Civpro Cases

THIRD DIVISION

[G.R. No. 154407. February 14, 2005]

MA. CRISTINA G. CORTEZ-ESTRADA, petitioner, vs. HEIRS OF DOMINGO SAMUT/ANTONIA SAMUT represented by LETICIA SAMUT, CHITO SINGSON and DIRECTOR OF LANDS, respondents.

D E C I S I O N

CARPIO-MORALES, J.:

Before this Court is a petition for review on certiorari seeking to reverse the April 12, 2002 Decision[1] and July 23, 2002 Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 68277 dismissing the petition for certiorari[3] of herein petitioner Ma. Cristina Cortez-Estrada (petitioner) and denying her motion for reconsideration,[4] respectively.

Petitioner’s father Emiliano Cortez (Cortez) filed on August 21, 1953 a Free Patent Application with the Bureau of Lands (Bureau) covering two parcels of land identified as Lot 4602 with an area of 4.467 hectares and Lot 4603 with an area of 6.3809 hectares, both of Cadastre No. 210, situated at Libertad, Echague, Isabela. The application was approved on December 5, 1955 by the Bureau which issued Cortez Free Patent No. V-17515.

Original Certificate of Title (OCT) No. P-9148 covering the subject properties was subsequently issued in Cortez’s name by the local Register of Deeds.

On November 6, 1956, Domingo Samut (Samut), represented by Antonia Samut, filed before the Bureau a Protest[5] alleging that he has since the Second World War been in possession of the properties which he converted into a flourishing rice, tobacco and corn field and introduced other improvements thereon such as a residential house, a well and rice paddies.

Acting on Samut’s claim that Cortez obtained the patent and title over the properties through fraud, deceit and misrepresentation in violation of the Public Land Law, the Legal Division of the Bureau directed the District Land Officer of Ilagan, Isabela to conduct an investigation on the grant of Cortez’s patent and title.

After the demise of Cortez, OCT No. P-9148 was on July 2, 1969 cancelled and Transfer Certificate of Title (TCT) No. T-42959 was issued in the name of his widow, Antonia Cortez (Antonia).

Antonia subsequently died intestate and is survived by her children including herein petitioner.

By Order[6] of January 6, 1997, Regional Executive Director Leonardo A. Paat of the Bureau recommended that

. . . proper steps be now taken in court for the cancellation of Patent No. V-17515 and the corresponding Original Certificate No. P-9148, now Transfer Certifiate (sic) Title No. T-42959 and for the reversion of the land covered thereby to the state. After the cancellation of said patent and title of Emiliano Cortez, the heirs of Domingo Samut are hereby directed to file the appropriate public land

application covering Lot Nos. 4602 and 4603, Cad. 240 situated at Libertad, Echague, Isabela.[7] (Emphasis and underscoring supplied)

In arriving at his recommendation, the Regional Executive Director ratiocinated:

Evidence shows that the herein claimants-protestants are the actual occupants over the land in dispute. They have introduced considerable improvements, established their respective houses with strong materials which serves (sic) as their family residence since the outbreak of World War II. This Office will not give credence with (sic) the view of the herein respondent that . . . claimants-protestants [were mere] tenants by virtue of a contract of lease executed by Emiliano Cortez as lessor, and Joaquin Samut as lessee whose validity is doubtful considering that Joaquin Samut denied having executed such contract. It appears also that his (lessee) signature appearing in the contract is not his signature as compared to his genuine signature given by him during the investigation, hence, it is a forged signature. (Exhibit “J” for the protestant and Exhibit “2” for the respondent.) Besides, Joaquin Samut, the alleged lessee has no authority to enter into said contract in behalf of Domingo Samut, the original possessor over the lot in dispute because nowhere (sic) in the records would show that he was authorized to enter into said contract.

Granting arguendo for the sake of arguments (sic), that herein claimants-protestants are merely tenants of the respondent. It holds no weight in favor of herein respondent, instead it is an admission on his part that he is not the actual occupants (sic) over the lots in dispute, contrary to the narration of facts stated in his patent application which led for (sic) the approval of said application. Hence, a clear misrepresentation of facts and in blatant violation of the Public Land Law. Had he disclosed the true facts, the then Director of Lands, Zoilo Castrillo was not (sic) misled in approving the application.

Presidential Decree No. 152 categorically prohibits the employment or use of share tenants in complying with the requirements of law regarding entry, occupation, improvement and cultivation [of] public lands, ammending (sic) for the purpose certain provisions of Commonwealth Act as amended, otherwise known as the Public Land Act. Section 2 of said law is clear and unequivocal:

“Section 2. The employment or use of share tenants in whatever form for purposes of complying with the requirements of the Public Land Act regarding entry, occupation, improvements, and cultivation is hereby prohibited. Any violation hereof shall constitute a ground for the denial of the application, cancellation of the grant and forfeiture of improvements on the land in favor of the government.”

(P.D. 152 Section 2)

There is no dispute that the herein respondent clearly violated the aforecited provision of law which will be a ground for the cancellation of his patent and title over the land in dispute. He misrepresented facts in his application thru deceit and fraud by stating on said application that he is the actual occupants (sic), to the damage and prejudice of the true occupants, herein claimants-protestants who have already acquired vested rights over the land in dispute by virtue of their occupations (sic) over said land for more than 30 years. Well settled is the rule that occupation and cultivation for more than 30 years by an applicant and his predecessors-in-interest, vest title on such applicant so as to segregate the land from the mass of public land (Republic vs. Court of Appeals 235 SCRA 567).

Since misrepresentation and fraud w[ere] clearly established on the part of the respondent which led to the approval of his patent application and with (sic) the issuance of corresponding title over the lot in

dispute, it is but proper that said patent and title be cancelled under Section 91, Commonwealth Act 141, before ordinary court of competent jurisdiction over the land in question.[8] (Emphasis and underscoring supplied)

No appeal from the above Order of Director Paat was filed.

The State, represented by the Director of Lands, later filed a complaint dated January 3, 2000,[9] for Reversion of Land to Public Domain, before the Regional Trial Court (RTC) of Echague, Isabela, docketed as Civil Case No. 533, praying that judgment be rendered: (1) declaring null and void Cortez’s Free Patent and his OCT No. P-9148 which had been cancelled by TCT No. T-42959 in the name of his wife Antonia; (2) ordering the Register of Deeds to cancel Antonia’s TCT No. T-42959; and (3) ordering the reversion of the properties to the State.[10]

The complaint alleged that Cortez deliberately made fraudulent representations in his free patent application, hence, the patent and title granted to him should ipso facto be cancelled pursuant to Section 91 of Commonwealth Act No. 141.[11]

In her Answer with Third Party Complaint,[12] petitioner averred that herein respondent Samut cannot legally acquire the properties by possessory rights despite the alleged period of occupation, for Cortez and Joaquin Samut (Joaquin), son of Domingo Samut, executed a Contract of Lease dated June 21, 1961 under which Joaquin, as lessee, agreed to plant agricultural crops on the properties and deliver to Cortez, as lessor, twenty (20%) percent of the crops harvested every year.

Petitioner likewise averred that upon investigation, she discovered that a portion (63,000 square meters) of the property was sold by the heirs of Samut to herein respondent Chito Singson who subsequently introduced improvements thereon, to the damage and prejudice of the heirs of Cortez.

Additionally, petitioner claimed that the investigation conducted by the Bureau is illegal and without legal force and effect as the same was conducted 18 years after the issuance of OCT No. P-9148 and that the right of reversion had already prescribed, the case for the purpose having been filed by the State more than 40 years after the grant of patent to Cortez.

Petitioner then prayed for the issuance of a temporary restraining order and/or a writ of preliminary injunction to prevent respondents Samut and Singson from selling or cultivating the properties or introducing any improvements thereon.

By Order[13] of July 10, 2001, Branch 24 of the Isabela RTC to which the case was raffled denied petitioner’s plea for injunctive relief, reasoning as follows:

Going over the allegations of the Third-Party Complaint and the Answer thereto filed by defendant Chito Singson, the Court believes that it would be better to maintain status quo. “The reason for the ruling is that before the issue of ownership is determined in the light of the evidence presented, justice and equity demand that the parties be maintained in their status quo so that no advantage may be given to one to the prejudice of the other” (Calo vs. Ortega, et al., L-4673, Jan. 25, 1952, cited in Moran Rules of Court, Vol. 3, 1973 Ed.).[14] (Underscoring supplied)

Petitioner’s Motion for Reconsideration[15] of the July 10, 2001 Order was denied by the trial court in this wise:

The third party defendants were admittedly in possession of the land in question prior to the filing of this case and therefore status quo should be maintained while the case is pending or before the issue of ownership is determined. Thus, “the writ of injunction” is not, as a general rule, proper where its purpose is to take property out of the possession or control of one person and place the same in the hands of another, whose title has not clearly been established by law (pp. 77 & 78, Moran, comments on The Rules of Court, vol. 3, 1970 Ed.).[16] (Emphasis and underscoring supplied)

Petitioner, “as surviving heir and with authority given to her by [her siblings],” thereupon filed a petition for certiorari before the CA, praying that: a) a temporary restraining order be issued restraining the RTC from conducting trial on the reversion case filed by the State and enjoining respondents Samut and Singson from selling the properties or cultivating and harvesting the produce therefrom and b) after due hearing, the temporary restraining order against private respondents be made permanent.[17]

Before the appellate court, petitioner posited that to allow respondents Samut et al. to enjoy possession of the properties before the RTC can decide the validity of OCT No. P-9148 violates the value and integrity of the title without due process of law, hence, the denial by the RTC of her prayer for injunctive relief constitutes grave abuse of discretion causing great injustice and irreparable damage to her and her co-heirs.

By Decision of April 12, 2001, the appellate court found petitioner’s petition dismissible for procedural infirmity, she having failed to append her Affidavit in support of her plea for injunctive relief and the Contract of Lease purportedly executed by Joaquin and Cortez, in contravention of Section 1 of Rule 65[18] in relation to Section 3 of Rule 46 of the Rules of Court.[19]

On the merits of the petition, the appellate court found the petition dismissible just the same, ratiocinating as follows:

. . . In the present recourse, the “status quo ante litem” of the Petitioners and the Private Respondents, vis-à-vis the subject property, before the Petitioners filed their “Third-Party Complaint” against the Private Respondents, was that: (a) the Private Respondents were in actual possession of the property; (b) they cultivated the property and reaped the produce therefrom; (c) the Petitioners were not in actual and physical possession of the property; (d) by their own admission, the Petitioners [were] not given, by the Private Respondents, any share in the produce from the property. The Petitioners sought, before the Respondent Court to alter or change the status quo of the parties by praying that the Private Respondents, via an injunctive writ, be ousted from their possession of the property and enjoined from cultivating the same and reaping the produce therefrom and that, consequently, the Petitioners be placed in actual and physical possession of the property. What the Petitioners sought, from the Respondent Court, was both a preliminary prohibitory injunction and a writ of preliminary mandatory injunction and, consequently, the alteration of the status quo of the parties before trial was terminated.

x x x

More, while it may be true that Original Certificate of Title No. 9148 was issued to and under the name of Emiliano Cortez and, by Transfer Certificate of Title No. 42959, under the name of Antonia Cortez, however, it cannot thereby be found and declared that the Petitioners were entitled, as a matter of right, to injunctive relief. In the light of the Order of the Regional Executive Director, the “Free Patent” executed in favor of Emiliano Cortez and said title issued to and under his name were placed, at the very

least, in doubt. Aside from the Private Respondents asserting ownership over the property, the State, likewise, sought the reversion of the property to the State.

It bears stressing that the threshold issue before the Respondent Court was the validity/nullity of the “Free Patent” executed in favor of Emiliano Cortez and of Original Certificate of Title No. 9148 issued to and under the name of Emiliano Cortez. For the Respondent Court to issue a writ of preliminary injunction, he would, in effect, be resolving the merits of the very issue before the Respondent Court. . . .

x x x

It was thus imperative for the Respondent Court to maintain the status quo of the parties, ante litem, pending resolution of the contrasting stance of the parties, including the Republic of the Philippines, on the ownership over the property.[20] (Emphasis and underscoring supplied)

Petitioner’s Motion for Reconsideration having been denied by the appellate court by Resolution of July 23, 2002, she filed the present petition faulting said court as follows:

I

PUBLIC RESPONDENT COURT OF APPEALS DECIDED THE UNRESOLVED ISSUES OF POSSESSION AND OWNERSHIP IN THE RTC OF ECHAGUE, ISABELA, BRANCH 24, WITHOUT OBSERVING THE RULES OF PROCEDURE ON THE ORDER OF TRIAL PROVIDED BY THE NEW RULES OF COURT.

II

PUBLIC RESPONDENT COURT OF APPEALS DEPARTED FROM THE ACCEPTED USUAL COURSE OF JUDICIAL PROCEEDINGS THAT DENIED THE PETITIONER OF DUE PROCESS.

III

PETITIONER’S DECEASED PARENTS HAVE A VALID OCT NO. P-9148 AND TO MAINTAIN “STATUS QUO”, PRELIMINARY INJUNCTION AGAINST PRIVATE RESPONDENTS SHOULD BE GRANTED.

IV

PUBLIC RESPONDENT HAS ACTED WITH GRAVE ABSUSE (sic) OF DISCRETION IN DECLARING THAT THE PRIVATE RESPONDENTS SAMUT HEIRS AND CHITO SINGSON ARE THE RIGHTFUL OWNERS AND POSSESSORS OF THE LOT IN QUESTION.[21]

The issue posed by petitioner before the appellate court was whether the RTC committed grave abuse of its discretion amounting to excess or lack of jurisdiction in denying her plea for injunctive relief.

Since petitioner’s petition for certiorari was originally filed in the Court of Appeals, Rule 46 applies, the pertinent provisions of which read:

SECTION 1. Title of cases. – In all cases originally filed in the Court of Appeals, the party instituting the action shall be called the petitioner and the opposing party the respondent.

SEC. 2. To what actions applicable. – This Rule shall apply to original actions for certiorari, prohibition, mandamus and quo warranto.

Except as otherwise provided, the actions for annulment of judgment shall be governed by Rule 47, for certiorari, prohibition and mandamus by Rule 65, and for quo warranto by Rule 66.

SEC. 3. Contents and filing of petition; effect of non-compliance with requirements. – The petition shall contain the full names and actual addresses of all the petitioners and respondents, a concise statement of the matters involved, the factual background of the case, and the grounds relied upon for the relief prayed for.

In actions filed under Rule 65, the petition shall further indicate the material dates showing when the notice of the judgment or final order or resolution subject thereof was received, when a motion for new trial or reconsideration, if any, was filed and when notice of the denial thereof was received.

It shall be filed in seven (7) clearly legible copies together with proof of service thereof on the respondent with the original copy intended for the court indicated as such by the petitioner, and shall be accompanied by a clearly legible duplicate original or certified true copy of the judgment, order, resolution, or ruling subject thereof, such material portions of the record as are referred to therein, and other documents relevant or pertinent thereto. The certification shall be accomplished by the proper clerk of court or by his duly authorized representative, or by the proper officer of the court, tribunal, agency or office involved or by his duly representative. The other requisite number of copies of the petition shall be accompanied by clearly legible plain copies of all documents attached to the original.

x x x (Emphasis and underscoring supplied)

Under the facts and circumstances of the case, and the issue raised by petitioner, it was necessary for the appellate court to peruse the above-said Affidavit and Contract of Lease. The dismissal in light of the failure of petitioner to submit such material documents was thus in order.

Procedural infirmity aside, on the merits, the petition is partly meritorious.

Petitioner’s argument that the appellate court prematurely resolved the issues of ownership and possession in the main case pending with the RTC by declaring that private respondents are the rightful owners and possessors of the subject parcels of land is bereft of merit. The appellate court Decision merely resolved the propriety of the trial court’s denial of petitioner’s application for the issuance of a temporary restraining order and writ of preliminary injunction. It did not adjudicate the principal action raising as basic issue the ownership of the properties which the trial court has still to determine.

Respecting petitioner’s prayer before this Court that a writ of preliminary injunction enjoining respondents Samut and Singson from cultivating and harvesting the produce therefrom issue, she contends that her [p]arents, being the registered landowner . . . as evidenced by OCT No. P-9148 and TCT No. T-42959, [she] has the right to occupy and exclude third parties like . . . Samut and Singson from its possession and use thereof.” Petitioner’s contention fails.

A preliminary injunction is a provisional remedy that a party may resort to in order to preserve and protect certain rights and interests during the pendency of an action.[22] Its sole objective is to preserve the status quo until the merits of the case can be heard fully.[23]

Status quo is defined as the last actual, peaceful, and uncontested status that precedes the actual controversy,[24] that which is existing at the time of the filing of the case.[25] Indubitably, the trial court must not make use of its injunctive power to alter such status.

To entitle a petitioner to the grant of a writ of preliminary injunction, he must establish the following requisites: (a) the invasion of the right sought to be protected is material and substantial; (b) the right of the complainant is clear and unmistakable; and (c) there is an urgent and paramount necessity for the writ to prevent serious damage.[26]

When the complainant’s right or title is doubtful or disputed, he does not have a clear legal right and, therefore, the issuance of injunctive relief is not improper[27] and constitutes grave abuse of discretion.[28]

. . . [T]he party applying for its issuance must show a clear right thereto the violation of which is so recent as to make its vindication an urgent one. In Locsin v. Climaco, We made the pronouncement that the applicant’s right or title must be clear and unquestioned, for equity, as a rule, will not take cognizance of suits to establish title, and will not lend its preventive aid by injunction where the applicant’s title or right is doubtful or disputed. So that if a writ of preliminary injunction is issued despite applicant’s doubtful title to the property in controversy or lack of interest therein, the Court is justified in dissolving the writ. xxx[29]

Sine dubio the grant or denial of a writ of preliminary injunction in a pending case rests in the sound discretion of the court taking cognizance of the case[30] since the assessment and evaluation of evidence towards that end involve findings of facts left to the said court for its conclusive determination.[31] Hence, the exercise of judicial discretion by a court in injunctive matters must not be interfered with except when there is grave abuse of discretion.[32]

Grave abuse of discretion in the issuance of writs of preliminary injunction implies a capricious and whimsical exercise of judgment that is equivalent to lack of jurisdiction, or where the power is exercised in an arbitrary or despotic manner by reason of passion, prejudice or personal aversion amounting to an evasion of positive duty or to a virtual refusal to perform the duty enjoined, or to act at all in contemplation of law.[33]

The records before this Court fail to reveal a clear and unmistakable right on the part of petitioner that would entitle her and her co-heirs to the protection of an injunctive writ to be placed in possession of the properties.

On the other hand, it is undisputed that private respondents have been in possession of the properties prior to and during the institution of the complaint. They have long occupied, cultivated and otherwise exercised control over the properties. Thus the appellate court held:

The Private Respondents Heirs of Domingo Samut and Chito Singson, on the other hand, insist that Domingo Samut and his heirs had been in possession of the subject property even before Emiliano Cortez filed his application for a “Free Patent”, with the Bureau of Lands, and had been tilling and

cultivating the property and reaping the produce therefrom and that they constructed their houses with strong materials on the subject property. Such was the “status quo ante litem” of the parties which must be preserved until final decision of the action on its merits. If the Court granted injunctive relief to the Petitioners, the “status quo ante litem” will thereby be altered which is anathema to and subversive of the purpose of a writ of preliminary prohibitory injunction.[34] (Emphasis and underscoring in the original)

To grant petitioner’s prayer for injunctive relief, upon her contention that her parents being the registered owners of the properties she and her co-heirs have the right to occupy the same, would virtually hand over control over the properties to her and her co-heirs. Such control, however, pertains to the rightful possessor of the properties ante litem, the determination of ownership of which – the central issue of the case – has yet to be resolved by the trial court only upon completion of trial on the merits.

A court should then avoid issuing a writ of preliminary injunction which would effectively dispose of the main case without trial.[35]

If the status quo is to be maintained in the present case, it is the status quo before or at the commencement of Civil Case No. 533, that is, the properties were in the possession of respondents. The trial court’s prima facie evaluation of the evidence proffered by the contending parties led it to hold that justice and equity would be better served if the status quo is preserved pending final determination of the merits of the main case. This Court finds that there is no showing that such evaluation was whimsical, arbitrary or capricious.

In fine, a prayer for injunctive relief should not be granted for the purpose of taking the property, the legal title to which is in dispute, out of the possession of one person and putting it into the hands of another before the right of ownership is determined.[36] The reason for this doctrine is that before the issue of ownership is determined in light of the evidence presented, justice and equity demand that the parties be maintained in their status quo so that no advantage may be given to one to the prejudice of the other.[37]

It is with respect to petitioner’s prayer that respondents be restrained from selling the properties or portions thereof that the present petition assumes merit. For pending the final determination of the ownership of the properties, private respondents can not exercise the attribute of ownership of jus disponendi. For only the owner can transfer his ownership to another.

WHEREFORE, the petition is PARTIALLY GRANTED. The assailed decision of the Court of Appeals is affirmed with modification in light of the foregoing discussion. Let a writ of preliminary injunction then issue enjoining respondents from selling or disposing Lots 4602 and 4603 of Cadastre No. 210 situated at Libertad, Echague, Isabela or any portions thereof.

SO ORDERED.

Panganiban, (Chairman), Sandoval-Gutierrez, Corona and Garcia, JJ., concur.

[1] Rollo at 32-53.

[2] Id. at 55.

[3] CA Rollo at 2-89.

[4] Id. at 127-147.

[5] Rollo at 85-86.

[6] Id. at 87-91.

[7] Id. at 91.

[8] Id. at 89-91.

[9] Id. at 63-67.

[10] Id. at 66.

[11] Sec. 91. xxx The statements made in the application shall be considered as essential conditions and parts of any concession, title, or permit issued on the basis of such application, and any false statement thereon or omission of facts altering, changing or modifying the consideration of the facts set forth in such statements and any subsequent modification, alteration or change of the material facts set forth in the application shall ipso facto produce the cancellation of the concession, title or permit granted.

[12] Rollo at 68-77.

[13] Id. at 102-103.

[14] Id. at 103.

[15] Id. at 106-111.

[16] Id. at 122.

[17] CA Rollo at 13.

[18] SECTION 1. Petition for certiorari. – When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as law and justice may require.

The petition shall be accompanied by a certified true copy of the judgment, order or resolution subject thereof, copies of all pleadings and documents relevant and pertinent thereto, and a sworn certification of non-forum shopping as provided in the third paragraph of section 3, Rule 46.

[19] SEC. 3. Contents and filing of petition; effect of non-compliance with requirements. – The petition shall contain the full names and actual addresses of all the petitioners and respondents, a concise statement of the matters involved, the factual background of the case, and the grounds relied upon for the relief prayed for.

In actions filed under Rule 65, the petition shall further indicate the material dates showing when notice of the judgment or (final) order or resolution subject thereof was received, when a motion for new trial or reconsideration, if any, was filed and when notice of the denial thereof was received.

It shall be filed in seven (7) clearly legible copies together with proof of service thereof on the respondent with the original copy intended for the court indicated as such by the petitioner, and shall be accompanied by a clearly legible duplicate original or certified true copy of the judgment, order, resolution, or ruling subject thereof, such material portions of the record as are referred to therein, and other documents relevant or pertinent thereto. The certification shall be accomplished by the proper clerk of court or by his duly authorized representative, or by the proper officer of the court, tribunal, agency or office involved or by his duly authorized representative. The other requisite number of copies of the petition shall be accompanied by clearly legible plain copies of all documents attached to the original.

The petitioner shall also submit together with the petition a sworn certification that he has not theretofore commenced any other action involving the same issues in the Supreme Court, the Court of Appeals or different divisions thereof, or any other tribunal or agency; if there is such other action or proceeding, he must state the status of the same; and if he should thereafter learn that a similar action or proceeding has been filed or is pending before the Supreme Court, the Court of Appeals, or different divisions thereof, or any other tribunal or agency, he undertakes to promptly inform the aforesaid courts and other tribunal or agency thereof within five (5) days therefrom.

The petitioner shall pay the corresponding docket and other lawful fees to the clerk of court and deposit the amount of P500.00 for costs at the time of the filing of the petition.

The failure of the petitioner to comply with any of the foregoing requirements shall be sufficient ground for the dismissal of the petition.

[20] Rollo at 48-52.

[21] Id. at 12.

[22] First Global Realty and Development Corporation v. San Agustin, 377 SCRA 341, 348 (2002) (citation omitted), Idolor v. Court of Appeals, 351 SCRA 399, 405 (2001) (citation omitted), Heirs of Joaquin Asuncion v. Gervacio, Jr., 304 SCRA 322, 329 (1999), Republic v. Silerio, 272 SCRA 280, 287 (1997), GSIS v. Florendo, 178 SCRA 77, 83 (1989) (citations omitted).

[23] Heirs of Joaquin Asuncion v. Gervacio, Jr. 304 SCRA 322, 329 (1999), Rivera v. Florendo, 144 SCRA 643, 660 (1986), Rodulfa v. Alfonso, 76 Phil. 225, 231 (1946).

[24] Los Baños Rural Bank, Inc. v. Africa, 384 SCRA 535, 547 (2002) (citations omitted), Bustamante v. Court of Appeals, 381 SCRA 171, 181 (2002) (citation omitted), First Global Realty and Development Corporation v. San Agustin, 341, 348 (2002) (citation omitted), Philippine Economic Zone Authority v.

Vianzon, 336 SCRA 309, 316 (2000) (citation omitted), Rodulfa v. Alfonso, 76 Phil. 225, 232 (1946) (citation omitted).

[25] Philippine Economic Zone Authority v. Vianzon, 336 SCRA 309, 316 (2000) (citation omitted).

[26] Toyota Motor Phils. Corporation Workers’ Association v. Court of Appeals, 412 SCRA 69, 86 (2003) (citation omitted), Biñan Steel Corporation v. Court of Appeals, 391 SCRA 90, 104 (2002) (citation omitted), Crystal v. Cebu International School, 356 SCRA 296, 305 (2001) (citations omitted), Valencia v. Court of Appeals, 352 SCRA 72, 83 (2001) (citation omitted), Philippine Economic Zone Authority v. Vianzon, 336 SCRA 309, 314 (2000) (citation omitted), Arcega v. Court of Appeals, 275 SCRA 176, 180 (1997) (citation omitted).

[27] Toyota Motor Phils. Corporation Workers’ Association v. Court of Appeals, 412 SCRA 69, 86 (2003), Heirs of Joaquin Asuncion v. Gervacio, 304 SCRA 322, 329 (1999), Medina v. City Sheriff, Manila, 276 SCRA 133, 139 (1997) (citations omitted), Arcega v. Court of Appeals, 275 SCRA 176, 180 (1997) (citation omitted).

[28] Manila International Airport Authority v. Court of Appeals, 397 SCRA 348, 363 (2003) (citation omitted), Heirs of Joaquin Asuncion v. Gervacio, Jr., 304 SCRA 322, 329 (1999), Medina v. City Sheriff, Manila, 276 SCRA 133, 139 (1997), Arcega v. Court of Appeals, 275 SCRA 176, 180 (1997) (citation omitted).

[29] Lopez v. Court of Appeals, 95 SCRA 359, 365-366 (1980).

[30] S &A Gaisano Incorporated v. Hidalgo, 192 SCRA 224, 229 (1990) (citations omitted).

[31] Bustamante v. Court of Appeals, 381 SCRA 171, 178 (2002) (citation omitted).

[32] Urbanes, Jr. v. Court of Appeals, 355 SCRA 537, 548 (2001) (citations omitted), GSIS v. Florendo, 178 SCRA 76, 89 (1989) (citation omitted).

[33] Toyota Motor Phil. Corporation Workers’ Association (TMPCWA) v. Court of Appeals, 412 SCRA 69, 85 (2003) (citation omitted), Urbanes, Jr. v. Court of Appeals, 355 SCRA 537, 547 (2001) (citations omitted).

[34] Rollo at 46.

[35] Toyota Motor Phils. Corporation Workers’ Association (TMPCWA) v. Court of Appeals, 412 SCRA 69, 87 (2003) (citation omitted), Bustamante v. Court of Appeals, 381 SCRA 171, 183 (2002) (citations omitted).

[36] Vide: Gordillo and Martinez v. Del Rosario, 39 Phil. 829 (1919).

[37] Allure Manufacturing, Inc. v. Court of Appeals, 199 SCRA 285, 296 (1991) (citation omitted).

Republic of the PhilippinesSUPREME COURTManila

THIRD DIVISION

G.R. No. 102881 December 7, 1992

TOYOTA MOTOR PHILIPPINES CORPORATION, petitioner,vs.THE COURT OF APPEALS, HON. FERNANDO V. GOROSPE, JR. and SUN VALLEY MANUFACTURING & DEVELOPMENT CORPORATION, respondents.

GUTIERREZ, JR., J.:

This case involves a boundary dispute between Toyota Motor Phil. Corporation (Toyota) and Sun Valley Manufacturing and Development Corporation (Sun Valley).

Both Toyota and Sun Valley are the registered owners of two (2) adjoining parcels of land situated in La Huerta, Parañaque, Metro Manila which they purchased from the Asset Privatization Trust (APT).

The properties in question formerly belonged to Delta Motors Corporation (DMC). They were foreclosed by the Philippine National Bank (PNB) and later transferred to the national government through the APT for disposition.

APT then proceeded to classify the DMC properties according to the existing improvements, i.e., buildings, driveways, parking areas, perimeter fence, walls and gates and the land on which the improvements stood. The entire DMC property is called GC III-Delta Motors Corporation, divided into Delta I, Delta II, and Delta III. Further subdivisions for the separate catalogues were made for each division e.g. Delta I into Lots 1, 2 and 3. After this classification, APT parcelled out and catalogued the properties for bidding and sale.

Part of the duly parcelled Delta I property (Lot 2) was sold to Toyota through public bidding on May 12, 1988 for the amount of P95,385,000.00. After its purchase, Toyota constructed a concrete hollow block (CHB) perimeter fence around its alleged property.

On October 5, 1990, another part of the parcelled Delta I (Lot 1) covering an area of 55,236 square meters was purchased by Sun Valley from APT for the bid price of P124,349,767.00. Relying upon the title description of its property and the surveys it had commissioned, Sun Valley claimed that Toyota's perimeter fence overlaps Sun Valley's property along corners 11 to 15 by 322 square meters and corners 19 to 1 by 401 square meters for a total of 723 square meters. (Rollo, p. 841)

Negotiations between the two (2) corporations for a possible settlement of the dispute bogged down. Court battles ensued, grounded on purely procedural issues. In pursuing the resolution of the dispute, both Toyota and Sun Valley opted to file separate actions. Much of the complications that arose and are

now before us can be traced to the two separate cases pursued by both parties. There are other cases arising from the same dispute but which are not before us.

Culled from the records, these are the antecedents of the two cases which transpired below.

TOYOTA CASE (Civil Case No. 91-2504)

On September 11, 1991, Toyota filed a case against APT and Sun Valley docketed as Civil Case No. 91-2504 with the Regional Trial Court of Makati, Branch 146 presided by Judge Salvador Tensuan. The complaint was for the reformation of the Deed of Sale executed between Toyota and APT. Toyota alleges that the instrument failed to reflect the true intention of the parties, as evidenced by the failure of the title to include the 723 square meters strip of land.

Toyota alleges that the discrepancy came about because of the serious flaw in the classification/cataloguing of properties bidded out for sale by APT. Toyota was made to understand that included in its perimeter fence is the disputed strip of land. Thus, Toyota sought the resurvey of the property to correct this error in the title. Sun Valley was impleaded considering that it purchased the adjoining land whose title allegedly included the 723 square meters property.

On September 11, 1991, upon Toyota's application, Judge Tensuan issued a temporary restraining order (TRO) enjoining Sun Valley and APT from any act of destruction and removal of Toyota's walls and structures. Sun Valley and APT were respectively served summons on the following day.

On September 16, 1991, Sun Valley filed a motion to dismiss, on the ground that the Toyota complaint failed to state a cause of action against it (1) since it was not a party to the contract of the deed of sale between Toyota and APT, and (2) the complaint was in effect a collateral attack on its title.

On September 27, 1991, Judge Tensuan initially denied Toyota's application for preliminary injunction on the finding that there was no evidence of any threatened destruction, removal or dispossession of Toyota's property.

On October 10, 1991, Judge Tensuan denied Sun Valley's motion to dismiss.

Both Toyota and Sun Valley filed their respective motions for reconsideration. Toyota moved to reconsider the denial of its injunctive application while Sun Valley moved to reconsider the denial of its motion to dismiss.

On October 30, 1991, APT filed its answer with affirmative defenses alleging that the complaint must be dismissed on the ground that Toyota and APT should first have resorted to arbitration as provided in Toyota's deed of sale with APT. On December 4, 1991, Toyota filed a motion alleging that Sun Valley's long threatened destruction and removal of Toyota's walls and structures were actually being implemented to which Judge Tensuan issued another TRO enjoining acts of destruction and removal of the perimeter walls and structures on the contested area.

Consequently, on December 17, 1991, Judge Tensuan reconsidered his earlier denial of Toyota's application for injunction and granted a writ of preliminary injunction enjoining Sun Valley from

proceeding with its threatened destruction and removal of Toyota's walls and directed Sun Valley to restore the premises to the status quo ante.

On December 11, 1991, Judge Tensuan denied Sun Valley's motion for reconsideration of its motion to dismiss. Sun Valley elevated this denial to the Court of Appeals. The case was docketed as CA-G.R. Sp. No. 26942 and raffled to the Eleventh (11th) Division.

Judge Tensuan's jurisdiction to act considering the defense of prematurity of action for failure to arbitrate the validity of the TRO issued on December 4, 1991 and the order granting injunctive reliefs were challenged in a petition for certiorari filed with the Court of Appeals and docketed as CA-G.R. No. 26813, assigned to the Second (2nd) Division.

SUN VALLEY CASE (Civil Case No. 91-2550)

On September 16, 1991, Sun Valley, on the other hand, filed a case for recovery of possession of the disputed 723 square meters boundary with the Regional Trial Court (RTC) Makati, Branch 61 presided by Judge Fernando Gorospe, Jr.

On the same day, Judge Gorospe issued a TRO enjoining Toyota from committing further acts of dispossession against Sun Valley.

On September 19, 1991, Toyota moved to lift the TRO and opposed Sun Valley's application for injunction.

On September 23, 1991, Toyota filed a motion to dismiss on the ground that the RTC has no jurisdiction over the case since the complaint was a simple ejectment case cognizable by the Metropolitan Trial Court (MTC). The motion to dismiss was set for hearing on September 27, 1991.

On September 27, 1991, Sun Valley filed an amended complaint to incorporate an allegation that Toyota's possession of the alleged disputed area began in September, 1988 when Toyota purchased the property.

Ruling that the amendment was a matter of right, Judge Gorospe admitted the amended complaint. Toyota adopted its motion to dismiss the original complaint as its motion to dismiss the amended complaint. After the arguments to Toyota's motion to dismiss, the same was submitted for resolution. Sun Valley's application for prohibitory and mandatory injunction contained in its complaint was set for hearing on October 1, 1991.

Protesting the admission of the amended complaint, Toyota went to the Court of Appeals, on certiorari on October 1, 1991. This petition was docketed as CA-G.R. No. 26152 raffled to the Tenth (10th) Division.

Toyota was later prompted to file two supplemental petitions, before the Court of Appeals as a result of Judge Gorospe's alleged hasty issuance of four (4) Orders, all dated October 1, 1992. These are:

(1) First supplemental petition dated October 4, 1991 which sought to nullify the Order denying Toyota's motion to dismiss the amended complaint.

(2) Second supplemental petition dated October 23, 1991 which sought the nullification of the orders granting Sun Valley's application for preliminary prohibitory and mandatory injunction and denying Toyota's motion to cross-examine Sun Valley's witnesses on the latter's injunction application.

On November 27, 1991, respondent Court of Appeals' Tenth Division promulgated its questioned decision which is primarily the subject matter of the present petition before us.

The respondent court denied due course to the Toyota petition on the finding that the amendment of Sun Valley's complaint was a valid one as Sun Valley's action was not for unlawful detainer but an accion publiciana. Furthermore, the supplemental petitions filed by Toyota assailing the prohibitory and mandatory injunctive writ were not ruled upon as they were expunged from the records because of Toyota's failure to attach a motion to admit these supplemental petitions.

Consequently, Toyota filed the present petition for certiorari on December 9, 1991.

Earlier, upon an ex-parte motion to clarify filed by Sun Valley on October 25, 1991, Judge Gorospe issued another order dated December 2, 1991 which followed Sun Valley to break open and demolish a portion of the Toyota perimeter walls, and eventually to secure possession of the disputed area. Toyota was constrained to come to this Court for relief.

On December 11, 1991, we issued a TRO enjoining the implementation of Judge Gorospe's injunction and break-open orders dated October 1, 1991 and December 2, 1991 respectively as well as further proceedings in Civil Case No. 91-2550.

Meanwhile, the Court of Appeals' Second Division issued a TRO ordering respondent Judge Tensuan and all other persons acting in his behalf to cease and desist from further proceeding with Civil Case No. 91-2504 and from enforcing the Order dated December 17, 1991 and the writ of preliminary mandatory injunction dated December 19, 1991.

This prompted Toyota to file a motion to quash the TRO and file a supplemental petition with this Court impleading the Court of Appeals' Second Division.

On January 13, 1992, we admitted the supplemental petition.

On January 10, 1992, the Court of Appeals' Second Division issued the Resolution granting Sun Valley's application for preliminary injunction which enjoined Judge Tensuan in the Toyota case from implementing his injunction Order and from proceeding with the case before him (Civil Case No. 91-2504).

Thus, Toyota filed its Second Supplemental Petition with this Court challenging the validity of the injunction writ issued by the Court of Appeals' Second Division.

This Second Supplemental Petition was admitted on February 10, 1992.

On February 10, 1992, we gave due course to Toyota's petition.

Subsequently, through a manifestation dated April 29, 1992, Toyota informed the Court that on April 15, 1992, the Court of Appeals' 11th Division (Sun Valley case) rendered a decision dismissing the case before it for lack of merit. The Court of Appeals ruled that the Toyota complaint was not a collateral attack on Sun Valley's title and that misjoinder of parties is not a ground for dismissal.

A subsequent motion for reconsideration was denied in a resolution dated August 10, 1992.

In the instant petition Toyota raises the following issues, to wit:

1. The Court of Appeals' 10th Division gravely abused its discretion when it ignored or pretended to ignore Toyota's protests against Judge Gorospe's injunction orders.

2. Sun Valley is guilty of forum-shopping and Judge Gorospe of case-grabbing.

Sun Valley, on the other hand raises the following:

1. Whether or not the petitioner availed of the proper mode of elevating the case to this Court.

2. Whether or not the Court of Appeals committed grave abuse of discretion in refusing to act upon petitioner's supplemental petitions for certiorari.

3. Whether or not the complaint filed in the court below is an accion publiciana which is within the jurisdiction of the RTC.

4. Whether or not Judge Salvador S. Tensuan had jurisdiction to take cognizance of Civil Case No. 2504 for reformation of instrument.

5. Whether or not respondent Judge Gorospe, Jr. committed grave abuse of discretion in granting private respondent's application for a writ of preliminary prohibitory/mandatory injunction.

6. Whether or not Judge Tensuan committed grave abuse of discretion in issuing the writ of mandatory injunction dated December 19, 1991.

This case is far from settlement on the merits. Through legal maneuverings, the parties have succeeded in muddling up the vital issues of the case and getting the lower courts embroiled in numerous appeals over technicalities. As it is now, there are three appellate decisions/resolutions before us for review and conflicting orders issued by lower courts as a result of the separate cases filed by the parties. As in the case of Consolidated Bank and Trust Corp. v. Court of Appeal,s 193 SCRA 158 [1991], the Court is explicit in stating that:

xxx xxx xxx

Where there are conflicting but inextricably interconnected issues in one and the same complicated case, it is best that these be resolved in one integrated proceeding where an overall picture of the entirety of the case can be presented and examined. Piecemeal determinations by several trial courts on segments of the basic issue and disconnected appeals to different Divisions of the Court of Appeals

resulting in separate decisions each dealing with only part of the problem are discouraged. Needless multiplicity of suits is something which is frowned upon.

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Amid the clutter of extraneous materials which have certainly bloated the records of this case, we find only two (2) issues vital to the disposition of the petition: first, is the matter of jurisdiction, who as between Judge Tensuan or Judge Gorospe has jurisdiction over the dispute; and second, who as between the parties has the rightful possession of the land.

Anent the issue on jurisdiction, we examine the two actions filed by the parties.

Toyota filed an action for reformation on September 11, 1991, before Judge Tensuan alleging that the true intentions of the parties were not expressed in the instrument (Art. 1359 Civil Code). The instrument sought to be reformed is the deed of sale executed by APT in favor of Toyota. Toyota alleges that there was a mistake in the designation of the real properties subject matter of the contract. Sun Valley was impleaded in order to obtain complete relief since it was the owner of the adjacent lot.

Sun Valley, however, argues that the complaint for reformation states no cause of action against it since an action for reformation is basically one strictly between the parties to the contract itself. Third persons who are not parties to the contract cannot and should not be involved. Thus, Sun Valley contends that it should not have been impleaded as a defendant.

The Court of Appeals' 11th Division, in its decision promulgated on April 15, 1992 where the denial of Sun Valley's motion to dismiss was sustained, correctly ruled that misjoinder of parties is not a ground for dismissal.

American jurisprudence from where provisions on reformation of instruments were taken discloses that suits to reform written instruments are subject to the general rule in equity that all persons interested in the subject matter of the litigation, whether it is a legal or an equitable interest should be made parties, so that the court may settle all their rights at once and thus prevent the necessity of a multiplicity of suits (Bevis Construction Co. v. Grace [Fla App] 115 So 2d 84; Green v. Stone, 54 N.J.E. 387, 34 A 1099). As a general rule, therefore, all persons to be affected by the proposed reformation must be made parties (American Fidelity & Casualty Co. v. Elder, 189 Ga 229, 5 SE 2d 668; Kemp v. Funderburk, 224 NC 353, 30 SE 2d 155). In an action to reform a deed, all parties claiming an interest in the land or any part thereof purportedly conveyed by the instrument sought to be reformed, and whose interests will be affected by the reformation of the instrument are necessary parties to the action (Kemp v. Funderburk, 224 NC 353, 30 SE 2d 155).

From the foregoing jurisprudence, it would appear that Toyota was correct in impleading Sun Valley as party defendant. However, these principles are not applicable under the particular circumstances of this case. Under the facts of the present case, Toyota's action for reformation is dismissible as against Sun Valley.

Attention must first be brought to the fact that the contract of sale executed between APT and Toyota provides an arbitration clause which states that:

xxx xxx xxx

5. In case of disagreement or conflict arising out of this Contract, the parties hereby undertake to submit the matter for determination by a committee of experts, acting as arbitrators, the composition of which shall be as follows:

a) One member to be appointed by the VENDOR;

b) One member to be appointed by the VENDEE;

c) One member, who shall be a lawyer, to be appointed by both of the aforesaid parties;

The members of the Arbitration Committee shall be appointed not later than three (3) working days from receipt of a written notice from either or both parties. The Arbitration Committee shall convene not later than three (3) weeks after all its members have been appointed and proceed with the arbitration of the dispute within three (3) calendar months counted therefrom. By written mutual agreement by the parties hereto, such time limit for the arbitration may be extended for another calendar month. The decision of the Arbitration Committee by majority vote of at least two (2) members shall be final and binding upon both the VENDOR and the VENDEE; (Rollo, pp. 816-817)

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The contention that the arbitration clause has become disfunctional because of the presence of third parties is untenable.

Contracts are respected as the law between the contracting parties (Mercantile Ins. Co. Inc. v. Felipe Ysmael, Jr. & Co., Inc., 169 SCRA 66 [1989]). As such, the parties are thereby expected to abide with good faith in their contractual commitments (Quillan v. CA, 169 SCRA 279 [1989]). Toyota is therefore bound to respect the provisions of the contract it entered into with APT.

Toyota filed an action for reformation of its contract with APT, the purpose of which is to look into the real intentions/agreement of the parties to the contract and to determine if there was really a mistake in the designation of the boundaries of the property as alleged by Toyota. Such questions can only be answered by the parties to the contract themselves. This is a controversy which clearly arose from the contract entered into by APT and Toyota. Inasmuch as this concerns more importantly the parties APT and Toyota themselves, the arbitration committee is therefore the proper and convenient forum to settle the matter as clearly provided in the deed of sale.

Having been apprised of the presence of the arbitration clause in the motion to dismiss filed by APT, Judge Tensuan should have at least suspended the proceedings and directed the parties to settle their dispute by arbitration (Bengson v. Chan, 78 SCRA 113 [1977], Sec. 7, RA 876). Judge Tensuan should have not taken cognizance of the case.

But the more apparent reason which warrants the dismissal of the action as against Sun Valley is the fact that the complaint for reformation amounts to a collateral attack on Sun Valley's title, contrary to the finding of the Court of Appeals' 11th Division.

It is disputed that Sun Valley has a Torrens title registered in its name by virtue of its purchase of the land from APT.

Toyota contends that the 723 square meters strip of land which it understood to be included in its purchase from APT was erroneously included in Sun Valley's title. This is the reason why reformation was sought to correct the mistake.

Well-settled is the rule that a certificate of title can not be altered, modified, or cancelled except in a direct proceeding in accordance with law (Section 48, P.D. No. 1529).

In the case of Domingo v. Santos Ongsiako, Lim y Sia (55 Phil. 361 [1930]), the Court held that:

. . . The fact should not be overlooked that we are here confronted with what is really a collateral attack upon a Torrens title. The circumstance that the action was directly brought to recover a parcel of land does not alter the truth that the proceeding involves a collateral attack upon a Torrens title, because as we have found, the land in controversy lies within the boundaries determined by that title. The Land Registration Law defines the methods under which a wrongful adjudication of title to land under the Torrens system may be corrected . . .

While reformation may often be had to correct mistakes in defining the boundary of lands conveyed so as to identify the lands, it may not be used to pass other lands from those intended to be bought and sold, notwithstanding a mistake in pointing out the lines, since reformation under these circumstances would be inequitable and unjust. (McCay v. Jenkins, 244 Ala 650, 15 So 2d 409, 149 ALR 746)

Assuming that Toyota is afforded the relief prayed for in the Tensuan court, the latter can not validly order the contested portion to be taken out from the Sun Valley's TCT and award it in favor of Toyota.

An action for reformation is in personam, not in rem (Cohen v. Hellman Commercial Trust & Savings Bank, 133 Cal App 758, 24 P2d 960; Edwards v. New York Life Ins. Co. 173 Tenn 102, 114 SW 2d 808) even when real estate is involved (Agurs v. Holt, 232 La 1026, 95 So 2d 644; Vallee v. Vallee (La App) 180 So 2d 570). It is merely an equitable relief granted to the parties where through mistake or fraud, the instrument failed to express the real agreement or intention of the parties. While it is a recognized remedy afforded by courts of equity it may not be applied if it is contrary to well-settled principles or rules. It is a long standing principle that equity follows the law. It is applied in the abscence of and never against statutory law (Zabat v. Court of Appeals, 142 SCRA 587 [1986]). Courts are bound by rules of law and have no arbitrary discretion to disregard them. (See Arsenal v. Intermediate Appellate Court, 143 SCRA 40 [1986].) Courts of equity must proceed with utmost caution especially when rights of third parties may intervene. Thus in the instant case, vis-a-vis well-settled principles or rules in land registration, the equitable relief of reformation may not come into play in order to transfer or appropriate a piece of land that one claims to own but which is titled in the name of a third party.

On the other hand, Sun Valley filed an action for reconveyance against Toyota to recover possession of the strip of land encroached upon and occupied by the latter. What Sun Valley seeks in its complaint is the recovery of possession de jure and not merely possession de facto. Toyota moved to dismiss on the assumption that the complaint was one for unlawful detainer cognizable by the MTC.

We do not find any reversible error in the decision of the Court of Appeals' 10th Division where it upheld Judge Gorospe's order denying Toyota's motion to dismiss. An amendment to a complaint before a responsive pleading is filed, is a matter of right (Rule 10, Sec. 2). Whether or not the complaint was amended, Sun Valley's complaint was one for accion publiciana cognizable by the RTC. Its right over the

land is premised on the certificate of title registered in its name after it had purchased said land from APT. As the registered owner it had the right of possession of said land illegally occupied by another (Ybañez v. IAC, 194 SCRA 743 [1991]). The case of Banayos v. Susana Realty, Inc. (71 SCRA 557 [1976]) is quite instructive:

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We deem it advisable, at this point, to reiterate the essential differences between three kinds of actions for the recovery of possession of real property, namely: (1) the summary action for forcible entry and unlawful detainer; (2) the accion publiciana; and (3) the accion de reivindicacion.

The action for forcible entry may be brought where dispossession of real property had taken place by any of the means provided for in Section 1 of Rule 70 of the Revised Rules of Court, and in the case of unlawful detainer, where the possession is withheld after the expiration or termination of the right to hold possession, by virtue of any contract express or implied. These two actions must be filed within one (1) year after such unlawful deprivation or withholding of possession with the municipal or city court. These actions in their essence are mere quieting processes by virtue of which a party in possession of land may not be, by force, dispossessed of that land, the law restoring to him such possession in a summary manner, until the right of ownership can be tried in due course of law. They are, therefore, intended to provide an expeditious means of protecting actual possession or right to possession of property. The aforesaid Rule 70 does not, however, cover all of the cases of dispossession of lands. Thus, "whenever the owner is dispossessed by any other means than those mentioned he may maintain his action in the Court of First Instance, and it is not necessary for him to wait until the expiration of twelve months before commencing an action to be repossessed or declared to be owner of land." (Gumiran v. Gumiran, 21 Phil. 174, 179. Cf. Medina, et al. v. Valdellon, 63 SCRA 278) Courts of First Instance have jurisdiction over actions to recover possession of real property illegally detained, together with rents due and damages, even though one (1) year has not expired from the beginning of such illegal detention, provided the question of ownership of such property is also involved. In other words, if the party illegal dispossessed desires to raise the question of illegal dispossession as well as that of the ownership over the property, he may commence such action in the Court of First Instance immediately or at any time after such illegal dispossession. If he decides to raise the question of illegal dispossession only, and the action is filed more than one (1) year after such deprivation or withholding of possession, then the Court of First Instance will have original jurisdiction over the case. (Bishop of Cebu v. Mangoron, 6 Phil. 286; Catholic Church v. Tarlac and Victoria, 9 Phil. 450; Ledesma v. Marcos, 9 Phil. 618; Medina, et al. v. Valdellon, supra) The former is an accion de reivindicacion which seeks the recovery of ownership as well as possession, while the latter refers to an accion publiciana, which is the recovery of the right to possess and is a plenary action in an ordinary proceeding in the Court of First Instance. (Sec. 88, Rep. Act No. 296; Rule 70, Rules of Court; Manila Railroad Co. v. Attorney General, 20 Phil. 523; Lim Cay v. Del, 55 Phil. 692; Central Azucarera de Tarlac v. De Leon, 56 Phil. 169; Navarro v. Aguila, 66 Phil. 604; Luna v. Carandang, 26 SCRA 306; Medina, et al. v. Valdellon, supra; Pasaqui, et al. v. Villablanca, et al., supra).

With the finding that Toyota's action for reformation is dismissable as it is in effect a collateral attack on Sun Valley's title, Sun Valley's action for recovery of possession filed before Judge Gorospe now stands to be the proper forum where the following dispute may be tried or heard.

We now come to the issue as to which of the parties has a legal right over the property to warrant the issuance of the preliminary mandatory/prohibitory injunction.

In actions involving realty, preliminary injunction will lie only after the plaintiff has fully established his title or right thereto by a proper action for the purpose. To authorize a temporary injunction, the complainant must make out at least a prima facie showing of a right to the final relief. Preliminary injunction will not issue to protect a right not in esse (Buayan Cattle Co. Inc. v. Quintillan, 128 SCRA 286-287 [1984]; Ortigas & Company, Limited Partnership v. Ruiz, 148 SCRA 326 [1987]).

Two requisites are necessary if a preliminary injunction is to issue, namely, the existence of the right to be protected, and the facts against which the injunction is to be directed, are violative of said right. In particular, for a writ of preliminary injunction to issue, the existence of the right and the violation must appear in the allegations of the complaint and an injunction is proper also when the plaintiff appears to be entitled to the relief demanded in his complaint. Furthermore, the complaint for injunctive relief must be construed strictly against the pleader (Ortigas & Company, Limited Partnership v. Ruiz, supra).

In the instant case the existence of a "clear positive right" especially calling for judicial protection has been shown by Sun Valley.

Toyota's claim over the disputed property is anchored on the fact of its purchase of the property from APT, that from the circumstances of the purchase and the intention of the parties, the property including the disputed area was sold to it.

Sun Valley, on the other hand has TCT No. 49019 of the Registry of Deeds of Parañaque embracing the aforesaid property in its name, having been validly acquired also from APT by virtue of a Deed of Sale executed in its favor on December 5, 1990 (Rollo, pp. 823-825; 826-827).

There are other circumstances in the case which militate against Toyota's claim for legal possession over the disputed area.

The fact that Toyota has filed a suit for reformation seeking the inclusion of the 723 square meters strip of land is sufficient to deduce that it is not entitled to take over the piece of property it now attempts to appropriate for itself.

As early as September, 1988 prior to the construction of the perimeter fence, Toyota was already aware of the discrepancies in the property's description in the title and the actual survey.

The letter of its surveyor company, Summa Kumagai thus reveals:

09 September, 1988

TOYOTA MOTOR PHILIPPINES CORPORATION10th Floor, Metrobank PlazaSen. Gil J. Puyat Ave.Makati, Metro Manila

ATTENTION: MR. FLORENCIO JURADOFinance Officer

SUBJECT: PHASE I RENOVATION WORK

PERIMETER FENCE

GENTLEMEN:

This is in connection with the construction of the Perimeter Fence for the Toyota Motor Plant Facilities which to this date we have not started yet due to the following reasons:

1. Lack of fencing permit which can only be applied to and issued by the Parañaque Building Official upon receipt of the transfer certificate to title and tax declaration.

2. Although the Building Official has verbally instructed us to proceed with the renovation work and construction of fence, we could not execute the fencing work due to discrepancies on the consolidation plan and the existing property monuments. These discrepancies was (sic) confirmed with the representatives of the Geodetic Engineer.

Kindly expedite the immediate confirmation with the Geodetic Engineer on the final descriptions of the property lines.

We would appreciate your usual prompt attention regarding this matter.

Very truly yours,

CESAR D. ELEProject Manager (Emphasis supplied, Rollo, p. 811)

Despite such notification, Toyota continued to build the perimeter fence. It is highly doubtful whether Toyota may be considered a builder in good faith to be entitled to protection under Article 448 of the Civil Code.

The records also reveal that Toyota's own surveyor, the Certeza Surveying & Acrophoto Systems, Inc. confirmed in its reports dated April 1 and April 5, 1991 that Toyota's perimeter fence overlaps the boundaries of Sun Valley's lot (Rollo, pp. 833-383).

Even communication exchanges between and among APT, Toyota & Sun Valley show that the parties are certainly aware that the ownership of the disputed property more properly pertains to Sun Valley. Among these are the following:

May 28, 1991

MR. JOSE CH. ALVAREZPresidentSun Valley Manufacturing &Development Corp. (SVMDC)Cor. Aurora Blvd. and Andrews Ave.Pasay City, Metro Manila

Dear Mr. Alvarez:

Thank you for honoring our invitation to a luncheon meeting held at noon time today at Sugi Restaurant.

As per our understanding, we would like to propose as a package the settlement of differences between your property and ours as follows:

1. Boundary Issue between TMP Main Office & Factory and the recently acquired property of SVMDC.

The boundary lines to our property lines bidded early 1988 were determined after making full payment in August 1988 jointly by representatives of TMP/Metrobank — Messrs. Mitake, Pedrosa, Alonzo and Jurado, APT — Mr. Bince together with representatives of Geo-Resources who installed the monuments and prepared the technical description of the property. The construction of the fence utilized existing fence marked yellow on Exhibit 1 and made sure that the new fence to set boundaries were on top of the monuments set by Geo-Resources. The replacement of existing wire fence were affected by setting concrete walls on exactly the same position.

This is the reason why we are surprised top be informed that our fence goes beyond the boundary lines set forth in the Technical Description on the Transfer Certificate of Title (TCT) to our property. This occurs even on fence already existing and should have been maintained in the TCT.

Since we have manifested our intention when we set boundaries to our property, we propose the following in relation to the excess area occupied by TMP.

1. We offer to give way to an access road 5 m. wide more or less from point 15 to 16 of Lot 2 (14.65 m. in length) at the back of our Paint Storage Building (Exhibit 2).

2. We propose to pay for the balance of excess land inside TMP fence (contested areas) at a price mutually agreed upon.

II. Question of ownership of certain permanent improvements (underground water reservoir and perimeter walls/fences) located at Lot 6 which we won by bidding from APT on October 5, 1990.

We have made our position to APT that these permanent improvements are part of Lot 6 on "as is where is" bid basis (See explanatory map — Exhibit 3). However, since you have relayed to us that the underground water reservoir is of no use to you, as part of the total package we are proposing to pay for the underground water reservoir, the applicable perimeter walls/fences and the water pump/pipings at a price mutually agreed upon.

We hope that through this proposal we would settle our differences and look forward to a more cooperative relationship between good neighbors.

We will appreciate your favorable consideration and immediate attention on the matter.

Very truly yours,

MASAO MITAKEPresident

July 4, 1991

TOYOTA MOTOR PHILIPPINES CORPORATIONRm. 15, South SuperhighwayParañaque, Metro Manila

ATTENTION: MR. MASAO MITAKEPresident

Gentlemen:

This refers to our several meetings regarding the property problems at "Lot 6" and your encroachment of SVMD LOT I.

We wish to thank you for finally acknowledging the legitimacy of our demands on both properties. In order to start a good business relationship, we propose that the property problem at "LOT 6" which consists of the perimeter fence, water reservoir, water pump and systems be settled first, in the amount of P3,500,000.00 payable to CMANC.

We also would like to request you to allow us to continue usage of the MERALCO posts and lines connecting to SVMD power station which passes thru your property and allow entry of MERALCO linemen from time to time.

Upon acceptance of these requests, I will confer which our Japanese partners to consider the selling of the 723 sq. m. of land adjacent to your Assembly Plant which you continue to use even after said property has been legally transferred to us from last quarter of 1990.

In view of your present good behavior, we are hoping that this first problem be settled not later than July 15, 1991, otherwise, we will consider the whole matter as unacceptable to you and we, therefore, proceed as earlier demanded to immediately demolish the CHB fence that prevents us from using our property.

We hope for your immediate action to start the resolution of these unwanted problems.

Very truly yours,

JOSE CH. ALVAREZPresident (Rollo, p. 832; Emphasis supplied)

Moreover, Sun Valley puts forth evidence that Toyota has altered the boundaries of its own property by moving the monuments erected thereon by APT's surveyor Geo-Resources and Consultancy, Inc. when Lot 2 was initially surveyed in August 1988:

The Asset Privitalization Trust10th Floor, BA-Lepanto Building9847 Paseo de Roxas BuildingMetro Manila

Attention: Mr. Felipe B. Bince, Jr.Associate Executive Trustee

Dear Sirs:

This has reference to our letter to your office dated April 8, 1991, a copy of which is attached, regarding the check survey of Delta I. After asking some of the field men who participated in the various surveys of Delta I from the consolidation to subdivision surveys, we found out that some more of the present corner points are not the same points shown to them during the surveys. We shall show this during a meeting with the representatives of the owners of Lots 1 and 2.

We hope this will clarify the discrepancies.

Very truly yours,

NORBERTO S. VILAExec. Vice Pres. & Gen. Manager

(Emphasis supplied; Rollo, p. 839)

There is therefore sufficient and convincing proof that Sun Valley has a clear legal right to possession in its favor to warrant the issuance of a writ of preliminary/mandatory injunction. Sun Valley's TCT gives it that right to possession. On the other hand, Toyota has not established its right over the said property except for the assertion that there was a mistake in an instrument which purportedly should have included the questioned strip of land.

As between the two (2) parties, Sun Valley has a better right. Under the circumstances, therefore, and considering that the clear legal right of Toyota to possession of the disputed area has not been established sufficient to grant the prayed for relief, a writ of preliminary mandatory injunction may be issued pendente lite. (See Mara, Inc. v. Estrella, 65 SCRA 471 [1975]; De Gracia v. Santos, 79 Phil. 365 [1947]; Rodulfa v. Alfonso, 76 Phil. 225 [1946] and Torre v. Querubin, 101 Phil. 53 [1957])

In view of all the foregoing, the petition is hereby DISMISSED for failure to show reversible error, much less grave abuse of discretion, on the part of the respondent court.

Bidin, Davide, Jr., Romero and Melo, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 157494             December 10, 2004

BACOLOD CITY WATER DISTRICT, petitioner, vs.THE HON. EMMA C. LABAYEN, Presiding Judge, RTC of Bacolod City, Br. 46 and the City of Bacolod, respondents.

D E C I S I O N

PUNO, J.:

First, the chronology of facts. Petitioner Bacolod City Water District (BACIWA) is a water district established pursuant to Presidential Decree No. 198 as a government-owned and controlled corporation with original charter. It is in the business of providing safe and potable water to Bacolod City.

Public respondent City of Bacolod is a municipal corporation created by Commonwealth Act No. 326, otherwise known as the Charter of Bacolod.

On March 26, 1999, respondent City filed a case for Injunction With a Prayer for Temporary Restraining Order And/Or Preliminary Mandatory Injunction against petitioner in the sala of public respondent judge. The petition stated that on January 15, 1999, BACIWA published in the Visayan Daily Star,1 a local paper of general circulation, a Schedule of Automatic Water Rates Adjustments for the years 1999, 2000 and 2001. The rates were supposed to take effect seven (7) days after its posting in the local papers or on January 22, 1999. The increase was aborted after petitioner unilaterally suspended the January 22, 1999 scheduled implementation. On March 15, 1999, however, petitioner announced that the rate hike will be implemented on April 1, 1999. 2

Respondent City opposed. It alleged that the proposed water rates would violate due process as they were to be imposed without the public hearing required under Letter of Instructions No. 7003 and Presidential Decree No. 1479.4 Hence, it prayed that before the hearing of the main case, a temporary restraining order or a preliminary injunction be issued.5

On March 30, 1999, the court a quo issued an Order6 summoning the parties with their counsels to attend the preliminary hearing for the issuance of a temporary restraining order or preliminary mandatory injunction. On April 8, 1999, it required the parties to simultaneously submit their

respective memoranda on whether it had jurisdiction over the case and whether a public hearing was conducted re the proposed increase in water rates.7

Petitioner filed its Position Paper dated April 15, 1999. It attached documents evidencing the conduct of extensive and lengthy public hearings in fifty-eight (58) of the sixty-one (61) barangays of Bacolod City. It opined that original jurisdiction over cases on rate review is vested in the Local Water Utilities Administration (LWUA); appellate jurisdiction is vested in the National Water Resources [Board] (NWRB) whose decisions shall be appealable to the Office of the President.8

On May 5, 1999, petitioner also filed a Motion to Dismiss. In an Order9 dated May 7, 1999, the court directed respondent City to file its Opposition to petitioner’s Motion to Dismiss within fifteen (15) days.

On June 17, 1999, respondent City filed a Motion to Set [for] Hearing10 its application for a temporary restraining order or preliminary mandatory injunction. It alleged that the parties had already submitted their respective memoranda and it has already submitted its Opposition to petitioner’s Motion to Dismiss. It also alleged that petitioner had already effected the water rates increase and collection, hence, causing irreparable injury to the public.

Petitioner opposed the Motion. On July 20, 1999, respondent City filed its Reply to Opposition and reiterated that the application for the issuance of a temporary restraining order or preliminary mandatory injunction be heard since petitioner continued to violate the right of the public to due process and it might take time before the case would be finally resolved.11 On the same date, petitioner filed a Manifestation and Motion12 stating that the hearing may no longer be necessary as the respective positions of both parties have already been presented and amplified in their pleadings and memoranda.

On July 22, 1999, respondent trial court issued an Order13 stating that there was no more need to hear the case on the merits14 as both parties have already submitted their position papers and documents to prove their respective allegations.

On July 23, 1999, petitioner filed its Reply15 to respondent City’s Opposition to the Motion to Dismiss reiterating that petitioner failed to exhaust administrative remedies provided by law hence the petition be dismissed for utter lack of merit.

After a hiatus of nearly seven (7) months, or on February 18, 2000, respondent City filed an Urgent Motion for the Issuance of Temporary Restraining Order And[/]Or Writ of Preliminary Injunction16 praying that the case be set for hearing on February 24, 2000. On the same date requested, respondent court heard respondent’s application for temporary restraining order and issued an Order17 commanding petitioner to stop, desist and refrain from implementing the proposed water rates for the year 2000 which were then supposed to take effect on March 1, 2000.

On March 7, 2000, petitioner filed an Urgent Motion for Reconsideration and Dissolution of the Temporary Restraining Order.18 Respondent court a quo issued on March 10, 2000 an Order19

directing respondent City to file an Opposition to the Urgent Motion. In its Opposition, respondent City20 contended that the temporary restraining order issued was not infirmed with procedural and substantive defects. It also averred that respondent court has jurisdiction over the case since the sole question of the lack of public hearing does not require the special knowledge or expertise of an administrative agency and may be resolved by respondent court, hence the doctrine of primary jurisdiction does not apply.

Respondent court continued with the proceedings by receiving the evidence of petitioner in support of its Motion for Reconsideration and Dissolution of Temporary Restraining Order. It further issued Orders dated March 17, 200021 and March 20, 2000.22

On April 6, 2000, respondent court issued an Order23 finding petitioner’s Urgent Motion for Reconsideration and Dissolution of Temporary Restraining Order moot and academic considering petitioner’s compliance of said temporary restraining order.

Four (4) days after, in an Order24 dated April 10, 2000, it denied petitioner’s Motion to Dismiss for lack of merit.

On April 19, 2000, respondent City filed a Manifestation praying that respondent trial court issue a writ of preliminary injunction against petitioner, stating thus:

A Temporary Restraining Order was issued against the respondents which, however, expired before the parties were able to finish the presentation of their respective witnesses and evidences;

The instant case was submitted for resolution and decision of this Honorable Court during the last week of March but while awaiting the decision of this Honorable Court, several complaints had reached the petitioner that the respondents had already reflected in the water billings for the month of April the new water rates for the year 2000;

x x x 25

Petitioner, for its part, filed a Motion for Reconsideration26 of respondent trial court’s Order denying its Motion to Dismiss. Respondent City filed an Opposition to [the] Motion for Reconsideration27 on June 1, 2000.

Respondent court did not act upon petitioner’s Motion for Reconsideration until respondent City filed an [Ex Parte] Motion for Speedy Resolution28 of the case on October 6, 2000 praying that the case be resolved before the year 2000 ends in order to prevent the implementation of the water rates increase for the year 2001 which was to be imposed allegedly without the benefit of a public hearing.

On December 21, 2000, respondent court issued the assailed Decision29 granting the final injunction which allegedly confirmed the previous preliminary injunction.

Petitioner filed its Motion for Reconsideration30 of the assailed Decision on January 11, 2001 asserting, among others, that the case was not yet ripe for decision when the court granted the final injunction, the petitioner having had no opportunity to file its answer, avail of the mandatory pre-trial conference and have the case tried on the merits.

Respondent court denied the Motion for Reconsideration for lack of merit in an Order31 dated January 24, 2001. Petitioner then filed a special civil action for certiorari under Rule 65 in the Court of Appeals. It alleged that public respondent judge acted without or in excess of jurisdiction and/or with grave and patent abuse of discretion amounting to lack or excess of jurisdiction when she issued the final injunction in disregard of petitioner’s basic right to due process.32

The Court of Appeals dismissed the petition for review on certiorari, ratiocinating thus:

In the case at bar, the [O]rder of public respondent dated 24 February 2000, though termed by BACIWA as a temporary restraining order, is in fact a preliminary injunction. The period of the restraint was not limited. By its wordings, it can be safely inferred that the increased water rates must not be effected until final disposition of the main case. This note of semi-permanence simply cannot issue from a mere temporary restraining order. It must be further noted that the temporary restraining order has been elevated to the same level as the preliminary injunction in the procedure, grounds and requirements of its obtention by S[ection] 4, Rule 58. Thus, to set [a] distinction, the present practice is to categorically refer to it as a temporary restraining order. In which case, the omission by the public respondent in referring to the 24 February 2000 order as a temporary restraining order could not have been a mere oversight but deliberate.33

Resorting to this Court, petitioner raises the following issues:

I

THE COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED AND REFUSED TO RULE THAT RESPONDENT COURT HAD ACTED WITHOUT OR IN EXCESS OF JURISDICTION AND/OR WITH GRAVE ABUSE OF DISCRETION FOR ARBITRARILY AND CAPRICIOUSLY RENDERING A DECISION PURPORTING TO ISSUE A FINAL INJUNCTION AND CONFIRMING ITS ALLEGED PRELIMINARY INJUNCTION, DESPITE THE FACT THAT:

A. NO PRELIMINARY INJUNCTION HAD BEEN ISSUED;

B. THE RESPONDENT LOWER COURT DID NOT RESOLVE HEREIN PETITIONER’S MOTION FOR RECONSIDERATION OF THE ORDER DENYING PETITIONER’S MOTION TO DISMISS;

C. THE HEREIN PETITIONER HAD NOT YET FILED ITS ANSWER TO THE PETITION;

D. THERE WAS STILL NO JOINDER OF THE ISSUES SINCE NO ANSWER HAD YET BEEN FILED;

E. THE MANDATORY PRE-TRIAL CONFERENCE WAS NOT YET CONDUCTED;

F. THERE WAS NO TRIAL ON THE MERITS FOR THE MAIN CASE.

II

THE COURT OF APPEALS GRAVELY ERRED WHEN IT INSISTED THAT THE 24 FEBRUARY 2000 ORDER (ANNEX R) ISSUED BY THE TRIAL COURT WAS A PRELIMINARY INJUNCTION WHEN THE RECORDS CLEARLY AND INDUBITABLY SHOW THAT IT WAS A TEMPORARY RESTRAINING ORDER (TRO).

III

BY DISMISSING THE PETITION FOR CERTIORARI, THE COURT OF APPEALS GRAVELY ERRED WHEN IT EFFECTIVELY PREVENTED PETITIONER FROM FULLY VENTILATING ITS CASE IN THE MAIN ACTION DUE TO THE IRREGULAR AND CONFUSED PROCEEDINGS CONDUCTED BY THE RESPONDENT COURT.34

We rule in favor of petitioner.

The initial issue is the proper characterization of the Order dated February 24, 2000.

The sequence of events and the proceedings that transpired in the trial court make a clear conclusion that the Order issued was a temporary restraining order and not a preliminary injunction.

First. We quote the pertinent parts of the questioned Order:

x x x

When this motion was called for hearing wherein both parties have argued exhaustedly their respective sides, this court denied the ten (10) days extension for further amplification of the arguments of the respondent to oppose the said motion for issuance of a temporary restraining order.

It appearing therefore, that the acts of the defendant will actually affect the plaintiff before the decision of this court can be rendered and in order to afford the court to pass on the issues without the same becoming moot and academic and considering the urgency of the matter that immediate action should be taken, and pursuant to Administrative Circular No. 6, Paragraph 4 and sub-paragraph 15 and The Interim Rules and Guidelines

[set forth] by the Rules of Court, this court hereby orders the respondent[,] its agents, representatives or any person acting in his behalf to stop, desist and refrain from implementing in their billings the new water rate increase which will start on March 1, 2000. The Deputy Provincial Sheriff of this court is hereby ordered to furnish copy of this order to the respondent Bacolod City Water District as well as to its agents or representatives acting [o]n his behalf.

x x x 35 (emphases supplied)

It can be gleaned from the afore-quoted Order that what the trial court issued was a temporary restraining order and not a preliminary injunction. The trial court has always referred to it as a temporary restraining order in the succeeding Orders it issued on March 10, 200036 and April 6, 2000.37

The parties, in their succeeding pleadings,38 also referred to the assailed Order as a temporary restraining order. The petitioner filed an Urgent Motion for Reconsideration and Dissolution of Temporary Restraining Order (TRO)39 on March 1, 2000. This was opposed by respondent City itself in its Opposition to Motion for Reconsideration and Dissolution of Temporary Restraining Order (TRO)40 dated March 14, 2000. Further, respondent City, in its Manifestation dated April 19, 2000 stated, viz:

x x x

A Temporary Restraining Order was issued against the respondents which, however, expired before the parties were able to finish the presentation of their respective witnesses and evidences;

x x x

WHEREFORE, it is most respectfully prayed that while waiting for the decision and order of the Honorable Court, a preliminary injunction as prayed for in the petition be issued against the respondents.

x x x41 (emphases supplied)

It can be gleaned from the foregoing that both parties and respondent trial court have consistently referred to the directive as a temporary restraining order. It was only in the respondent court’s assailed Decision that the Order was referred to as a preliminary injunction, viz:

x x x

This Court therefore grants the final injunction prayed for restraining the respondent from the commission of the act complained of for the year 2001 and hereby confirming the preliminary injunction previously ordered.

x x x 42 (emphasis supplied)

Again, it was only when petitioner expressed its vehement objection on the ruling that the final injunction confirmed the preliminary injunction previously issued, when the respondent City and the respondent trial court started to insist that the questioned Order was a preliminary injunction. Given the previous undeviating references to it as a temporary restraining order, respondents cannot now consider it as a preliminary injunction to justify the validity of the assailed Decision. The attendant facts and circumstances clearly show that the respondent trial court issued a temporary restraining order.

Second. Injunction is a judicial writ, process or proceeding whereby a party is ordered to do or refrain from doing a certain act. It may be the main action or merely a provisional remedy for and as an incident in the main action.43

The main action for injunction is distinct from the provisional or ancillary remedy of preliminary injunction which cannot exist except only as part or an incident of an independent action or proceeding. As a matter of course, in an action for injunction, the auxiliary remedy of preliminary injunction, whether prohibitory or mandatory, may issue. Under the law, the main action for injunction seeks a judgment embodying a final injunction which is distinct from, and should not be confused with, the provisional remedy of preliminary injunction, the sole object of which is to preserve the status quo until the merits can be heard.44 A preliminary injunction is granted at any stage of an action or proceeding prior to the judgment or final order. It persists until it is dissolved or until the termination of the action without the court issuing a final injunction.45

A restraining order, on the other hand, is issued to preserve the status quo until the hearing of the application for preliminary injunction which cannot be issued ex parte. Under Rule 5846 of the Rules of Court, a judge may issue a temporary restraining order with a limited life of twenty (20) days from date of issue. If before the expiration of the twenty (20)-day period the application for preliminary injunction is denied, the temporary restraining order would be deemed automatically vacated. If no action is taken by the judge on the application for preliminary injunction within the said twenty (20) days, the temporary restraining order would automatically expire on the 20th day by the sheer force of law, no judicial declaration to that effect being necessary.47

Hence, in the case at bar, since no preliminary injunction was issued, the temporary restraining order granted automatically expired after twenty (20) days under the Rules. The fact that respondent court merely ordered "the respondent[,] its agents, representatives or any person acting in his behalf to stop, desist and refrain from implementing in their billings the new water rate increase which will start on March 1, 2000"48 without stating the period for the restraint does not convert the temporary restraining order to a preliminary injunction.

The rule against the non-extendibility of the twenty (20)-day limited period of effectivity of a temporary restraining order is absolute if issued by a regional trial court. The failure of respondent court to fix a period for the ordered restraint did not lend the temporary restraining order a breath of semi-permanence which can only be characteristic of a preliminary injunction. The twenty (20)-day period provided by the Rules of Court should be deemed incorporated in the Order where there is an omission to do so. It is because of this rule on non-extendibility that

respondent City was prompted to move that hearings be set for its application of a preliminary injunction. Respondent City cannot take advantage of this omission by respondent trial court.

Third. Even if we assume that the issued Order was a preliminary injunction, petitioner is correct in contending that the assailed Decision is premature.

The records reveal that respondent court did not resolve petitioner’s Motion for Reconsideration of the Order denying its Motion to Dismiss before it issued the assailed Decision. Consequently, there was no answer filed by petitioner, no joinder of issues, no mandatory pre-trial conference, and no trial on the merits, yet, a Decision was handed down by the respondent trial court.

The short circuiting of the procedural process denied the petitioner due process of law. It was not able to allege its defenses in an answer and prove them in a hearing. The convoluted procedure allowed by the respondent trial court and the pleadings filed by the parties which are not models of clarity certainly created confusion. But this confusion should not be seized as a reason to deny a party the constitutional right to due process. Over and above every desideratum in litigation is fairness. All doubts should be resolved in favor of fairness.

IN VIEW WHEREOF, the petition is GRANTED. The Decision and Resolution of the Court of Appeals dated November 27, 2002 and February 28, 2003, respectively, are REVERSED and SET ASIDE. The case is remanded to the court a quo for further proceedings.

SO ORDERED.

Austria-Martinez, Callejo, Sr., Tinga, and Chico-Nazario, JJ., concur.

Footnotes

1 CA Rollo, p. 44.

2 Id. at 39-40; Petition, pp. 2-3.

3 Providing Measures to Continue and Regulate Increases in Water Rates, issued on June 1, 1978 by then President Ferdinand E. Marcos.

4 Further Amending P.D. No. 198, Otherwise Known as the Provincial Water Utilities Act of 1973, As Amended by P.D. No. 768.

5 Id. at 42; Id. at 5.

6 Id. at 50.

7 Id. at 51.

8 Id. at 55-57.

9 Id. at 87.

10 Id. at 88.

11 Id. at 90-91.

12 Id. at 92-94.

13 Id. at 95.

14 Emphasis supplied.

15 Id. at 96-100.

16 Id. at 102-105.

17 Id. at 107.

18 Id. at 108-119.

19 Id. at 120.

20 Id. at 121-130.

21 Id. at 131. The Order directed the issuance of subpoenas to four (4) barangay captains of Bacolod City.

22 Id. at 132. The Order reset the hearing for the presentation of rebuttal evidence.

23 Id. at 133.

24 Id. at 134-135.

25 Id. at 136-137.

26 Rollo, pp. 175-181.

27 CA Rollo, pp. 139-142.

28 Id. at 143-144.

29 Rollo, pp. 87-96.

30 Id. at 188-200.

31 CA Rollo, p. 37.

32 Id. at 2-3; Petition for Certiorari, pp. 1-2.

33 Rollo, pp. 77-78.

34 Id. at 42-43; Petition for Review on Certiorari, pp. 14-15. Petitioner did not raise the issue of jurisdiction in the instant petition.

35 Id. at 143.

36 CA Rollo, p. 120.

37 Id. at 133.

38 Rollo, pp. 144-155, Urgent Motion for Reconsideration and Dissolution of Temporary Restraining Order; pp. 157-166, Opposition to Motion for Reconsideration and Dissolution of Temporary Restraining Order (TRO).

39 Emphasis supplied.

40 Emphasis supplied.

41 Rollo, pp. 172-174.

42 Id. at 96.

43 I Regalado, Remedial Law Compendium 637 (1999).

44 Urbanes, Jr. v. CA, G.R. No. 117964, March 28, 2001, 355 SCRA 537.

45 Miriam College Foundation, Inc. v. CA, G.R. No. 127930, December 15, 2000, 348 SCRA 265.

46 RULE 58, SECTION 1. Preliminary Injunction defined; classes. – A preliminary injunction is an order granted at any stage of an action or proceeding prior to the judgment or final order, requiring a party or a court, agency or a person to refrain from a particular act or acts. It may also require the performance of a particular act or acts, in which case it shall be known as a preliminary mandatory injunction.

x x x

SEC. 5. Preliminary Injunction not granted without notice; exception. – No preliminary injunction shall be granted without hearing and prior notice to the party or person sought to be enjoined. If it shall appear from facts shown by affidavits or by the verified application that great or irreparable injury

would result to the applicant before the matter can be heard on notice, the court to which the application for preliminary injunction was made, may issue ex parte a temporary restraining order to be effective only for a period of twenty (20) days from service on the party or person sought to be enjoined, except as herein provided. Within the said twenty-day period, the court must order said party or person to show cause at a specified time and place, why the injunction should not be granted, determine within the same period whether or not the preliminary injunction shall be granted, and accordingly issue the corresponding order.

x x x

In the event that the application for preliminary injunction is denied or not resolved within the said period, the temporary restraining order is deemed automatically vacated. The effectivity of a temporary restraining order is not extendible without need of any judicial declaration to that effect and no court shall have authority to extend or renew the same on the same ground for which it was issued.

However, if issued by the Court of Appeals or a member thereof, the temporary restraining order shall be effective for sixty (60) days from service on the party or person sought to be enjoined. (emphases supplied)

47 Supra Note 45.

48 Rollo, p. 143.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 135885 April 28, 2000

SPOUSES JUAN J. DIAZ and ELIZABETH L. DIAZ, petitioners,vs.JOSE DIAZ and COURT OF APPEALS, respondents.

DE LEON, JR., J.:

This case stems from the action for a sum of money filed before the Regional Trial Court of Mandaluyong City, Branch 214 1 by private respondent Jose Diaz against petitioners Juan and Elizabeth Diaz. In the instant Petition for Review on Certiorari, petitioners assail the Decision 2 dated July 14, 1998 and Resolution 3 dated October 8, 1998 of the Court of Appeals, 4 affirming the trial court's denial of their Motion to Dismiss. In their Supplemental Petition, petitioners question the trial court's Order 5 dated January 8, 1999, denying their Motion to Set Aside Order of Default and to Admit Attached Answer, and the Order 6 dated January 12, 1999, correcting certain paragraphs of the Order dated January 8, 1999.

The relevant facts are:

In his Complaint, private respondent alleged that:

3

Plaintiff and defendant Juan J. Diaz are brothers, and together with their recently widowed sister, Marita D. Papa, owned in common, as co-heirs (sic), a parcel of land, with improvements thereon, situated in the Municipality of Mandaluyong (now Mandaluyong City), hereinafter referred to as the Mandaluyong property, in the Following proportions:

Defendant Juan J. Diaz — 6/8

Plaintiff Jose Diaz — 1/8

Marita D. Papa — 1/8

4

On May 17, 1968, the above-mentioned co-owners sold their Mandaluyong property to PHILAMGEN for P125,000.00. Thus, the corresponding amounts pertaining to each co-owner from the sale were as follows:

Juan J. Diaz — P90,000.00

Jose Diaz — 15,000.00

Maria D. Papa — 15,000.00

5

Immediately after the sale of the Mandaluyong property, defendant Juan J. Diaz, purchased a 1,000 sq. meter lot in Greenhills Subdivision, San Juan, for P140,00000 (hereinafter referred to as the Greenhills lot), using as part of the purchase price plaintiff's P15,000.00 share of the sale of the Mandaluyong property, and thereafter caused title thereto to be issued in his name, all with the knowledge and without objection of the plaintiff;

xxx xxx xxx

11

Defendant spouses have recently sold the Greenhills lot, together with their Greenhills home, for P54,000,000.00.

12

Considering that defendant Juan J. Diaz, in buying the Greenhills lot, used as part of the purchase price plaintiff's afore-mentioned P15,000.00 share of the sale of the Mandaluyong property, and caused the title to said lot to be issued in his name, all with the knowledge and without the objection on the part of the plaintiff, an implied trust was created by force of law, between plaintiff and defendants, in favor of the former, in proportion to his interest in said Greenhills lot, pursuant to Article 1452 of the Civil Code of the Philippines;

13

On June 18, 1997, plaintiff wrote defendant spouses a letter demanding from them an amount of at least P2 million as his share of the actual value of the Greenhills lot which can reasonably be placed at P30 million but defendant spouses, however, refused to honor plaintiff's demand in a letter to him dated August 28, 1997 . . . 7

On September 19, 1997, private respondent filed an action for sum of money with the Regional Trial Court of Mandaluyong City. On October 7, 1997, petitioners filed a Motion to Dismiss 8 on

the ground that private respondent's Complaint failed to state a cause of action, and assuming that private respondent had a cause of action against them, it was already barred by prescription and laches. Private respondent filed his Opposition to the Motion to Dismiss, to which petitioners responded by filing a Reply.

In its Order dated November 27, 1997, the trial court denied petitioners' Motion to Dismiss as the "points invoked and the arguments advanced were contentious and evidentiary in nature which could not be established by mere allegations in the pleadings but must be proved during the trial on the merits."9 The trial court denied the Motion for Reconsideration of petitioners in its Order dated January 14, 1998.1âwphi1.nêt

On February 6, 1998, petitioners filed a Petition for Certiorari and Prohibition 10 with the Court of Appeals. In its Resolution dated February 12, 1998, the Second Division of the Court of Appeals dismissed the petition for failure to comply with Section 11, Rule 13 of the 1997 Rules of Civil Procedure (the "Rules"). 11

On February 23, 1998, petitioners filed another Petition for Certiorari and Prohibition with the Court of Appeals. On July 14, 1998, the appellate court denied the petition. Petitioners' Motion for Reconsideration was denied on October 8, 1998.

Dissatisfied, on October 29, 1998, petitioners filed a Petition for Certiorari and Prohibition with this Court. In our Resolution 12 dated November 25, 1998, we treated said petition as a petition for review on certiorari under Rule 45.

In the meantime, during the pendency of petitioners' first Petition for Certiorari before the Court of Appeals, private respondent filed with the trial court a motion dated February 16, 1998 to declare petitioners in default for failure to file an answer on or before January 27, 1998, allegedly the last day for filing the same. Petitioners filed their Opposition thereto on February 25, 1998. In its Order dated March 2, 1998, the trial court granted the motion of private respondent and set the date for the ex-parte presentation of evidence on March 30, 1998. On March 20, 1998, petitioners moved for reconsideration of the order of default. Before the trial court could act upon said motion, on March 27, 1998, the Court of Appeals granted petitioners' March 17, 1998 motion for issuance of a temporary restraining order thereby enjoining the trial court from proceeding with the scheduled hearing on March 30, 1998 or on any future date until ordered by the appellate court. 13

With the denial by the Court of Appeals of petitioners' second Petition for Certiorari, private respondent filed with the trial court a motion dated July 27, 1998, praying that he be allowed to proceed with the ex-parte presentation of evidence. The trial court granted said motion in its Order dated August 7, 1998.

On August 13, 1998, petitioners filed a Motion for Reconsideration of the Order dated August 7, 1998, contending that their Motion for Reconsideration dated March 20, 1998 had not yet been resolved. In the interim, petitioners filed their Answer on October 21, 1998.

In its Order dated October 28, 1998, the trial court denied petitioners Motions for Reconsideration dated March 20, 1998 and August 13, 1998 and expunged their Answer from the records. Subsequently, in its Order dated November 6, 1998, the trial court allowed private respondent to present his evidence ex-parte.

On November 9, 1998, petitioners filed a Motion to Set Aside the Order of Default and to Admit Attached Answer. Petitioners filed a supplement thereto on November 17, 1998. On January 8, 1999, the trial court denied the motion on the ground that:

It is clear from the records that after the denial of defendants' Motion to Dismiss and Motion for Reconsideration, they failed to file any answer or pleading within the remaining period provided under Section 4, Rule 16 of the Rules and opted instead to file a petition for certiorari with the Court of Appeals. It was only upon receipt of the adverse decision of the Court of Appeals that defendants partially sought to set things right.

The foregoing simply demonstrate defendants' obstinate refusal or inordinate neglect of the rules of procedure which deserves no compassion from the court. Therefore, the default order should be maintained. 14

In an Order dated January 12, 1999, the trial court corrected certainparagraphs 15 in its Order dated January 8, 1998 which "had been inadvertently and/or erroneously typed and/or omitted." 16

On February 3, 1999, petitioners filed, with leave from this Court, a Supplemental Petition, 17 assailing the trial court's Orders dated January 8, 1999 and January 12, 1999 for having been issued without or in excess of jurisdiction, and/or with grave abuse of discretion amounting to lack of jurisdiction.

Parenthetically, on March 11, 1999, the trial court rendered judgment in favor of private respondent. On March 30, 1999, petitioners filed a Notice of Appeal to the Court of Appeals, which was given due course by the trial court in its Order dated March 31, 1999. Sometime thereafter, the appellate court granted private respondent's Motion for Execution Pending Appeal. Petitioners posted a supersedeas bond with the trial court. Petitioners manifested that while they were preparing their Appellants' Brief, they also filed with the Court of Appeals a Motion for Deferment of Any Proceeding Relative to the Appeal in light of this Court's Resolution dated October 4, 1999, giving due course to their petition. On December 6, 1999, the appellate court promulgated a Resolution: (1) reversing its prior decision allowing petitioners to file a supersedeas bond and thereby ordering them to comply with the writ of execution of the trial court, (b) declaring petitioners guilty of forum-shopping, and (c) denying petitioners' second motion for an extension of forty-five (45) days within which to file their Appellant's Brief. Claiming that they would suffer grave injustice from the enforcement of said Resolution, petitioners filed an urgent motion with this Court on December 10, 1999, praying for issuance of a status quo or temporary restraining order. 18 On December 13, 1999, we granted petitioners' prayer.

In their petition for review, petitioners assign the following errors:

I. THE COURT OF APPEALS ERRED IN NOT FINDING THAT, ON ITS FACE, THE COMPLAINT FAILED TO STATE A CAUSE OF ACTION.

II. THE COURT OF APPEALS LIKEWISE ERRED IN NOT DISMISSING THE COMPLAINT DUE TO PRIVATE RESPONDENT'S VACILLATING CAUSE OF ACTION, WHICH SHOWS HIS INABILITY TO ALLEGE AN ACTIONABLE CAUSE IN HIS COMPLAINT.

III. ASSUMING FOR THE SAKE OF ARGUMENT THAT THE COMPLAINT DID STATE A CAUSE OF ACTION, THE COURT OF APPEALS STILL ERRED IN FINDING THAT PRESCRIPTION HAD NOT SET IN WHEN THE CASE WAS FILED ON SEPTEMBER 19, 1997.

IV. ASSUMING FOR THE SAKE OF ARGUMENT THAT PRESCRIPTION HAD NOT SET IN WHEN THIS CASE WAS FILED, THE COURT OF APPEALS ALSO ERRED IN FINDING THAT PETITIONERS' ARGUMENT ON LACHES IS UNSUSTAINABLE.

V. THE COURT OF APPEALS ERRED IN RULING THAT A SPECIAL CIVIL ACTION FOR CERTIORARI IS NOT THE APPROPRIATE REMEDY FOR THE PETITIONERS.

VI. THE COURT OF APPEALS FURTHER ERRED IN DENYING PETITIONERS' MOTION FOR RECONSIDERATION BECAUSE OF THE ALLEGED LACK OF COMPELLING REASON TO MODIFY, REVERSE OR RECONSIDER THE DECISION, AND THE ARGUMENTS RAISED THEREIN WERE PURPORTEDLY ALREADY CONSIDERED AND PASSED UPON IN THE DECISION.

On the other hand, petitioners' Supplemental Petition hinges upon the resolution of the following issues:

I. WHETHER OR NOT THE TRIAL JUDGE ERRED AND/OR ACTED WITHOUT JURISDICTION AND/OR GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OR LACK OF JURISDICTION IN DECLARING PETITIONERS IN DEFAULT AND ORDERING THEIR ANSWER EXPUGNED FROM THE RECORDS OF THE CASE.

II. ASSUMING THAT PETITIONERS WERE PROPERLY DECLARED IN DEFAULT, WHETHER OR NOT THE TRIAL JUDGE STILL ERRED AND/OR ACTED WITHOUT JURISDICTION IN NOT SETTING ASIDE THE ORDER OF DEFAULT AND ADMITTING PETITIONERS' ANSWER.

III. IN ISSUING THE ASSAILED ORDERS AND CATEGORICALLY DECLARING THAT HE WOULD PROCEED TO RESOLVE THE MAIN CASE "UNLESS ENJOINED BY [THE] SUPREME COURT," THE TRIAL JUDGE ERRED AND ACTED WITH GRAVE ABUSE OF DISCRETION.

I. Denial of Petitioners' Motion to Dismiss

Petitioners maintain that private respondent's Complaint failed to state a cause of action as it contained mere averments of facts and conclusions of law that neither establish any right or claim on the part of private respondent nor constitute wrongful acts or omissions violative of his right. Petitioners specifically draw this Court's attention to paragraphs 5 and 12 upon which private respondent allegedly anchors his cause of action. Citing Remitere v. Vda. de Yulo 19 as the case in point, petitioners contend that the allegations in paragraph 5 failed to state private respondent's claim to the P15,000.00, the Greenhills property, or the manner by which his rights or interests were prejudiced by the alleged use of his P15,000.00 by petitioners while paragraph 12 is a mere reiteration of paragraph 5.

We disagree with petitioners. It has been our consistent ruling that a complaint states a cause of action when it contains the following elements: (1) the legal right of plaintiff, (2) the correlative obligation of the defendant, and (3) the act or omission of the defendant in violation of said legal right. 20 Accordingly, in Remitere, we found that the complaint failed to allege any connection between the plaintiffs and the deceased Gregorio Remitere, their claim to the properties, the manner by which their rights or interests were affected by the sale of said properties as well as facts and circumstances upon which the nullity of the public auction was predicated. In the case at bar, the connection which petitioners seek can readily be found by an examination of the Complaint in its entirety. In his Complaint, private respondent alleged that he was entitled to receive P15,000.00 as his share in the sales proceeds of the Mandaluyong property. He thereafter claimed that, with his knowledge and without his objection, the same P15,000.00 was used by his brother in paying for the Greenhills property. Having allowed his brother to use his money, private respondent demanded the return of the present equivalent of his contribution following the sale of the Greenhills property but the said demand was rejected. Hypothetically admitting these allegations, private respondent's Complaint satisfies all the elements of a cause of action.

Petitioners argue that private respondent's invocation of Article 1452 of the Civil Code is a mere conclusion of law which is not allowed to be alleged in the Complaint. Petitioners also dispute the applicability of Article 1452 as there was never any agreement between the parties for the purchase of the Greenhills property and for registration of the title in their name. We agree with petitioners that private respondent's invocation of Article 1452 is a conclusion of law. However, the inclusion thereof does not render the Complaint infirm since statements of law made by parties to a case are not binding on the courts. Similarly, doubtful veracity of the allegations in the Complaint is not a ground for granting a motion to dismiss. The existence or non-existence of an agreement between petitioners and private respondent is a matter that should be threshed out during the trial of the case.

Petitioners further contend that private respondent's vacillating cause of action indicated an inability to allege an actionable cause which should have impelled the Court of Appeals to grant

their Motion to Dismiss. Petitioners ask this Court to take notice of the fact that private respondent first cited the implied trust provisions of Article 1452 of the Civil Code in his Complaint then shifted to implied trust under Article 1455 in his Opposition to the Motion to Dismiss, and finally, co-ownership in his Comment before the Court of Appeals. Petitioners correctly pointed out that in determining the existence of a cause of action, only the statements in a complaint may properly be considered, and that it is error for the courts to take cognizance of external facts or hold preliminary hearings to determine its existence. 21 Petitioners will, however, concede that private respondent's Opposition to the Motion to Dismiss and Comment are extraneous matters which we are proscribed from considering for purposes of determining the sufficiency of private respondent's Complaint. Whether or not the provision of law cited by private respondent is applicable to the case at bar is immaterial. Under the rules of pleading, a party is not required to specify the provisions of law or contract relied upon by the pleader. 22 If he does so, and is mistaken, this will not preclude him from obtaining relief under a different conception of the case, provided always that the facts stated and proved justify such relief. 23

Assuming that the Complaint did state a cause of action, petitioners claim that the Court of Appeals failed to consider that private respondent's cause of action accrued in 1968 with the sale of the Mandaluyong property. Thus, when private respondent filed his Complaint twenty-nine (29) year later, prescription and laches had already set in. The points raised by petitioners are contentious in nature and should be resolved after considering evidence other than mere allegations in pleadings.

As to petitioners' argument that the Court of Appeals erred in ruling that a special civil action for certiorari is not the appropriate remedy to question the denial of their motion to dismiss, it need not be gainsaid that a special civil action for certiorari is a remedy designed for the correction of errors of jurisdiction and not errors of judgment. 24 To justify the grant of such extraordinary remedy, the abuse of discretion must be grave and patent, and it must be shown that discretion was exercised arbitrarily or despotically. 25 In this case, no such circumstances attended the denial of petitioners Motion to Dismiss.

II. Propriety of the Order of Default

Petitioners submit that Section 4, Rule 16 of the Rules, respecting the period within which a defendant is allowed to file an answer following the denial of his motion to dismiss, must be harmoniously construed with Rule 65. Petitioners try to convince this Court that they could not be expected to file an answer because they intended to file a petition for certiorari with the Court of Appeals. Petitioners further submit that the notice of denial provided in Section 4 referred to a decision or resolution of the Court of Appeals or the Supreme Court, denying a petition for certiorari with finality. Until resolved, petitioners contend that the period provided for in said section does not apply to them.

We are not convinced. Petitioners received on January 22, 1998 a copy of the trial court's Order dated October 8, 1997, denying reconsideration of its ruling on their Motion to Dismiss. Petitioners had only five (5) days from receipt of said Order, or until January 27, 1998, within which to file an answer. When petitioners filed their first Petition for Certiorari with the Court of Appeals on February 6, 1998, they were already in default. Hence, the filing of said Petition for

Certiorari cannot be considered as having interrupted the reglementary period for filing an answer. More importantly, Section 7, Rule 65 of the Rule's provides that:

Sec. 7. Expediting proceedings; injunctive relief. The court in which the petition is filed may issue orders expediting the proceedings, and it may also grant a temporary restraining order or a writ of preliminary injunction for the preservation of the rights of the parties pending such proceedings. The petition shall not interrupt the course of the principal case unless a temporary restraining order or writ of preliminary injunction has been issued against the public respondent from further proceeding in the case. (Emphasis Ours)

In Santiago v. Vasquez, 26 we explained that:

The original and special civil action filed with this Court is, for all intents and purposes, an invocation for the exercise of its supervisory powers over lower courts. It does not have the effect of divesting the inferior courts of jurisdiction validly acquired over the case pending before them. It is elementary that the mere pendency of a special civil action for certiorari commenced in relation to a case pending before a lower court, does not even interrupt the course of the latter when there is no writ of injunction restraining it. The inevitable conclusion is that for so long as no writ of injunction or restraining order is issued in the special civil action for certiorari, no impediment exist and there is nothing to prevent the lower court from exercising its jurisdiction and proceeding with the case pending before it. And even if such injunctive writ or order is issued, the lower court nevertheless continues to retain its jurisdiction. 27 (Emphasis Ours)

This rule was reiterated in the later cases of United States of America v. Reyes, 28 Reyes v. Commission on Elections 29 and Yasay, Jr. v. Desierto. 30 In United States of America, therefore, we held that although petitioner Maxine Bradford questioned the denial of her motion to dismiss before this Court, she was nonetheless properly declared in default for failure to file her answer within the reglementary period. In that case, we issued a temporary restraining order against the trial court three (3) months after rendering a default judgment against petitioner. It is clear from the foregoing that proceedings in the court of origin are not automatically suspended by filing of a petition for certiorari, much less by a mere intent to file the same. It will be noted in the case at bar that the Court of Appeals issued a temporary restraining order against the trial court two (2) months after the latter denied petitioners' motion seeking reconsideration of its Order dated October 18, 1998. We need not stress that petitioners cannot assume that the Court of Appeals or this Court will readily grant prayers for a writ of preliminary injunction or temporary restraining order.

Petitioners also contend that to require them to file an answer before resolution of their Petition for Certiorari would render nugatory their right to question the denial of their Motion to Dismiss and result in taking inconsistent positions by compelling them to admit the existence of a cause of action. As early as Palomares v. Jimenez, 31 we stated that an application for certiorari is an independent action which is not part of a continuation of the trial which resulted in the rendition

of the judgment complained of. Impliedly, a petition for certiorari pending before a higher court does not necessarily become moot and academic by a continuation of the proceedings in the court of origin. We also find that petitioners' fear of taking inconsistent positions is more apparent than real. The grounds relied upon by petitioners in their Motion to Dismiss may validly be raised in their Answer and invoked in moving for the dismissal of the action should said grounds become evident during the trial.

Petitioners argue that they should not have been declared in default because the trial judge could have easily considered their Motion to Dismiss as their Answer as in the case of Matute v. Court of Appeals. 32 Petitioners overlook the fact that in Matute, petitioners were prematurely declared in default because the period for filing their answer had not commenced to run anew as counsel for petitioners had not yet received a copy of the order denying their motion to dismiss. This is our rationale for setting aside the order of default. In this case, notwithstanding receipt of the Orders denying their Motion to Dismiss and Motion for Reconsideration thereof, petitioners did not file an answer within the reglementary period.

III. Propriety of the Denial of Petitioners

Motion to Lift Order of Default

Petitioners submit that the import of Section 4 of Rule 16 involved a difficult question of law which may be considered as a mistake of fact, excusing them from the legal consequences of their act. Moreover, they honestly and firmly believed that Section 7 of Rule 65 did not render useless the doctrine of hierarchical courtesy among courts. If not persuaded, petitioners argue that their actuation and that of their counsel should at least be considered as excusable negligence. Petitioners' submission is without merit. Our pronouncements in Santiago, United States of America, Reyes and Yasay, Jr. sufficiently explain the import of the term "notice of denial" and indicate that Section 7 is intended as an exception to the observance of hierarchical courtesy among courts. Petitioners' own admissions likewise militate against their claim of mistake and excusable negligence. In their second Petition for Certiorari before the Court of Appeals, petitioners alleged the following in support of their prayer for a writ of injunction or temporary restraining order:

6.3 Unless inhibited by the Honorable Court of Appeals, the Regional Trial Court of Mandaluyong City, Branch 214, being presided by Respondent Judge Edwin D. Sorongon will and should set for continuation of the proceedings of said Civil Case No. 15-MD of your Petitioners considering that the assailed ORDERS DENIED the Motion to Dismiss and Motion for Reconsideration and further found that said civil case necessitates trial on the merits and presentation of evidence. This would cause great injustice to Petitioners considering that they are clearly entitled to the issuance of a writ of preliminary injunction or at least temporary restraining order and their need for relief is extremely urgent. 33 (Emphasis Ours).

Similarly, in their motion dated March 12, 1998 seeking, among others, reconsideration of the trial court's ruling on their Motion to Set Aside Order of Default and to Admit Attached Answer, petitioners stated:

3. While it is true that without a temporary restraining order from the Court of Appeals, the proceedings before this Honorable Court may proceed, the decision of whether to proceed or not is still discretionary with the trial court. 34 (Emphasis Ours).

These statements show that petitioners were fully aware of the rule that a petition for certiorari does not stay the proceedings in the court of origin in the absence of a writ of injunction or temporary restraining order.

This notwithstanding, we note that the emerging trend in the rulings of this Court is to afford every party litigant the amplest opportunity for the proper and just determination of his cause, free from the constraints of technicalities. Hence, in Genite v. Court of Appeals, 35 we stressed that:

The Rules of Court were conceived and promulgated to set forth guidelines in the dispensation of justice but not to bind and chain the hand that dispenses it, for otherwise, courts will be mere slaves to or robots of technical rules, shorn of judicial discretion. That is precisely why courts, in rendering justice have always been, as they in fact ought to be conscientiously guided by the norm that on the balance, technicalities take a backseat to substantive rights, and not the other way around. As applied to [the] instant case, in the language of Justice Makalintal, technicalities "should give way to the realities of the situation" 36

Suits should as much as possible be decided on the merits and not on technicalities. 37 In this regard, we have often admonished courts to be liberal in setting aside orders of default as default judgments are frowned upon and not looked upon with favor for they may amount to a positive and considerable injustice to the defendant and the possibility of such serious consequences necessitates a careful examination of the grounds upon which the defendant asks that it be set aside. 38 Since rules of procedure are mere tools designed to facilitate the attainment of justice, it is well recognized that this Court is empowered to suspend its operation, or except a particular case from its operation, when the rigid application thereof tends to frustrate rather than promote the ends of justice. 39 We are not unmindful of the fact that during the pendency of the instant petition, the trial court has rendered judgment against petitioners. However, being the court of last resort, we deem it in the best interest that liberality and relaxation of the Rules be extended to petitioners by setting aside the order of default issued by the trial court and the consequent default judgment; otherwise, great injustice would result if petitioners are not afforded an opportunity to prove their claims.

WHEREFORE, the decision of the Court of Appeals affirming the denial of petitioners' Motion to Dismiss is AFFIRMED. The Motion to Set Aside Order of Default and to Admit Attached Answer is hereby GRANTED; and the default judgment rendered by the trial court on March 11,

1999 is SET ASIDE. The trial court is directed to proceed with the trial of the case, and to resolve the same with dispatch. The Court of Appeals is hereby ordered to remand the records of the case to the trial court within fifteen (15) days from notice hereof. Both the trial court and the appellate court are ordered to immediately inform this Court of their compliance with these orders.

Costs against petitioners.1âwphi1.nêt

SO ORDERED.

Bellosillo, Mendoza, Quisumbing and Buena, JJ., concur.

Footnotes

1 Presided by Judge Edwin D. Sorongon.

2 Annex "A" of the Petition, Rollo, pp. 62-72; Penned by Court of Appeals Associate Justice Conrado M. Vasquez, Jr. and concurred in by Associate Justices Quirino D. Abad Santos and Teodoro P. Regino.

3 Annex "B" of the Petition, Rollo, p. 73-74.

4 Tenth Division.

5 Annex "A" of the Supplemental Petition, Rollo, pp. 324-325.

6 Annex "B" of the Supplemental Petition, Rollo, p. 326.

7 Annex "C" of the Petition, Rollo, pp. 75-78.

8 Annex "D" of the Petition, Rollo, pp. 83-88.

9 Annex "G" of the Petition, Rollo, p. 109.

10 A copy of this petition was not attached as an annex.

11 Annex "L" of the Petition, Rollo, p. 130.

12 Rollo, p. 236.

13 Annex "I" of the Supplemental Petition, Rollo, pp. 354-357.

14 Annex "A" of the Supplemental Petition, Rollo, pp. 324-325.

15 Paragraphs 3, 5 and 6 of the Order dated January 8, 1998 were corrected to read as follows:

Paragraph 3

. . . was due to their firm belief that their period to answer has not yet expired because the validity of the order denying their motion to dismiss has not yet attained finality since the same was brought via certiorari to the Court of Appeals . . .

Paragraph 5

. . . It was only upon receipt of the adverse decision of the Court of Appeals that defendants frantically sought to set things right . . .

Paragraph 6

. . . defendants' obstinate refusal or inordinate neglect of the Rules of Procedure.

16 Annex "B" of the Supplemental Petition, Rollo, p. 326.

17 Rollo, pp. 280-323.

18 Rollo, pp. 738-746.

19 16 SCRA 251 (1966).

20 San Lorenzo Village Association, Inc, v. Court of Appeals, 288 SCRA 115 (1998).

21 Rava Development Corporation v. Court of Appeals, 211 SCRA 144 (1992).

22 Sea-Land Service, Inc. v. Court of Appeals, 223 SCRA 316 (1993).

23 La Insular Cigar & Cigarette Factory, Inc. v. Jao One, 42 Phil. 366 (1921).

24 BF Corporation v. Court of Appeals, 288 SCRA 267 (1998).

25 Santiago Land Development Company v. Court of Appeals, 258 SCRA 535 (1996), citing Palma v. Q&S, Inc., 17 SCRA 97 (1966).

26 217 SCRA 633 (1993).

27 Ibid.

28 219 SCRA 192 (1993).

29 254 SCRA 514 (1996).

30 300 SCRA 494 (1998).

31 90 Phil. 773 (1952).

32 26 SCRA 768 (1969).

33 Annex "M" of the Petition, Rollo, p. 156.

34 Annex "H" of the Supplemental Petition, Rollo, p. 346.

35 296 SCRA 38 (1998).

36 Id. at 52.

37 Gerales v. Court of Appeals, 218 SCRA 638 (1993).

38 Montinola, Jr. v. Republic Planters Bank, 161 SCRA 45 (1988).

39 Ramos v. Court of Appeals, 269 SCRA 34 (1997).