G.R. No. 76322 - Foto-Quick, Inc. vs. Lapena, Jr.

Case Summary (G.R. No. 76322)

Administrative Cancellation and the Civil Case for Unfair Competition

On 23 April 1978, Rustico Claveria filed with the Philippine Patent Office a petition for the cancellation of Certificate of Registration No. 24381 issued for the trade name FOTO-QUICK. While this administrative case remained pending, Claveria filed on 1 June 1978 a complaint in the Regional Trial Court of Pasig for unfair competition with preliminary injunction, docketed as Civil Case No. 29674.

After trial, the court rendered a decision on 17 March 1986, dismissing the complaint and lifting the earlier preliminary injunction. The court also ordered the plaintiff (Claveria) to pay defendant (Foto-Quick) attorney’s fees of P20,000.00 and the costs of suit. The defendant’s counterclaim for damages was dismissed for lack of merit.

Motion for Reconsideration/New Trial and the New Liability Determination

Claveria then filed a motion for reconsideration and/or new trial dated 4 April 1986. The motion sought a new trial based on newly discovered evidence, specifically the Philippine Patent Office decision dated 14 January 1985 in an inter partes cancellation case, docketed as Inter Partes Case No. 1163, involving Claveria versus Foto-Quick, Inc., which cancelled the certificate of registration for the trade name FOTO-QUICK for use on photo-vending equipment.

The trial court granted the motion for new trial. On 26 September 1986, the court reconsidered its earlier decision and rendered a new one holding petitioner liable for unfair competition and for damages. The dispositive portion ordered petitioner to pay P100,000.00 as actual and compensatory damages and P50,000.00 as attorney’s fees, made the writ of preliminary injunction permanent, and imposed costs against defendant.

Motion for Execution Pending Appeal and the Grounds Alleged

After the adverse resolution, Claveria moved for execution pending appeal. In support, he alleged the existence of “good reasons” to justify execution before the lapse of the appeal period. The motion asserted that Foto-Quick had transferred or was in the process of transferring properties to render any eventual judgment ineffective; that its bulk assets consisted of photo-vending machines acquired years earlier that had depreciated, broken down, or were unserviceable or non-operational, making further delay prejudicial to the effectiveness of execution; and that Claveria had no awareness of any visible operations by petitioner that would suggest imminent danger of insolvency or actual insolvency, which the motion characterized as recognized grounds for execution during the appeal period.

Foto-Quick opposed the motion on 15 October 1986 and filed a timely notice of appeal from the 26 September 1986 resolution. It argued that no proof had been presented by Claveria to substantiate the truthfulness of the allegations in the motion and that the absence of verification evidenced that even Claveria was not convinced of the factual basis of his assertions.

The Order Granting Execution Pending Appeal and Issuance of the Writ

Despite the opposition, on 23 October 1986 the trial court granted the motion for execution pending appeal upon Claveria’s filing of a P150,000.00 bond to answer for whatever damages petitioner might suffer as a consequence of the execution. Upon posting of the bond, a writ of execution pending appeal was issued on 29 October 1986. On 30 October 1986, the Deputy Sheriff of Branch 167 seized three (3) photo-vending machines and four (4) I.D. photo three-minute service machines belonging to petitioner.

Third-Party Claim and the Filing of Certiorari

As a result of the seizure scheduled for sale on 18 November 1986, Virginia Ong, treasurer of Island-Photo Center, filed a third-party claim over the seven (7) machines seized, asserting ownership and stating an aggregate value of P605,000.00.

Foto-Quick then filed the present petition for certiorari, alleging that the trial judge acted without jurisdiction and with grave abuse of discretion in granting execution pending appeal, and that no other plain, speedy, and adequate remedy existed. On 17 November 1986, the Supreme Court issued a Temporary Restraining Order enjoining enforcement of the 23 October 1986 Order. On the same date, the court a quo issued an Order granting the petitioner’s urgent ex parte motion to stay execution by approving a supersedeas bond of P200,000.00, thereby staying the execution pending appeal.

Principal Issue: Grave Abuse in Granting Execution Pending Appeal

The Supreme Court framed the principal issue as whether the trial judge committed grave abuse of discretion amounting to lack of jurisdiction in granting execution pending appeal in the civil case before him.

In resolving the issue, the Court cited Section 2, Rule 39 of the Rules of Court, which permits, upon motion of the prevailing party with notice and upon good reasons stated in a special order, the issuance of execution even before the expiration of the time to appeal. The Court emphasized that execution pending appeal is within the trial court’s discretion. Interference is warranted only upon a showing of grave abuse. Consequently, the trial court’s assessment of equities and the factual circumstances motivating the order deserve weight, particularly when the trial court’s conclusions rest on evidence not controverted.

Petitioner’s Contentions on Lack of Proof and Verification

Foto-Quick attacked the execution pending appeal on two grounds. First, it contended that Claveria presented no proof to establish the truthfulness of the allegations supporting the motion. Second, it argued that no affidavit of merit or verification accompanied the motion.

The Court rejected the contentions for lack of support in the record. It found that neither in the petition nor in the memorandum did Foto-Quick show that the facts alleged in the execution motion were false. The Court noted that the record was barren of any attempt by petitioner to refute the allegations in the motion. It further observed that petitioner’s own opposition effectively corroborated the motion’s factual premise by admitting that since the issuance of the preliminary injunction in July 1978, petitioner had ceased visible operations of its business.

As to the verification requirement, the Court held that the motion’s lack of verification was not fatal because there was no requirement under the Rules of Court that a motion for issuance of a writ of execution pending appeal be verified.

Requirement of Good Reasons and the Role of a Bond

Although the Court affirmed that the requisites under Section 2, Rule 39 were present and that the petition lacked merit, it clarified an additional point raised by the private respondent. Claveria argued that the posting and approval of a bond, by itself, sufficed to justify execution pending appeal and foreclosed any claim of abuse. The Court did not accept this proposition.

The Court explained that execution pending appeal must not issue as a matter of course. It relied on Roxas vs. CA, et al., G.R. No. 56960, January 28, 1988, 157 SCRA 370, which clarified that the posting of a bond should not be treated as a good reason that makes immediate execution routine, contrary to the law’s intent to prevent oppression and inequity.

Injunction Cases and Immediate Execution Under Section 4, Rule 39

The Court nonetheless held that, in the case at bar, the trial court’s course of action was consistent with a different rule: Section 4, Rule 39 of the Rules of Court, which directs immediate execution of judgments in injunction cases notwithstanding the pendency of an appeal. Under this provision, no special reason need even be invoked. The trial court retains discretion to stay immediate execution or to refuse to do so.

The Court characterized the civil action in Civil Case No. 29674 for unfair competition with prayer for injunction and damages. It cited statutory treatment under Republic Act 166, explaining that a complaint for unfair competition is essentially a suit for “injunction and damages.” Injunction serves to enjoin the unlawful competitor from proceeding further, while damages compensate for injuries caused by

Case Syllabus (G.R. No. 76322)

The case arose from a petition for certiorari with prayer for a writ of preliminary injunction and/or restraining order challenging the Order of the respondent Judge dated 23 October 1986.
The challenged Order granted execution pending appeal in Civil Case No. 29674 titled Rustico Claveria, doing business under the name and style PHOTO-QUICK, plaintiff, versus Foto-Quick Inc., defendant, Branch 167, RTC, Pasig, Metro Manila.
The petitioner claimed that the respondent Judge committed grave abuse of discretion amounting to lack of jurisdiction in granting execution pending appeal.
The petitioner further alleged that no appeal nor any plain, speedy and adequate remedy in the ordinary course of law was available other than the petition for certiorari.

Parties and Procedural Posture

Foto-Quick, Inc. acted as petitioner and sought to annul the trial court’s Order granting execution pending appeal.
Hon. Nicolas P. Lapena, Jr. acted as respondent Judge who issued the challenged Order.
Rustico Claveria, doing business under the name and style PHOTO-QUICK acted as private respondent and prevailed in obtaining execution pending appeal.
The petition was filed to assail an interlocutory Order granting execution pending appeal in an ongoing case still subject to appeal.
On 17 November 1986, the Court issued a Temporary Restraining Order enjoining the respondent Judge from enforcing the 23 October 1986 Order.
On the same date, the trial court issued an Order acting on an urgent ex-parte motion to stay execution and approved a supersedeas bond of P200,000.00, thereby staying execution pending appeal.
The central issue for resolution was whether the respondent Judge gravely abused discretion amounting to lack of jurisdiction in granting execution pending appeal.

Key Factual Allegations

On 23 April 1978, private respondent Rustico Claveria filed with the Philippine Patent Office a petition for cancellation of Certificate of Registration No. 24381 issued for the trade name FOTO-QUICK.
While the administrative case remained pending, private respondent filed on 1 June 1978 a complaint for unfair competition with preliminary injunction against the petitioner in the RTC, docketed as Civil Case No. 29674.
After trial, the respondent Judge rendered a decision on 17 March 1986 dismissing the complaint and lifting the preliminary injunction earlier issued.
The decision dated 17 March 1986 also ordered the plaintiff to pay the defendant attorney’s fees of P20,000.00 and the costs of suit, while dismissing the defendant’s counterclaim for lack of merit.
Private respondent then filed a motion for reconsideration and/or new trial dated 4 April 1986, seeking a new trial on the ground of newly discovered evidence consisting of a decision of the Philippine Patent Office dated 14 January 1985.
The Patent Office decision dated 14 January 1985 purportedly cancelled Certificate of Registration No. 24381 for the trade name FOTO-QUICK for use on photo-vending equipment.
On 26 September 1986, the trial court reconsidered its earlier decision and found the petitioner liable for unfair competition, ordering payment of P100,000.00 as actual and compensatory damages and P50,000.00 as attorney’s fees, while making the previously issued preliminary injunction permanent.
After the resolution dated 26 September 1986, private respondent moved for execution pending appeal.
Private respondent alleged, in support of execution pending appeal, that the petitioner had transferred or was transferring properties to defeat eventual judgment, and that the petitioner’s principal properties were photo-vending machines that had depreciated, broken down, or become non-operational.
Private respondent also alleged that there was no visible operation by the petitioner and invoked authorities as purported grounds for execution during the appeal period, including danger of insolvency and actual insolvency.
The petitioner opposed execution pending appeal, asserting that private respondent allegedly failed to present proof supporting the truthfulness of the motion’s allegations and that the motion lacked the required verification.
On 23 October 1986, the respondent Judge granted execution pending appeal upon private respondent’s filing of a P150,000.00 bond.
After posting of the bond, a writ of execution pending appeal issued on 29 October 1986, and on