G.R. No. 157498 - Filipino Metals Corp. vs. Secretary of the Department of Trade and Industry

Case Summary (G.R. No. 157498)

Factual Background

The Court found that petitioners’ principal raw material for their steel products was steel billets, sourced partly from domestic producers and partly from overseas suppliers. Domestic supply covered only about fifteen percent of the country’s total requirements, and these domestic billets came from scrap containing impurities. Petitioners considered the domestic billets inferior to imported billets made from virgin-ore materials, which compelled them to import a substantial portion of their raw materials.

On July 17, 2000, Republic Act No. 8800 was enacted, codifying the provisions of Article XIX of GATT and the WTO Agreement on Safeguards. These international instruments authorize safeguard measures when imports of a product increase in such quantities as would cause or threaten to cause serious injury to domestic producers of like or directly competitive products.

On April 6, 2001, petitioners filed with the Regional Trial Court of Valenzuela City, Branch 172 a petition for declaratory relief and/or certiorari and prohibition. They asked that Republic Act No. 8800 be declared unconstitutional. The RTC judge held the matter in abeyance but found a strong case against the law’s constitutionality sufficient to justify preliminary injunctive relief.

Trial Court Proceedings and the Issuance of a Preliminary Injunction

The RTC order required petitioners to file a bond in the amount of P10,000,000.00 to answer for whatever damages respondents might sustain if the court ultimately decided that petitioners were not entitled to the injunction. Thereafter, the RTC issued a writ restraining respondents from enforcing Republic Act No. 8800 and/or its Implementing Rules and Regulations.

Court of Appeals Review: Alleged Grave Abuse of Discretion

Respondents challenged the RTC order through a petition for certiorari before the Court of Appeals. In its assailed Decision dated February 28, 2003, the Court of Appeals reversed and set aside the RTC writ on the ground that the RTC judge committed grave abuse of discretion in issuing the preliminary injunction.

The Court of Appeals reasoned that questions on constitutional validity do not automatically entitle a party to enjoin the operation of a statute, given the presumption of constitutionality that laws enjoy. It further ruled that petitioners’ projected business loss was not the kind of “clear legal right” contemplated by the rules for injunctive relief.

Petitioners’ Issues in the Supreme Court

Petitioners then sought review on certiorari, contending that the Court of Appeals erred in dissolving the RTC injunction because petitioners had shown a strong case of unconstitutionality sufficient to overcome the presumption of constitutionality for purposes of a preliminary injunction. They also raised issues on whether the alleged violation of WTO Agreements was properly raised in the trial court, whether they had shown a clear right to injunctive relief, and whether the Court of Appeals erred in failing to dismiss a third petition filed by public respondents.

At the outset, the Supreme Court clarified that the issue of constitutionality of Republic Act No. 8800 was not directly presented for final determination in the instant petition, because it remained pending at the regional trial court. The Court also stated that the alleged forum-shopping issue was not determinative of the controversy before it. The central question thus became whether the preliminary injunction granted by the RTC should be upheld.

Doctrinal Point on Injunction and Safeguard Measures

The Court addressed first a preliminary contention that safeguard measures should not be enjoined. It noted that, in Southern Cross Cement Corporation v. Philippine Cement Manufacturers Corporation, the Court had intimated in an obiter dictum that enjoining safeguard measures would be tantamount to enjoining the collection of taxes. It then relied on earlier jurisprudence, particularly Churchill and Tait v. Rafferty, which rejected judicial control over tax collection.

The Court explained that internal revenue taxes must be collected promptly, and thus no court may grant injunction to restrain the collection of such taxes. It distinguished safeguard measures from taxes, however, and held that Republic Act No. 8800 authorized safeguard measures when imports increase in a manner that substantially causes or threatens serious injury to the domestic industry. Safeguard measures, the Court reasoned, are not designed primarily to generate government revenue. Their objective is to protect domestic industry threatened by import surges.

The Court stressed that safeguard measures are not necessarily in the form of a tariff increase. They may also take the form of quantitative restrictions on imports. Accordingly, safeguard measures were not characterized as taxes “in the sense of being the lifeblood of the national economy” such that their enforcement cannot per se be enjoined. The Court therefore proceeded to the merits of whether the RTC injunction met the requirements for preliminary injunctive relief.

Legal Standard for a Preliminary Injunction Under the Rules of Court

The Court invoked Rule 58, Section 3 of the Revised Rules of Court, which provides that a preliminary injunction may issue on grounds that include: (a) a plaintiff’s entitlement to the relief demanded where the relief consists in restraining acts complained of; (b) that the commission or continuance of an act complained of during litigation or the non-performance of an act would probably work injustice to the plaintiff; or (c) that the defendant is doing or threatening to do acts in violation of the plaintiff’s rights that tend to render judgment ineffectual.

The act complained of in this case was the enforcement of Republic Act No. 8800. The Court noted that petitioners asserted that the statute allegedly delegated the power to fix tariffs and imposts to the Secretary of the Department of Trade and Industry, and they also argued that the statute impaired Philippine treaty obligations under the WTO Agreement on Safeguards.

The Court further reiterated a line of rulings that when the petitioner establishes a case of unconstitutionality strong enough to overcome, in the mind of the judge, the presumption of validity, and also shows a clear legal right to the remedy sought, the court should issue a writ of preliminary injunction.

Merits: Existence of a Clear Right and a Strong Case of Unconstitutionality

The Court held that petitioners had established a strong case for the unconstitutionality of Republic Act No. 8800 sufficient for the issuance of a preliminary injunction. It also clarified the nature of such relief: a writ of preliminary injunction is issued only to preserve the status quo ante, and it is intended to prevent actual or threatened acts until the merits are fully heard.

The Court rejected respondents’ argument that the statute’s presumption of validity always controls. For purposes of a provisional remedy, the Court treated the presumption of constitutionality as lacking strict relevance once the court determines that the petitioner has made a strong showing of unconstitutionality for the limited purpose of provisional relief. It reasoned that a preliminary injunction does not require a prior final declaration of unconstitutionality, because the law could later be nullified in which event the need for an injunction would become moot.

The Court emphasized the requisites for a preliminary injunction: (one) the existence of a right to be protected and (two) facts showing that the acts against which the injunction is directed violate that right. It held that although a clear showing of the right is required, the right’s existence need not be conclusively established in the preliminary stage. Evidence need only provid

Case Syllabus (G.R. No. 157498)

Filipino Metals Corporation, Maxima Steel Mills Corporation, Builders Steel Corporation, Unicorn Metal Corporation, Venus Steel Corporation, Legacy Steel Corporation, Pag-asa Steel Corporation, Martian Steel Corporation, Lunar Steel Corporation, Cebu Steel Corporation, Capitol Steel Corporation, Steel Asia Manufacturing Corporation, and Grand Asia Corporation petitioned for review on certiorari assailing the Court of Appeals decision dated February 28, 2003 in CA-G.R. SP No. 67397.
The Court of Appeals decision set aside the Regional Trial Court of Valenzuela City, Branch 172 order dated September 4, 2001 in Civil Case No. 82-V-01, which had issued a writ of preliminary injunction restraining the enforcement of Republic Act No. 8800 and its implementing rules.
The petitioners invoked errors in the appellate court’s reversal of the trial court’s injunction issuance.
The respondents were Secretary of the Department of Trade and Industry, Secretary of the Department of Agriculture, Secretary of the Department of Finance, the Commissioner of the Bureau of Customs, and the Chairman of the Tariff Commission.

Antecedent Facts

The petitioners manufactured various steel products such as reinforcing bars, steel sections, and profiles.
Their principal raw material was steel billets, sourced partly from domestic producers and partly from overseas suppliers.
The domestic suppliers supplied only about fifteen percent of the country’s total requirements.
The domestic billets were made from scraps containing impurities and were described as inferior compared to imported billets made from virgin-ore materials.
Because of the quality and supply limits of domestic billets, petitioners imported a substantial portion of their raw materials.
On July 17, 2000, Republic Act No. 8800 was enacted codifying provisions of Article XIX of the General Agreement on Tariffs and Trade (GATT) and the WTO Agreement on Safeguards.
The statute authorized the application of a safeguard measure when imported products entered in such quantities as to cause or threaten to cause serious injury to domestic producers of like or directly competitive products.
On April 6, 2001, petitioners filed with the RTC a petition for declaratory relief and/or certiorari and prohibition, seeking to declare R.A. 8800 unconstitutional.
The RTC judge held the constitutionality issue in abeyance but found a sufficiently strong case against the law to justify preliminary injunctive relief.
The RTC order required petitioners and petitioners in intervention to post a bond in the amount of P10,000,000.00 and restrained respondents from enforcing R.A. 8800 and/or its Implementing Rules and Regulations.
The respondents sought relief by filing a petition for certiorari with the Court of Appeals.
The Court of Appeals concluded that the RTC judge committed grave abuse of discretion in issuing the writ of injunction.

Issues Raised in Petitioners

Petitioners argued that the Court of Appeals committed reversible error in reversing and setting aside the September 4, 2001 RTC order because petitioners allegedly presented a case of unconstitutionality strong enough to overcome the presumption of constitutionality for purposes of issuing a writ of preliminary injunction.
Petitioners challenged the Court of Appeals reversal despite petitioners’ alleged showing of a clear legal right to injunctive relief.
Petitioners raised whether the Court of Appeals erred in failing to dismiss the “third petition” filed by public respondents in the appellate court.
Petitioners claimed that forum-shopping by respondents should be considered, as alleged in the trial and appellate context.
Petitioners asserted that the RTC properly considered the alleged violation of WTO Agreements as a ground for the unconstitutionality of R.A. 8800.
Petitioners maintained that R.A. 8800 violated Article VI, Section 28(2) of the Constitution by allegedly delegating powers to fix tariff rates and other import-related measures to persons other than the President.
Petitioners contended that R.A. 8800 impaired the Philippines’ treaty obligations under the WTO Agreement on Safeguards.

Court of Appeals Rationale

The Court of Appeals held that questions on the constitutionality of a law do not necessarily entitle a movant to have the law enjoined.
It found the RTC judge acted with undue haste in issuing the preliminary injunction and disregarded the well-settled presumption of validity that laws enjoy.
It reasoned that petitioners’ projected business loss did not constitute the kind of clear legal right required for the issuance of injunctive relief.

Constitutional and Statutory Framework

Petitioners invoked Article VI, Section 28(2) of the Constitution, contending it authorizes delegation of tariff-related and import-export quota-fixing powers only to the President within specified limits and under congressional restrictions.
The