G.R. No. 181040 - People vs. Fabian y Nicolas

Case Summary (G.R. No. 181040)

Parties and Setting

The petitioner, Detective and Protective Bureau, Inc., claimed corporate existence under Philippine law and designated itself as plaintiff in Civil Case No. 56949. It alleged that respondent Fausto S. Alberto served as managing director from 1952 until January 14, 1964, and later refused to vacate the office despite the stockholders’ meeting electing Jose de la Rosa as successor managing director. Respondent Judge Gaudencio Cloribel acted as the trial judge of Branch VI, Court of First Instance of Manila and issued both the preliminary injunction order and the subsequent order lifting it.

Initiation of Civil Case and Prayer for Provisional Relief

In Civil Case No. 56949, the petitioner filed a complaint dated May 4, 1964. The complaint alleged that, in June 1963, Alberto “illegally seized and took control” of all corporate assets and also took the corporate books, records, vouchers, and receipts, concealed them, and refused corporate members’ access to examine them. The complaint further alleged that on January 14, 1964, the stockholders removed Alberto as managing director and elected Jose de la Rosa in his stead. It also alleged that Alberto refused to deliver corporate assets and records to the newly elected managing director and continued unauthorized acts for and in behalf of the corporation. Additionally, the complaint asserted that Alberto had failed to render an accounting and had illegally disposed of corporate funds contrary to a board resolution dated November 24, 1963. Finally, the complaint alleged that without immediate restraint ex parte, Alberto would continue performing as managing director, and it sought the appointment of a receiver.

The petitioner prayed for a preliminary injunction ex parte restraining Alberto from exercising the functions of managing director and from disbursing or disposing of corporate funds, for the appointment of Jose M. Barredo as receiver, and, after judgment, for a permanent injunction and an order compelling Alberto to render an accounting.

Trial Court’s Order Granting Preliminary Injunction and Admission of Counter-Bond

Respondent Judge set the prayer for ancillary relief for hearing and required memoranda. On June 18, 1964, he granted the writ of preliminary injunction prayed for, subject to the petitioner’s posting of a bond of P5,000.00. The petitioner filed the bond, but while it was pending approval, Alberto filed a motion on July 1, 1964 to admit a counter-bond for the purpose of lifting the preliminary injunction. The petitioner opposed the motion. Despite the opposition, respondent Judge issued, on August 5, 1964, an order admitting the counter-bond of P5,000 and setting aside the writ of preliminary injunction previously issued.

The Certiorari Petition and the Limited Issue

Believing that the August 5, 1964 order was contrary to law and involved grave abuse of discretion, and that no plain, speedy, and adequate remedy existed, the petitioner filed a petition for certiorari with the Supreme Court. The petition sought (i) an injunction to restrain Alberto from exercising functions as managing director and (ii) annulment of the August 5, 1964 order admitting the counter-bond and lifting the preliminary injunction.

The Supreme Court gave due course to the petition but did not issue a preliminary injunction. In his answer, Alberto traversed the allegations, justified the challenged order, and sought dismissal. From the pleadings, the Supreme Court characterized the sole issue as whether respondent Judge’s August 5, 1964 order admitting and approving the counter-bond and setting aside the June 18, 1964 preliminary injunction was issued contrary to law and with grave abuse of discretion.

Petitioner’s Grounds for Certiorari

The petitioner anchored its argument on five principal contentions. First, it asserted that the motion to admit Alberto’s counter-bond was not supported by affidavits showing why the counter-bond should be admitted, allegedly as required by Section 6 of Rule 58. Second, it argued that because the preliminary injunction had been issued after hearing and not ex parte, the admission of the counter-bond necessarily rendered the injunction ineffective. Third, it maintained that the preliminary injunction had been issued according to Rule 58 and that established precedents should control. Fourth, it claimed public interest required maintenance of the injunction because Alberto allegedly arrogated corporate powers, causing irreparable damage. Fifth, it argued that the counter-bond could not compensate the petitioner for irreparable damage due to Alberto’s continued control.

On Verification Requirements for Motions to Dissolve

The Supreme Court addressed first the petitioner's claim that the counter-bond-related motion was not verified and lacked affidavits. It noted that the questioned motion was not shown in the record, even though the petitioner alleged non-compliance. The record, however, reflected that Alberto had filed a verified answer to the complaint and a verified opposition to the issuance of the writ of preliminary injunction.

The Court then examined the jurisprudential treatment of verification in relation to dissolution of preliminary injunctions. It recalled that in Sy Sam Bio, et al. vs. Barrios and Buyson Lampa (63 Phil. 206), the Court had interpreted statutory sources of Section 6 of Rule 58—specifically Section 169 of Act 190—as not prescribing the manner of filing an application to annul or modify a writ of preliminary injunction, and held that an application could be verbal based on grounds such as insufficiency of the complaint. On that basis, the Court further referenced Caluya, et al. vs. Ramos, et al. (79 Phil. 640), where the Court rejected criticism that a motion to dissolve was unverified, reasoning that if rule did not prescribe the form of the application for dissolution or modification, then even an indirect verbal application could suffice for compliance.

At the same time, the Court recognized that in Canlas, et al. vs. Aquino, et al. (L-16815, July 24, 1961), it had ruled that a motion for dissolution should be verified, particularly where the motion asserted that the injunction would cause great damage to the defendant while the plaintiff could fully compensate the defendant through damages. The Supreme Court therefore summarized the doctrine that whether an application must be verified depended on the ground invoked: if based on insufficiency of the complaint, verification was not required; if based on anticipated great damage to the defendant with the ability of the plaintiff to compensate, verification was required.

Applying this framework to the case before it, the Supreme Court held that it could not determine what grounds were alleged in Alberto’s motion because the motion itself was absent from the record. The Court therefore relied on respondent Judge’s August 5, 1964 order stating that “the filing of the counter-bond is in accordance with law.” For that reason, it rejected the first ground of petitioner.

Whether a Preliminary Injunction Issued After Hearing May Be Dissolved

The Court then disposed of petitioner’s second and third reasons, which assumed that a preliminary injunction issued after hearing and in accordance with Rule 58 could not be set aside. The Supreme Court held the assumption untenable. It reasoned that Section 6 of Rule 58, particularly the clause that an injunction “may be refused, or, if granted ex parte, may be dissolved,” did not place dissolution beyond the reach of the trial court when the injunction had been issued after hearing. The Court characterized a writ of preliminary injunction as an interlocutory order that remains within the trial court’s control before final judgment.

To support this, it cited Caluya, et al. vs. Ramos, et al. (79 Phil. 640, 642-643), which rejected the same erroneous view that dissolution was only proper for ex parte injunctions. The Court also referenced Clarke vs. Philippine Ready Mix Concrete Co., Inc., et al. (88 Phil. 460) for the principle that even if dissolution of an injunction issued after hearing was done ex parte without giving the other party an opportunity to be heard, such irregularity did not amount to lack or excess of jurisdiction or grave abuse of discretion, and the remedy was not certiorari but appeal.

Corporate Control, Qualification, and the Alleged Public Interest

The fourth ground rested on public interest, asserted to require maintenance of the injunction. The petitioner argued that Alberto had taken corporate control by refusing to surrender the managing director position to Jose de la Rosa, who had been elected by the stockholders. Alberto disputed that Jose de la Rosa could be managing director, asserting that Jose de la Rosa did not own any shares of stock in the corporation.

The Supreme Court found no record showing that Jose de la Rosa owned at least one share. It relied on Section 30 of the Corporation Law, which required every director to own at least one share standing in his name on the corporate books. It further connected this to the corporation’s by-laws: Article V, Section 3 provided that the manager is elected by the board from among its members. If Jose de la Rosa could not qualify as a director, he could not qualify as managing director. The Court added that Article IV, Section 1 of the by-laws provided that directors serve until the election and qualification of their duly qualified successors. Thus, the Supreme Court held that Alberto could not be compelled to vacate the office and cede it to an alleged successor who lacked qualification as managing director.

Bond, Possession, and the Presumption in Disputed Ownership

For the fifth ground, petitioner argued that the counter-bond could not compensate for irreparable damage from Alberto’s continued management. The Supreme Court framed a factual concern: there was a question as to who owned the controlling interest in the corporation. Und

Case Syllabus (G.R. No. 181040)

The case arose from Civil Case No. 56949 of the Court of First Instance of Manila, where Detective and Protective Bureau, Inc. (petitioner) sued Fausto S. Alberto (respondent) for accounting, with preliminary injunction and receivership.
The respondents were Gaudencio Cloribel, in his capacity as Presiding Judge of Branch VI, Court of First Instance of Manila, and Fausto S. Alberto.
The petitioner filed a petition for certiorari with the Supreme Court, alleging that the trial court committed grave abuse of discretion in issuing an order that admitted a counter-bond and set aside a previously granted writ of preliminary injunction.
The Supreme Court gave due course to the petition but denied preliminary injunctive relief and later dismissed the petition.
The dispositive question was whether the order of August 5, 1964 was issued contrary to law and with grave abuse of discretion.

Key Factual Allegations

The complaint alleged that the petitioner was a corporation duly organized and existing under Philippine law.
The complaint alleged that the defendant Fausto S. Alberto served as managing director from 1952 until January 14, 1964.
The complaint alleged that in June 1963, the defendant illegally seized and took control of the corporation’s assets and the books, records, vouchers, and receipts, and concealed them while refusing access to corporate members.
The complaint alleged that on January 14, 1964, the stockholders, in a meeting, removed the defendant as managing director and elected Jose de la Rosa in his place.
The complaint alleged that the defendant refused to vacate his position and deliver the assets and books to the newly elected managing director and continued to perform acts for and in behalf of the corporation without authority.
The complaint alleged that the defendant failed to submit a required financial statement and to render an accounting of his administration from 1952.
The complaint alleged that contrary to a Board of Directors resolution adopted on November 24, 1963, the defendant illegally disposed of corporate funds.
The complaint alleged the need for immediate restraint to prevent continued discharge of the managing director’s functions and sought the appointment of a receiver to take charge of corporate assets and income.

Trial Court Orders Issued

The petitioner prayed for an ex parte preliminary injunction restraining the defendant from exercising the functions of managing director and from disbursing or disposing of corporate funds.
The petitioner also prayed for the appointment of Jose M. Barredo as receiver, and for later permanent injunction and a court-ordered accounting after judgment.
The trial judge set the prayer for ancillary relief for hearing and required the parties to submit memoranda.
On June 18, 1964, the trial judge granted the writ of preliminary injunction, conditioned upon the petitioner’s filing of a bond of P5,000.00.
The petitioner filed the bond, subject to approval.
While the bond was pending approval, the defendant filed on July 1, 1964 a motion to admit a counter-bond to lift the preliminary injunction.
The trial judge, despite opposition, issued on August 5, 1964 an order admitting the counter-bond and setting aside the previously issued writ of preliminary injunction.

Petition for Certiorari

The petitioner believed the August 5, 1964 order was contrary to law and constituted grave abuse of discretion.
The petitioner claimed there was no plain, speedy, and adequate remedy available, and thus sought relief by certiorari.
The petition asked the Supreme Court to issue a writ of preliminary injunction enjoining the defendant from exercising the functions of managing director.
The petition also asked the Supreme Court to set aside the August 5, 1964 order as null and void.

Parties’ Arguments

The petitioner argued that the setting aside of the writ was contrary to law and involved grave abuse of discretion.
The petitioner contended that the motion to admit the counter-bond was defective because it was not supported by affidavits as purportedly required by Section 6 of Rule 58.
The petitioner argued that the preliminary injunction had been issued after hearing and thus the admission of a counter-bond rendered it ineffective.
The petitioner asserted that the issuance and setting aside followed established rules and precedents under Rule 58.
The petitioner argued that public interest required maintenance of the injunction because the defendant allegedly arrogated powers of the corporation’s board and continued to cause irreparable damage.
The petitioner argued that the counter-bond could not compensate for the irreparable harm to the corporation.

Issue Presented

The Supreme Court stated that, from the pleadings, the only issue was whether the August 5, 1964 order admitting the counter-bond and lifting the preliminary injunction was issued contrary to law and with grave abuse of discretion.

Verification and Affidavit Requirement

The Supreme Court rejected the petitioner’s first theory because the controverted motion to admit the counter-bond did not appear in the record.
The Supreme Court observed that the record showed the defendant had filed a verified answer and a verified opposition to the issuance of the writ of preliminary injunction.
The Court explained that the requirement of verification for motions to dissolve preliminary injunction was not absolute and depended on the circumstances and the ground invoked.
In Sy Sam Bio, et al. vs. Barrios and Buyson Lampa, the Court treated an application to dissolve as adequate w