G.R. No. 199324 - Executive Secretary vs. Forerunner Multi Resources, Inc.

Case Summary (G.R. No. 199324)

Factual Background

On 12 December 2002 President Gloria Macapagal-Arroyo issued EO 156, which imposed a partial ban on the importation of used motor vehicles as part of a comprehensive industrial policy to accelerate development of the domestic motor vehicle industry. EO 156 contained specified exemptions and a separability clause. In prior litigation consolidated as Executive Secretary v. Southwing Heavy Industries, Inc. and related cases (collectively, Southwing), this Court held that EO 156 was a valid executive issuance enforceable throughout the Philippine customs territory but declared Article 2, Section 3.1 void insofar as it applied to the fenced-in former Subic Naval Base area, which is a separate customs territory under Republic Act No. 7227.

Respondent’s Claim and Lower Court Relief

Forerunner Multi Resources, Inc., a corporation engaged in importing used motor vehicles through the ports of Aparri, Cagayan and San Fernando, La Union, filed suit in the Regional Trial Court of Aparri, Cagayan to declare EO 156 invalid. The complaint alleged that EO 156 was issued ultra vires, violated the Due Process and Equal Protection Clauses, and had been superseded or repealed by EO 418, issued 4 April 2005, which modified tariff rates on used motor vehicles. Respondent sought a preliminary injunctive writ to enjoin, litis pendentia, enforcement of EO 156.

Trial Court Proceedings

The trial court initially issued a temporary restraining order and thereafter granted a writ of preliminary injunction in its Order dated 27 November 2008. Upon petitioners’ motion for reconsideration the trial court reversed course and lifted the preliminary injunctive writ on 7 July 2010. The trial court grounded its reconsideration on this Court’s decision in Southwing, viewing that precedent as negating any clear and unmistakable legal right on respondent’s part to protection by a preliminary injunction.

Court of Appeals Ruling

Respondent elevated the matter to the Court of Appeals by certiorari. The Court of Appeals granted the petition, found that the trial court committed grave abuse of discretion in lifting the preliminary injunction, set aside the trial court’s 7 July 2010 Order, and reinstated the Order of 27 November 2008. The appellate court concluded that implementation of EO 156 would subject respondent to grave and irremediable financial losses and, by analogy, relied on this Court’s ruling in Filipino Metals Corporation v. Secretary of the Department of Trade and Industry in support of its reinstatement of injunctive relief.

Issue Presented to this Court

Whether the Court of Appeals erred in granting preliminary injunctive relief to Forerunner Multi Resources, Inc. to enjoin enforcement of EO 156.

Supreme Court Disposition

The Court held that the Court of Appeals erred in granting the preliminary injunctive relief. The petition was granted. The Decision dated 27 June 2011 and the Resolution dated 14 November 2011 of the Court of Appeals were set aside. The Order dated 7 July 2010 of the Regional Trial Court of Aparri, Cagayan, Branch 10, was reinstated. The temporary restraining order issued by this Court on 16 January 2012 was made permanent. Justices Brion, Del Castillo, Perez, and Perlas-Bernabe concurred.

Legal Basis for Denying Preliminary Injunctive Relief

The Court restated the well-settled rule that a writ of preliminary injunction under Rule 58 issues only upon a showing of the applicant’s clear legal right that is violated or under threat of violation. Clear legal right means a right clearly founded in or granted by law; any doubt or dispute over the asserted right precludes preliminary injunctive relief. When the relief sought attacks the validity of laws or issuances with the force of law, the petitioner bears the added burden of overcoming the presumption of validity that attends such laws or issuances. These procedural requirements reflect the equitable character of injunctive relief, which preserves the status quo and restricts defendants before final adjudication.

Application of Precedent and Effect of Southwing

Respondent’s attack on EO 156 followed the Court’s adjudication of the same issuance in Southwing, where this Court found EO 156 to be a reasonable exercise of police power to protect the domestic motor manufacturing industry and therefore valid as applied to the customs territory outside Subic Freeport. Given that precedent, the Court found any legal right respondent might claim in relation to EO 156 to be doubtful. The Court held that until reversed or modified, Southwing conclusively sustained the presumption of validity of EO 156 and thus foreclosed a showing of a clear legal right necessary for a preliminary injunction.

Self-inflicted Losses and Distinguishing Filipino Metals

The Court observed that the trial court and the Court of Appeals relied heavily on the prospect of respondent’s financial losses if EO 156 were enforced. The Court stated that any such losses resulting from importing in contravention of EO 156 were self-imposed and amounted to damnum absque injuria, for which injunctive relief will not issue in the absence of proof of a clear legal right. The Court distinguished Filipino Metals, noting that in that case the petitioners had established a strong case for unconstitutionality of Republic Act No. 8800 and had thereby discharged the burden of overcoming the presumption of validity; no such showing had been made here because Southwing already upheld EO 156.

The EO 418 Repeal Argument

The Court rejected respondent’s contention that EO 418 repealed EO 156. It explained th

Case Syllabus (G.R. No. 199324)

Parties and Posture

EXECUTIVE SECRETARY, SECRETARY OF FINANCE, COMMISSIONER OF CUSTOMS, DISTRICT COLLECTOR OF CUSTOMS, PORT OF APARRI, CAGAYAN, DISTRICT COLLECTOR OF CUSTOMS, PORT OF SAN FERNANDO, LA UNION, AND HEAD OF THE LAND TRANSPORTATION OFFICE were impleaded as petitioners in the Supreme Court under Rule 45.
FORERUNNER MULTI RESOURCES, INC. was the respondent and a corporation engaged in the importation of used motor vehicles via the ports of Aparri and San Fernando.
The petition sought review of a Decision dated 27 June 2011 and a Resolution dated 14 November 2011 of the Court of Appeals.
The case was docketed for review under Rule 45 of the 1997 Rules of Civil Procedure.

Key Facts

Executive Order No. 156 (EO 156) was issued on 12 December 2002 and imposed a partial ban on the importation of used motor vehicles as part of a motor vehicle industry development program.
EO 156 expressly exempted returning residents' personal vehicles, diplomatic vehicles, trucks, buses, and special purpose vehicles.
Executive Order No. 418 (EO 418) was issued on 4 April 2005 and modified tariff nomenclature and rates for used motor vehicles without expressly repealing EO 156.
Forerunner Multi Resources, Inc. continued importing used motor vehicles and filed suit in the Regional Trial Court of Aparri, Cagayan to declare EO 156 invalid and to obtain a preliminary injunction to enjoin enforcement of EO 156 litis pendentia.
The trial court initially issued a temporary restraining order and a writ of preliminary injunction in an Order dated 27 November 2008, but later lifted that injunctive writ in an Order dated 7 July 2010 after reconsideration.
The Court of Appeals granted certiorari, found grave abuse in the trial court's lifting of the injunction, and reinstated the trial court's 27 November 2008 Order prior to Supreme Court review.

Procedural History

The trial court issued a temporary restraining order and a writ of preliminary injunction on 27 November 2008.
The trial court reconsidered and lifted the preliminary injunctive writ on 7 July 2010.
FORERUNNER MULTI RESOURCES, INC. filed a certiorari petition with the Court of Appeals, which set aside the trial court's 7 July 2010 Order and reinstated the preliminary injunction.
Petitioners filed a Rule 45 petition before the Supreme Court challenging the Court of Appeals' reinstatement of the injunction.
The Supreme Court issued a temporary restraining order on 16 January 2012 against enforcement of the Court of Appeals' ruling.

Issue

The central issue was whether the Court of Appeals erred in granting preliminary injunctive relief to enjoin enforcement of EO 156.

Ruling

The Court held that the Court of Appeals erred in granting preliminary injunctive relie