Case Summary (G.R. No. 164459)
Factual Background
The parties' controversy arose from a Billboard Advertisement Contract between Digital Networks Communications and Computers, Inc. and Limitless Potentials, Inc. for the construction and one-year lease of a billboard at P60,000.00 per month plus VAT, executed 12 October 1995, with a three-month deposit arrangement. The billboard was later destroyed by unknown persons, whereupon the advertising contract was treated as terminated and Digital demanded return of two months' rental deposit; Limitless Potentials, Inc. refused, alleging force majeure and pointing to other responsible persons.
Third-Party Complaint and Allegations
On 18 June 1997 Limitless Potentials, Inc. filed a Third-Party Complaint against Macgraphics Carranz International Corporation, Crisostomo Yalung, and Atty. Roy Manuel Villasor, alleging that petitioner had leased space from the Roman Catholic Archbishop of Manila and that the billboard was maliciously dismantled by the private respondents or at their instigation, with consequent claims for moral, exemplary, and nominal damages, attorney’s fees, litigation expenses, and costs.
MeTC Proceedings on Motions to Dismiss
The Metropolitan Trial Court denied the private respondents' initial Motion to Dismiss the Third-Party Complaint in an Order dated 25 August 1997 and again denied their Motion to Dismiss the Amended Third-Party Complaint in an Order dated 10 October 1997, prompting private respondents to seek relief by a special civil action in the RTC.
RTC Petition for Certiorari and Issuance of Preliminary Injunction
Private respondents filed a petition for certiorari with prayer for a preliminary restraining order and/or preliminary injunction before the RTC of Makati City, which issued a writ of preliminary injunction on 6 February 1998 conditioned upon a bond of P10,000.00, enjoining the MeTC from hearing the Third-Party Complaint pending resolution of the certiorari petition in order to preserve the status quo and prevent mootness.
RTC Decision Dissolving Injunction and Subsequent Orders
The RTC later dismissed private respondents' certiorari petition for lack of merit in a Decision dated 28 April 2000 and dissolved the preliminary injunction; the RTC denied private respondents' motion for reconsideration and subsequently denied petitioner’s Motion for Judgment Against the Bond in an Order dated 3 April 2002, concluding that the preliminary injunction was not wrongfully obtained.
Proceedings in the Court of Appeals
Limitless Potentials, Inc. filed a Petition for Certiorari under Rule 65 before the Court of Appeals assailing the RTC orders. The CA initially dismissed the petition on 6 November 2002 for lack of proof of authorization, reinstated the petition on 24 January 2003, and on 16 September 2003 dismissed the petition for lack of merit; the CA denied reconsideration on 8 July 2004.
Issues Presented to the Supreme Court
The petition to this Court under Rule 45 raised principally: (1) whether malice or bad faith is a condition sine qua non for liability on an injunction bond; and (2) whether attorney’s fees, litigation costs, and costs of delay caused by the injunction are recoverable against the injunction bond.
Petitioner’s Contentions
Limitless Potentials, Inc. contended that malice or lack of good faith is not an element of recovery on an injunction bond and that dissolution of the injunction, even if it had been obtained in good faith, creates an immediate right of action on the bond; the petitioner further maintained that attorney’s fees, litigation costs, and delay costs incurred by reason of the injunction were proper items of damage recoverable from the bond and that it proved such damages by testimonial and documentary evidence.
Respondents’ Contentions
Private respondents Crisostomo Yalung and Atty. Roy Manuel Villasor argued that the petition should be dismissed for defective certification on non-forum shopping under Rule 7, Section 5, that the injunction was directed at the MeTC and not at the petitioner and therefore did not occasion damages to petitioner, that petitioner in fact benefited because Digital’s prosecution was impeded, and that petitioner failed to oppose the injunction application.
Legal Framework on Preliminary Injunctions and Bonds
The Court reviewed the nature and purpose of a preliminary injunction as a provisional remedy to preserve the status quo ante and protect rights during pendency of an action, the requisites for injunctive relief, and the statutory requirement that, unless exempted, an applicant must file a bond to pay all damages which the enjoined party may sustain if the injunction is later dissolved, as provided in Rule 58, Section 4(b) and the procedure for claims against such bond under Rule 57, Section 20.
Precedent on Malice and Recovery on the Bond
Relying on prior jurisprudence including Aquino v. Socorro and Pacis v. Commission on Elections, the Court affirmed that malice or lack of good faith is not a prerequisite for recovery on an injunction bond and that the dissolution of an injunction constitutes the actionable wrong entitling the enjoined party to pursue damages under the bond.
Scope of Damages Covered by the Bond
The Court reiterated that the injunction bond is answerable for all damages which the enjoined party may sustain by reason of the injunction, and that such coverage may extend to costs and reasonable counsel’s fees and other expenses sustained by reason of the writ, provided they were incurred because of the injunction and the injunction is finally determined to have been wrongfully issued.
Application of Law to the Present Facts
Applying these principles, the Court agreed that malice was not required for recovery and that attorney’s fees and litigation costs may be recoverable in principle, but it concluded that the petitioner had not established that the damages it claimed were sustained by reason of the preliminary injunction; the CA and
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Case Syllabus (G.R. No. 164459)
Parties and Posture
- Limitless Potentials, Inc. was the petitioner before the Supreme Court seeking review under Rule 45, 1997 Revised Rules of Civil Procedure.
- The respondents included the Hon. Court of Appeals, Crisostomo Yalung, and Atty. Roy Manuel Villasor as private respondents in the underlying litigation.
- The petition sought to annul and set aside the Court of Appeals Decision dated 16 September 2003 and Resolution dated 8 July 2004 which dismissed petitioner’s Rule 65 petition.
- The petition challenged rulings of the Regional Trial Court of Makati City and the Metropolitan Trial Court of Makati City arising from a dispute over a destroyed billboard.
Key Facts
- On 12 October 1995, Digital Networks Communications and Computers, Inc. contracted with Limitless Potentials, Inc. to construct and rent a billboard at PHP 60,000.00 per month plus VAT.
- The contract required a three-month deposit comprised of PHP 60,000.00 plus VAT upon signing and PHP 120,000.00 plus VAT upon completion, which Digital paid.
- The erected billboard was later destroyed by unknown persons, the billboard contract was treated as terminated, and Digital sued for return of two months' rental deposit in MeTC Civil Case No. 55170.
- Limitless Potentials, Inc. filed a Third-Party Complaint against Macgraphics Carranz International Corporation, Bishop Crisostomo Yalung, and Atty. Roy Manuel Villasor, alleging that respondents maliciously dismantled the billboard and induced RCAM to do so.
- Petitioner sought various damages from private respondents including moral damages of PHP 1,000,000.00 and claimed attorney’s fees and litigation expenses in varying amounts.
Procedural History
- The MeTC denied private respondents’ Motions to Dismiss on 25 August 1997 and 10 October 1997.
- Private respondents filed a Petition for Certiorari with prayer for preliminary injunction before the RTC of Makati City on 9 December 1997.
- The RTC granted a writ of preliminary injunction on 6 February 1998 conditioned upon an injunction bond of PHP 10,000.00 enjoining the MeTC from proceeding on the Third-Party Complaint.
- The RTC later dismissed private respondents’ certiorari petition on 28 April 2000 and dissolved the preliminary injunction.
- Petitioner moved for judgment against the injunction bond claiming attorney’s fees of PHP 74,375.00 and moral damages of PHP 1,000,000.00, but the RTC denied the motion on 3 April 2002 and denied reconsideration on 6 August 2002.
- Petitioner filed a Rule 65 petition with the Court of Appeals, which initially dismissed it for lack of proof of authority on 6 November 2002, reinstated it on 24 January 2003, and ultimately dismissed it on 16 September 2003.
- The Court of Appeals denied petitioner’s Motion for Reconsideration on 8 July 2004, prompting this Rule 45 petition to the Supreme Court.
Issues Presented
- Whether malice or bad faith is a condition sine qua non for recovery on an injunction bond.
- Whether attorney’s fees, litigation costs, and costs of delay are recoverable from an injunction bond.
- Whether petitioner’s petition should be dismissed for defective certification on non-forum shopping under Section 5, Rule 7, 1997 Revised Rules of Civil Procedure.
Contentions
- Petitioner argued that malice or lack of good faith is not required to recover on an injunction bond and that dissolution of the injunction gives rise to a right of action on the bond.
- Petitioner contended that attorney’s fees, litigation costs, and cost of delay were proper elements of damages recoverable on the injunction bond and that it proved such damages.
- Private respondents argued that the petition should be dismissed for defective non-forum-shopping certificat