Title
Dolmar Real Estate Development Corp. vs. Court of Appeals
Case
G.R. No. 172990
Decision Date
Feb 27, 2008
Spouses Young sued Dolmar Real Estate for specific performance, seeking a TRO to halt a board meeting. Courts upheld status quo, denying petitioners' injunction, citing no grave abuse of discretion.
writ of preliminary injunction
trial court
sound discretion

Case Summary (G.R. No. 172990)

Factual Background

On June 1, 2005, respondents filed in the Regional Trial Court, Branch 211, Mandaluyong City, a complaint for specific performance and damages against petitioners, docketed as SEC Case No. MC05-093. The complaint prayed for a TRO and a preliminary injunction ordering petitioners, among others: (a) to cease and desist from further violating the provisions of the MOA dated March 4, 2003 and the Shareholders Agreement dated May 16, 2003; (b) to comply with their obligations by restoring to respondents the authority to manage the corporation; (c) to abide by quorum and consensus rules established in the agreements governing corporate acts and powers; and (d) to desist from holding a Board of Directors meeting scheduled on June 3, 2005.

On June 2, 2005, the trial court issued a 72-hour restraining order preventing the holding of the June 3, 2005 Board meeting. On June 17, 2005, after a summary hearing, the trial court issued the TRO prayed for by respondents and set the hearing on the prayer for a writ of preliminary injunction on June 21, 2005. The trial court also approved the bond in the amount of P100,000.00 posted by respondents.

On October 14, 2005, the trial court issued an order directing, among other directives: (1) that the status quo ante—defined as the situation of the contending parties prior to December 13, 2004—must be maintained; (2) that the four-director quorum and consensus rules must be observed; (3) that the rule on counter-signature by spouses Young must be observed on checks issued by Festive Foods International, Inc. and in the corporation’s banking transactions; and (4) that the parties shall mutually comply with their respective duties and responsibilities under the MOA and Shareholders Agreement. The dispositive portion expressly declared the status quo ante and maintained the temporary restraining order bond in full force for the stated purpose, with the sheriff designated to enforce compliance.

Trial Court Proceedings and the Challenged Status Quo Ante Order

Petitioners treated the trial court’s October 14, 2005 order, which maintained the status quo ante and effectively required observance of the agreements’ management, quorum, consensus, and counter-signature requirements, as a matter that warranted immediate appellate review. Accordingly, petitioners filed in the Court of Appeals a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure, as amended, assailing the status quo ante order for having been issued with grave abuse of discretion amounting to lack or excess of jurisdiction.

Court of Appeals Disposition

On November 15, 2005, the Court of Appeals dismissed the petition for being fatally defective. It held that the petition failed to include the required certification of non-forum shopping, that the verification referred to an answer with counterclaim rather than to the petition itself, and that material portions of the record referred to in the petition were not attached.

Upon petitioners’ filing of a motion for reconsideration with motion to admit an amended petition dated November 21, 2005 (including an application for a TRO and a writ of preliminary injunction), the Court of Appeals, in a resolution dated December 7, 2005, granted the motion and reinstated the case.

On January 25, 2006, the Court of Appeals issued a resolution denying petitioners’ application for a writ of preliminary injunction. It characterized the petition before it as one seeking to nullify the trial court’s order declaring a status quo for the parties to mutually observe and comply with their duties and obligations under the MOA and Shareholders Agreement during the pendency of the case. The Court of Appeals noted that the underlying case was one for specific performance filed by respondents to compel petitioners’ compliance with the agreements, and it observed that petitioners’ requested preliminary injunction would disturb the trial court’s finding as to the prevailing status quo ante.

The Court of Appeals held that it found no compelling reason to interfere with the state of affairs ordered by the trial court. It further ruled that none of the grounds mentioned in Section 3 of Rule 58 existed to justify issuance of the writ. It thus denied the application.

Petitioners’ motion for reconsideration was denied in a resolution dated April 24, 2006 for lack of merit.

The Parties’ Positions Before the Supreme Court

Petitioners then filed the present petition, contending that the Court of Appeals committed grave abuse of discretion amounting to lack or excess of jurisdiction when it issued the assailed resolutions. Petitioners argued that the Court of Appeals resolved their application for a TRO and writ of preliminary injunction in a simplistic manner, by relying on the absence of a “compelling reason” to interfere with the trial court’s order. They asserted that the appellate resolution likewise failed to provide a full discussion of the applicable rules and law. They also contended that the resolution denying reconsideration merely declared lack of merit.

Respondents countered that the petition should be denied for lack of merit.

Legal Standards Applied by the Supreme Court

The Supreme Court reiterated that the sole object of a writ of preliminary injunction, whether prohibitory or mandatory, was to preserve the status quo and prevent further injury to the applicant until the merits of the principal case could be heard. The Court defined status quo as the last actual peaceable uncontested status which preceded the controversy. It added that injunctive relief could be resorted to only for the preservation and protection of the litigant’s rights or interests during the pendency of the main action.

The Court also stressed that the grant or denial of a writ of preliminary injunction rested on the sound discretion of the issuing court. For grave abuse of discretion to justify nullification in a Rule 65 petition, the Court required a capricious and whimsical exercise of judgment equivalent to lack or excess of jurisdiction, or a power exercised arbitrarily due to passion, prejudice, or personal hostility, in a manner so patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law.

Supreme Court’s Evaluation of the Court of Appeals’ Resolutions

The Supreme Court found no capricious, whimsical, or arbitrary act by the Court of Appeals. It observed that the Court of Appeals sustained the trial court’s exercise of discretion in issuing the status quo ante order because it found no compelling reason to interfere with the prevailing state of affairs. It further noted that the Court of Appeals determined that petitioners had failed to establish the existence of any ground under Section 3 of Rule 58 that would justify the issuance of the injunctive writ. Those grounds, as framed by the Court of Appeals, involved the existence of a clear and unmistakable right to the relief demanded and the probability that the acts sought to be enjoined would work injustice to petitioners during the pendency of the case.

On petitioners’ complaint that the Court of Appeals’ resolution was too simplistic and allegedly insufficient because it did not contain a full discussion of findings and applicable law, the Supreme Court held that there was no definite or stringent rule on the manner resolutions denying an application for a TRO or a writ of preliminary injunction should be written. It explained that such a resolution need not strictly follow the requirements applicable to decisions disposing of an appealed case. The Court relied on its ruling in U

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