

In its December 14, 1999 order, the Regional Trial Court (RTC) of Butuan City, Branch 5, reconsidered its earlier
6

order, denied the prayer for a Writ of Preliminary Injunction, and ordered that the possession and occupation of the
7

land be returned to the respondents. The RTC found that the auction sale was tainted with irregularity as the bidder
was a government employee disqualified in accordance with Section 89 of the Local Government Code of 1991. The
petitioners are not buyers in good faith either. On the contrary, they were in bad faith for having falsified the tax
declaration they redeemed the property with.
THE CAS RULING

Through a petition for review on certiorari under Rule 65, the petitioners challenged the RTCs order before the CA.

While the petition for review on certiorari was pending before the CA, the petitioners filed an action for specific
performance against the City Government of Butuan. According to the petitioners, they acquired possession and
8

ownership over the auctioned property when they redeemed it from Tuazon. The City Government of Butuan must
therefore issue them a certificate of sale.9

In its October 24, 2005 decision, the CA affirmed the RTCs ruling, found the petitioners guilty of forum shopping,
10

dismissed the case, and referred the case to the Court and to the Integrated Bar of the Philippines for investigation
and institution of the appropriate administrative action. The CA, after legal analysis, similarly concluded that for being
11

disqualified to bid under Section 89 of the Local Government Code of 1991, Tuazon never obtained ownership over
the property; much less transmit any proprietary rights to the petitioners. Clearly, the petitioners failed to establish any
clear and unmistakable right enforceable by the injunctive relief.

On April 6, 2006, the CA rejected the petitioners motion for reconsideration.

THE PARTIES ARGUMENTS

The petitioners filed the present petition for review on certiorari with this Court to challenge the CA rulings. The
petitioners maintain that they did not falsify the tax declaration in acquiring the auctioned property. Moreover,
assuming that Tuazon, the sole bidder, was indeed disqualified from participating in the public auction, Section
181 of the Local Government Code of 1991 finds application. Applying the law, it is as if there was no bidder, for
12

which the City Government of Butuan was to be considered the purchaser of the land in auction. Therefore, when the
petitioners bought the land, they bought it directly from the purchaser - City Government of Butuan - and not from
Tuazon, as redeemers.

Also, the respondents may not question the validity of the public auction for failing to deposit with the court the
amount required by Section 267 of the Local Government Code of 1991.
13

Finally, the petitioners argue that they did not commit forum shopping, as the reliefs prayed for in the present case
and in the specific performance case are not the same. In the present case, they merely impleaded the City
Government of Butuan as a nominal party to pay for the value of the land only if possession of the land was awarded
to the respondents. On the other hand, the complaint for specific performance prayed that the City Government of
Butuan execute the necessary certificate of sale and other relevant documents pertaining to the auction.

The respondents, for their part, reiterate the lower courts findings that there could have been no legal redemption in
favor of the petitioners as the highest bidder was disqualified from bidding. Moreover, the CA correctly applied the law
in finding the petitioners guilty of forum shopping. Most importantly, the grant of preliminary injunction lies in the
sound discretion of the court and the petitioners failed to show proof that they are entitled to it.

Meanwhile, on August 8, 2013, the RTC dismissed the main action and ordered the petitioners to pay the
respondents attorneys fees and litigation expenses. 14

THE COURTS RULING

We resolve to deny the petition for lack of merit.

The petitioners may not


raise factual issues
The petitioners maintain that they did not falsify the tax declaration they reimbursed the property with. According to
them, the document already existed in 1987, way before they acquired the land in 1997. Contrary likewise to the
lower courts finding, they did not purchase the land from Tuazon as redemptioners; they directly bought the property
from the City Government of Butuan.

These factual contests are not appropriate for a petition for review on certiorari under Rule 45. The Court is not a trier
of facts. The Court will not revisit, re-examine, and re-evaluate the evidence and the factual conclusions arrived at by
15

the lower courts. In the absence of compelling reasons, the Court will not disturb the rule that factual findings of the
16

lower tribunals are final and binding on this Court.17

Sections 181 and 267 of the Local Government Code of 1991 are inapplicable; these provisions do not apply to the
present case

The petitioners may not invoke Section 181 of the Local Government Code of 1991 to validate their alleged title. The
18

law authorizes the local government unit to purchase the auctioned property only in instances where "there is no
bidder" or "the highest bid is xxx insufficient." A disqualified bidder is not among the authorized grounds. The local
government also never undertook steps to purchase the property under Section 181 of the Local Government Code
of 1991, presumably because it knew the invoked provision does not apply.

Neither can the Court agree with the petitioners stance that the respondents defense the petitioners defective title
must fail for want of deposit to the court the amount required by Section 267 of the Local Government Code. The
provision states:

Section 267. Action Assailing Validity of Tax Sale. - No court shall entertain any action assailing the validity or any
sale at public auction of real property or rights therein under this Title until the taxpayer shall have deposited with the
court the amount for which the real property was sold, together with interest of two percent (2%) per month from the
date of sale to the time of the institution of the action. The amount so deposited shall be paid to the purchaser at the
auction sale if the deed is declared invalid but it shall be returned to the depositor if the action fails.

Neither shall any court declare a sale at public auction invalid by reason or irregularities or informalities in the
proceedings unless the substantive rights of the delinquent owner of the real property or the person having legal
interest therein have been impaired. [underscores ours; italics supplied]

A simple reading of the title readily reveals that the provision relates to actions for annulment of tax sales. The section
likewise makes use of terms "entertain" and "institution" to mean that the deposit requirement applies only to initiatory
actions assailing the validity of tax sales. The intent of the provision to limit the deposit requirement to actions for
annulment of tax sales led to the Courts ruling in National Housing Authority v. Iloilo City, et al. that the deposit
19

requirement is jurisdictional a condition necessary for the court to entertain the action:

As is apparent from a reading of the foregoing provision, a deposit equivalent to the amount of the sale at public
auction plus two percent (2%) interest per month from the date of the sale to the time the court action is instituted is a
condition a "prerequisite," to borrow the term used by the acknowledged father of the Local Government Code
which must be satisfied before the court can entertain any action assailing the validity of the public auction sale. The
law, in plain and unequivocal language, prevents the court from entertaining a suit unless a deposit is made. xxx.
Otherwise stated, the deposit is a jurisdictional requirement the nonpayment of which warrants the failure of the
action.

xxxx

Clearly, the deposit precondition is an ingenious legal device to guarantee the satisfaction of the tax delinquency, with
the local government unit keeping the payment on the bid price no matter the final outcome of the suit to nullify the
tax sale.20
The Court would later reiterate the jurisdictional nature of the deposit in Wong v. City of Iloilo, and pronounce:
21

In this regard, National Housing Authority v. Iloilo City holds that the deposit required under Section 267 of the Local
Government Code is a jurisdictional requirement, the nonpayment of which warrants the dismissal of the action.
Because petitioners in this case did not make such deposit, the RTC never acquired jurisdiction over the complaints. 22

These rulings clearly render inapplicable the petitioners insistence that the respondents should have made a deposit
to the court. The suit filed by the petitioners was an action for injunction and damages; the issue of nullity of the
auction was raised by the respondents themselves merely as a defense and in no way converted the action to an
action for annulment of a tax sale.

The petitioners failed to show clear


and unmistakable rights to be protected
by the writ; the present action has been
rendered moot and academic by the
dismissal of the main action

As the lower courts correctly found, Tuazon had no ownership to confer to the petitioners despite the latters
reimbursement of Tuazons purchase expenses. Because they were never owners of the property, the petitioners
failed to establish entitlement to the writ of preliminary injunction. "[T]o be entitled to an injunctive writ, the right to be
protected and the violation against that right must be shown. A writ of preliminary injunction may be issued only upon
clear showing of an actual existing right to be protected during the pendency of the principal action. When the
complainants right or title is doubtful or disputed, he does not have a clear legal right and, therefore, the issuance of
injunctive relief is not proper."
23

Likewise, upon the dismissal of the main case by the RTC on August 8, 2013, the question of issuance of the writ of
preliminary injunction has become moot and academic. In Arevalo v. Planters Development Bank, the Court ruled
24

that a case becomes moot and academic when there is no more issue between the parties or object that can be
served in deciding the merits of the case. Upon the dismissal of the main action, the question of the non-issuance of
a writ of preliminary injunction automatically died with it. A writ of preliminary injunction is a provisional remedy; it is
auxiliary, an adjunct of, and subject to the determination of the main action. It is deemed lifted upon the dismissal of
the main case, any appeal therefrom notwithstanding. 25

The petitioners are guilty


of forum shopping

We agree with the CA that the petitioners committed forum shopping when they filed the specific performance case
despite the pendency of the present case before the CA. In the recent case of Heirs of Marcelo Sotto, etc., et al. v.
Matilde S. Palicte, the Court laid down the three ways forum shopping may be committed: 1) through litis pendentia
26

filing multiple cases based on the same cause of action and with the same prayer, the previous case not having
been resolved yet; 2) through res judicata filing multiple cases based on the same cause of action and the same
prayer, the previous case having been finally resolved; and 3) splitting of causes of action filing multiple cases
based on the same cause of action but with different prayers the ground to dismiss being either litis pendentia or
res judicata. "The requisites of litis pendentia are: (a) the identity of parties, or at least such as representing the same
interests in both actions; (b) the identity of rights asserted and relief prayed for, the relief being founded on the same
facts; and (c) the identity of the two cases such that judgment in one, regardless of which party is successful, would
amount to res judicata in the other." 27

Noticeable among these three types of forum shopping is the identity of the cause of action in the different cases
filed. Cause of action is "the act or omission by which a party violates the right of another." 28
The cause of action in the present case (and the main case) is the petitioners claim of ownership of the land when
they bought it, either from the City Government of Butuan or from Tuazon. This ownership is the petitioners basis in
enjoining the respondents from dispossessing them of the property. On the other hand, the specific performance case
prayed that the City Government of Butuan be ordered to issue the petitioners the certificate of sale grounded on the
petitioners ownership of the land when they had bought it, either from the City Government of Butuan or from
Tuazon. While it may appear that the main relief prayed for in the present injunction case is different from what was
prayed for in the specific performance case, the cause of action which serves as the basis for the reliefs remains the
same the petitioners alleged ownership of the property after its purchase in a public auction.

Thus, the petitioners' subsequent filing of the specific performance action is forum shopping of the third kind-splitting
causes of action or filing multiple cases based on the same cause of action, but with different prayers. As the Court
has held in the past, "there is still forum shopping even if the reliefs prayed for in the two cases are different, so long
as both cases raise substantially the same issues." 29

Similarly, the CA correctly found that the petitioners and their counsel were guilty of forum shopping based on litis
pendentia. Not only were the parties in both cases the same insofar as the City Government of Butuan is concerned,
there was also identity of rights asserted and identity of facts alleged. The cause of action in the specific performance
case had already been ruled upon in the present case, although it was still pending appeal before the CA. Likewise,
the prayer sought in the specific performance case-for the City Government ofButuan to execute a deed of sale in
favor of the petitioners - had been indirectly ruled upon in the present case when the R TC declared that no certificate
of sale could be issued because there had been no valid sale.

WHEREFORE, premises considered, the Court DENIES the petition for review on certiorari. The decision dated
1wphi1

October 24, 2005 and the resolution dated April 6, 2006 of the Court of Appeals in CA-G.R. SP No. 59859 are hereby
AFFIRMED.

SO ORDERED.