Case Summary (G.R. No. 101469)
Factual Background
On December 12, 1977, the City of Mandaue and MALAYAN entered into a reclamation contract for approximately 180 hectares (later increased to 360 hectares) of offshore and foreshore lands and their development into an industrial and trading center with modern harbor and port facilities for domestic and international commerce. The project was designed to connect Cebu City harbor with Mandaue from Cabahug coastway to the Cebu City–Mandaue boundary. Completion was contemplated within four (4) years after presidential approval.
The reclamation arrangement later came under legal scrutiny because P.D. No. 3-A mandated that reclamation of areas under water, whether foreshore or inland, must be undertaken only by the national government or persons authorized by it through a proper contract. Executive Order No. 525 further designated the Public Estates Authority (PEA) as the central authority for integrating, directing, and coordinating reclamation projects for and in behalf of the national government. The Minister of Justice, acting through Opinion No. 70 (Series of 1979) dated July 16, 1979, interpreted P.D. No. 3-A as implying a withdrawal or repeal of the City’s charter-based right to reclaim submerged or foreshore lands, while recognizing that if PEA authorized the City to reclaim its own foreshore, the former could execute a contract with the latter under P.D. No. 3-A and related provisions.
In response, the Sangguniang Panlungsod of Mandaue in October 1979 adopted Resolution No. 116, authorizing the City Mayor to sign a Memorandum of Understanding with PEA, and Resolution No. 117, authorizing the City Mayor to enter into a contract with PEA for reclamation of 360 hectares or more of foreshore and submerged lands. On November 26, 1979, the City and MALAYAN executed a Confirmatory Agreement, under which MALAYAN undertook, at its own expense, to prepare the detailed and integrated development plan on land use, including technical, economic, marketing, and financial feasibility studies required by the Office of the President, with submission contemplated “not later than July 31, 1980.”
MALAYAN submitted documents to PEA on August 13, 1980 and then submitted additional strategies on August 15, 1980. On September 29, 1980, PEA Chairman Ruben Ancheta recommended approval. Although President Marcos approved the project “in principle,” the reclamation contract between the City and MALAYAN reportedly remained unresolved or “hanging in the air.” After the 1986 “People Power” Revolution, the project was resubmitted to President Corazon C. Aquino. The City reiterated its request for approval and permission to commence reclamation on June 13, 1988, and the matter was referred to PEA. As of May 24, 1989, the feasibility and integrated plan submissions were stated to remain pending approval by the Office of the President.
On February 13, 1989, PEA informed MALAYAN that its feasibility study should be updated. Owing to reservations about the City–MALAYAN arrangement and the City’s desire to proceed without further delay, Mayor Ouano notified PEA on April 15, 1989 that the City was negotiating with F.F. Cruz & Co., Inc., in consortium with the Cebu Contractors Association, to undertake the detailed feasibility and development plan. The City emphasized that F.F. Cruz & Co., Inc. had international reputation, reclamation capability, dredging equipment, and financial capacity.
The Sangguniang Panlungsod passed Resolution No. 134/89 on April 19, 1989, authorizing the Mayor to enter a reclamation contract with F.F. Cruz & Co., Inc., conditioned on presidential approval. The contract with F.F. Cruz & Co., Inc. was executed on April 26, 1989. When MALAYAN inquired from the Office of the President whether Section 7 of R.A. 5519 (Mandaue City Charter), which granted the City authority to reclaim offshore land, had been repealed or superseded by Section 1 of P.D. No. 3-A and Section 1 of E.O. No. 525, the inquiry was answered affirmatively on August 31, 1989 by Chief State Counsel Elmer T. Bautista, citing the earlier Opinion No. 70, Series of 1979 of the Secretary of Justice as still controlling.
On May 6, 1989, PEA recommended approval in principle subject to conditions. Among those conditions were submission of a master development plan within six months, undertaking detailed engineering studies, PEA supervision and related cost-bearing, delegation to the City to negotiate with a reputable contractor for physical reclamation under a proper contract subject to PEA review and approval, and a declaration that a prior approval in principle involving MALAYAN jointly with other local entities be deemed abandoned due to failure to execute or implement within a long period from 1979 to the present.
After MALAYAN protested the City’s reclamation contract with F.F. Cruz & Co., Inc., the Office of the President, through Executive Secretary Catalino Macaraig, Jr., acting by authority of the President, approved on June 27, 1989 the proposed Mandaue reclamation project for approximately 180 hectares of foreshore and submerged lands, with specific conditions. Critically, the approval declared that the reclamation and development contract entered by and between the City and MALAYAN on December 12, 1977 was “DISAPPROVED” and/or “declared as without force and effect” because it appeared to have been entered in violation of Section 1 of Presidential Decree No. 3-A and/or because MALAYAN failed to implement the project within a reasonable period.
Proceedings Before the Trial Court and the Injunction Orders
On November 26, 1990, MALAYAN filed before the Regional Trial Court, Branch 10, Cebu City—after an earlier filing in Manila that the case withdrew—a petition for prohibitory and mandatory preliminary injunction against the City of Mandaue, F.F. Cruz & Co., Inc., the Cebu Contractors Association, Mandaue Realty Resources Corporation, and Philippine Orion Properties, Inc. The case was docketed as Civil Case No. CEB-9658. MALAYAN prayed for restraint against the implementation of the reclamation contract between the City and F.F. Cruz & Co., Inc., alleging injustice to it and violation of MALAYAN’s previously perfected contract, as well as emphasizing that it had already incurred expenses and invested substantial sums in the Mandaue Reclamation Project. It also sought a writ of preliminary mandatory injunction allowing MALAYAN to undertake actual reclamation works immediately.
On November 29, 1990, the trial court issued a temporary restraining order stopping the respondents from continuing implementation of the questioned contract pending further orders. The respondents’ motion to quash the restraining order and motion to dismiss failed. After a hearing, Judge Leonardo B. Canares issued on December 18, 1990 a writ of preliminary prohibitory injunction upon posting of an injunction bond of P5,000,000. The order enjoined the respondents and those acting for them from implementing the reclamation contract executed on April 26, 1989 by the City and F.F. Cruz & Co., Inc., from implementing all other reclamation contracts executed in favor of those respondents or their assigns by the City and/or PEA, and from conducting any kind of works within the area covered by the Mandaue Reclamation Project.
The respondents’ motions for reconsideration were denied. They then elevated the matter to the Court of Appeals.
Court of Appeals’ Action in CA-G.R. SP No. 25621
On August 9, 1991, the respondents filed in the Court of Appeals a petition for certiorari with prohibitory and mandatory preliminary restraining order and/or preliminary injunction under CA-G.R. SP No. 25621, challenging Judge Canares’ preliminary injunction. They sought annulment of the writ, restraint against MALAYAN from interfering with reclamation works, restraint against enforcing later orders of Judge Canares, dismissal of MALAYAN’s petition in Civil Case No. CEB-9658, and an injunction against MALAYAN’s interference with the City–F.F. Cruz contract and the related Memorandum of Agreement involving PEA and the other corporate participants.
The Court of Appeals issued a temporary restraining order on August 9, 1991 to preserve the status quo and enjoined the parties from enforcing Judge Canares’ orders pending further orders. On August 28, 1991, it issued a writ of preliminary injunction upon a P10,000,000 bond posted by F.F. Cruz & Co., Inc. After the Court of Appeals denied MALAYAN’s motion for reconsideration, MALAYAN brought the controversy to the Supreme Court.
The Parties’ Contentions and the Sole Issue on Review
In the Supreme Court, MALAYAN asked for a restraining order or writ of preliminary injunction to stop respondents from further proceeding in the Court of Appeals action, and it sought annulment of the Court of Appeals’ resolutions dated August 9, 1991 and August 28, 1991, as well as annulment of the writ of preliminary injunction issued on August 29, 1991. The Supreme Court framed the only issue as whether the Court of Appeals had exceeded its jurisdiction or acted with grave abuse of discretion in issuing the writ of preliminary injunction in CA-G.R. SP No. 25621.
Legal Basis and Reasoning of the Supreme Court
The Court held that the Court of Appeals had not abused its discretion in stopping Judge Canares and MALAYAN from interfering with the prosecution of the Mandaue reclamation project of F.F. Cruz & Co., Inc. and its associates. First, the Court of Appeals had properly considered that the reclamation contract with F.F. Cruz & Co., Inc. had been approved by the Office of the President, while the reclamation contract with MALAYAN had been disapproved. The official document referenced in the appellate resolutions showed that the Office of the President approved the reclamation project pursued through the City and private petitioners, while disapproving the City–MALAYAN contract of December 12, 1977. The appellate resolution f
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Case Syllabus (G.R. No. 101469)
Parties and Procedural Posture
- Malayan Integrated Industries Corporation (MALAYAN) filed a special civil action in the Supreme Court denominated as certiorari and prohibition to stop further proceedings in CA-G.R. SP No. 25621.
- The respondents included the Court of Appeals, the City of Mandaue, its Mayor Alfredo M. Ouano, Vice-Mayor Paterno P. Canete, and Sangguniang Panlungsod members, together with private respondents F.F. Cruz & Co., Inc., Cebu Contractors Association, Mandaue Realty & Resources Corporation, and Philippine Orion Properties, Inc..
- CA-G.R. SP No. 25621 was an action by the City of Mandaue and F.F. Cruz & Co., Inc. to annul the trial court’s writ of preliminary injunction issued by Judge Leonardo B. Canares.
- The Court of Appeals initially issued a temporary restraining order on August 9, 1991 and later issued a writ of preliminary injunction on August 28, 1991 upon a P10,000,000.00 bond.
- MALAYAN then sought Supreme Court review by a petition for certiorari and prohibition, principally attacking the Court of Appeals’ jurisdiction and alleged grave abuse of discretion in issuing the writ.
Key Factual Allegations
- In December 12, 1977, the City of Mandaue and MALAYAN signed a reclamation contract for about 180 hectares, later increased to 360 hectares, of offshore and foreshore land for development into an industrial and trading center with modern harbor and port facilities.
- The project was envisioned to be completed within four (4) years after contract approval by the Office of the President.
- The transaction was questioned as unauthorized under P.D. No. 3-A (January 11, 1973), which provided that reclamation of areas under water would be done only by the national government or persons authorized by it with a proper contract.
- Executive Order No. 525 designated the Public Estates Authority (PEA) as the central authority for integrating, directing, and coordinating reclamation projects for and in behalf of the national government.
- Opinion No. 70 (July 16, 1979) of Acting Minister of Justice Catalino Macaraig, Jr. opined that P.D. No. 3-A impliedly withdrew or repealed the City’s charter right to reclaim submerged or foreshore lands, while allowing authorization by PEA through contracting if PEA so decided.
- The Sangguniang Panlungsod of Mandaue passed Resolution No. 116 authorizing the City Mayor to sign a memorandum of understanding with PEA and Resolution No. 117 authorizing entry into a contract with PEA for reclamation of 360 hectares or more.
- On November 26, 1979, the parties executed a Confirmatory Agreement binding MALAYAN to prepare and submit detailed development plans and required studies by July 31, 1980.
- On August 13, 1980, MALAYAN submitted documents to PEA, and on August 15, 1980, it submitted detailed strategies and an overview of the project.
- On September 29, 1980, PEA Chairman Ruben Ancheta recommended approval, and President Marcos approved the project “in principle,” but the reclamation contract remained unresolved.
- After the 1986 revolution, the project was resubmitted to President Corazon C. Aquino, and the City reiterated its request on June 13, 1988 for approval to commence reclamation.
- As of May 24, 1989, MALAYAN’s detailed integrated plan remained “still pending approval by the Office of the President.”
- PEA’s General Manager Eduardo C. Zialcita advised MALAYAN on February 13, 1989 that its feasibility study should be updated, and the Office of the President allegedly had reservations about the City-MALAYAN contract.
- On April 15, 1989, Mayor Alfredo M. Ouano informed PEA that the City was negotiating with F.F. Cruz & Co., Inc., in consortium with the Cebu Contractors Association, to prepare the feasibility and development plan, citing the contractor’s alleged capability and capacity.
- On April 19, 1989, the City passed Resolution No. 134/89 authorizing the City Mayor to enter into a reclamation contract with F.F. Cruz & Co., Inc., subject to presidential approval.
- The contract with F.F. Cruz & Co., Inc. was signed on April 26, 1989.
- After MALAYAN learned of the City’s contract, it asked whether Section 7 of R.A. 5519 had been repealed or superseded by P.D. No. 3-A and E.O. No. 525, and on August 31, 1989 the query was answered in the affirmative by the Chief State Counsel, citing Justice Secretary Macaraig’s opinion.
- On May 6, 1989, PEA recommended approval in principle subject to conditions including review of a master development plan, updated detailed studies, PEA supervision at charged costs, delegation for negotiation with a reputable contractor subject to PEA review, and setting aside MALAYAN’s earlier approval due to MALAYAN’s alleged long failure to implement from 1979 to the present.
- MALAYAN filed a protest with the Office of the President against the F.F. Cruz contract.
- By authority of the President, Executive Secretary Catalino Macaraig, Jr. approved the proposed project on June 27, 1989, covered approximately 180 hectares, and declared that the December 12, 1977 MALAYAN contract was “DISAPPROVED” and “declared as without force and effect,” citing violation of Section 1 of P.D. No. 3-A and failure to implement within a reasonable period.
- On November 26, 1990, MALAYAN filed Civil Case No. CEB-9658 for prohibitory and mandatory preliminary injunction in the Regional Trial Court, Branch 10, Cebu City, praying that implementation of the City-F.F. Cruz contract be restrained and that MALAYAN be allowed to proceed with actual reclamation works.
- The trial court issued a temporary restraining order on November 29, 1990, and later, on December 18, 1990, granted MALA