Australian Professional Realty, Inc. vs. Municipality of Padre Garcia

Injunction will not issue to restrain execution of a final and executory judgment absent a clear and unmistakable right and irreparable injury, proven by (1) a clear right to be protected, (2) direct threat thereto, (3) material and substantial invasion, and (4) urgent necessity to prevent serious and irreparable damage.

Australian Professional Realty, Inc. is a private developer invited by the Municipality of Padre Garcia, Batangas to participate in rebuilding municipal market facilities. The Municipality is a local government unit asserting ownership and regulatory authority over its public market. Republic Act No. 6957 and Republic Act No. 7718, the Build-Operate-Transfer laws invoked against the transaction, provide the statutory backdrop for the dispute over the validity of the arrangement.

In 1993, fire razed the old public market of the Municipality of Padre Garcia, Batangas. The municipal government, through then Mayor Eugenio Gutierrez, invited Australian Professional Realty, Inc. to rebuild the public market and construct a shopping center.

On 19 January 1995, a Memorandum of Agreement was executed between APRI and the Municipality, represented by Mayor Gutierrez and members of the Sangguniang Bayan. Under the agreement, APRI undertook to construct a shopping complex on a 5,000-square-meter area, in return acquiring the exclusive right to operate, manage, and lease stall spaces for 25 years. APRI thereafter developed the Padre Garcia Shopping Center, which at the time of the Supreme Court Petition had 47 tenants and lessees and yielded an average monthly rental income of ₱100,000, with APRI's claimed investment estimated at ₱30,000,000.

After Victor Reyes was elected municipal mayor in May 1995, the Municipality, through Mayor Reyes, initiated on 6 February 2003 a Complaint for Declaration of Nullity of the Memorandum of Agreement with Damages before the Regional Trial Court of Rosario, Batangas, Branch 87. Summons issued on 12 February 2003 was returned unserved because petitioners were no longer holding office at the given address. On respondent's motion, the trial court allowed service by publication. On 24 November 2003, petitioners were declared in default and respondent was allowed to present evidence ex parte. On 6 October 2004, after admission of respondent's Exhibits A to H, the trial court declared the Memorandum of Agreement null and void for being contrary to law and public policy, particularly R.A. 6957 and R.A. 7718, ordered respondents therein to pay ₱5,000,000 damages, and declared the structures within the unfinished shopping center forfeited to the Municipality.

With no timely appeal taken, respondent moved for execution, and a Writ of Execution issued on 15 July 2005. Upon learning of the judgment, petitioners filed a Petition for Relief from Judgment dated 18 July 2005, denied on 15 June 2006, with reconsideration denied on 14 February 2008. Petitioners then filed a Petition for Certiorari and Prohibition before the Court of Appeals on 28 February 2008, together with a motion to restrain the trial court from further proceeding with execution. The trial court's factual premises credited respondent's ex parte testimonial and documentary evidence and found the petition sufficient in form and substance and supported by sufficient evidence, there being no opposition.

• Clear Right and Irreparable Injury: Petitioner argued that execution of the void RTC judgment during pendency of the CA petition would work injustice, resulting in loss of about ₱30,000,000 in investments and ₱100,000 in average monthly rentals from 47 tenants, plus loss of jobs and exposure to lessee suits, warranting a status quo order, TRO and injunction.
• Lack of Jurisdiction and Due Process: Petitioner maintained that the RTC Decision was arrived at without first obtaining jurisdiction over their persons and would arbitrarily nullify the MOA without due process, leaving no clear remedy except injunctive restraint of further orders, resolutions, writs of execution, and court processes.
• Defective Service by Publication: Petitioner argued that respondent did not exercise reasonable diligence in inquiring into their address, as the Process Server Return did not indicate impossibility of personal service within a reasonable time, efforts exerted to locate APRI, or inquiry as to its whereabouts.

• Absence of Urgency and Injury: Respondent countered that despite issuance of the Writ of Execution, it did not move to implement the writ out of administrative comity and fair play, and petitioners failed to state in categorical terms the serious injury they would sustain if injunction were denied.
• Changed Possession Militating Against Status Quo: Respondent argued that it was now in possession of the contracts that the lessees executed with APRI, constituting actions militating against preservation of the present state of things sought through a status quo order.

• Proper Remedy Against Denial of Injunction: Whether a Petition for Review on Certiorari under Rule 45 lies to assail the CA Resolutions denying a motion for status quo order, TRO and/or writ of preliminary injunction.
• Grave Abuse in Denying Injunctive Relief: Whether the CA committed grave abuse of discretion in denying petitioners’ Motion for Issuance of Status Quo Order and Motion for Issuance of TRO and/or Writ of Preliminary Injunction.

• Proper Remedy Against Denial of Injunction: No. An order granting or denying preliminary injunction is interlocutory and not appealable under Section 1(c), Rule 41, the proper remedy being Certiorari and/or Prohibition under Rule 65, though the Petition was treated as filed thereunder.
• Grave Abuse in Denying Injunctive Relief: No. No capricious or arbitrary exercise of judgment was shown, petitioners having failed to establish a clear and unmistakable right and urgent necessity to prevent serious irreparable damage.

• Proper Remedy Against Denial of Injunction: Under Section 1(c), Rule 41, no appeal may be taken from an interlocutory order that does not completely dispose of the case. Because an order granting or denying preliminary injunction leaves the principal case to be decided, the proper remedy is a Petition for Certiorari and/or Prohibition under Rule 65. While dismissal for improper remedy was available, review was nevertheless undertaken by treating the Rule 45 Petition as one under Rule 65.
• Grave Abuse in Denying Injunctive Relief: A writ of preliminary injunction and TRO are preservative remedies requiring a verified showing of entitlement, with urgent necessity to prevent serious damage, and a TRO issuing only upon extreme urgency to avoid grave injustice and irreparable injury before the injunction can be heard under Section 5, Rule 58. Entitlement requires (1) clear and unmistakable right, (2) direct threat by the act to be enjoined, (3) material and substantial invasion, and (4) urgent paramount necessity to prevent serious irreparable damage. The grant or denial rests on the sound discretion of the court taking cognizance, reviewable only for grave abuse — capricious, whimsical, arbitrary or despotic exercise equivalent to lack of jurisdiction. No such abuse was imputed to the CA here. Petitioners relied on faithful execution of the MOA, but that right had been declared inferior or inexistent under a final and executory RTC judgment, and was at minimum disputed, and a doubtful or disputed right will not support injunction. After finality, execution becomes ministerial and is not to be restrained by injunction except upon supervening inequity or change in the parties’ situation, neither of which was shown. The alleged ₱30,000,000 investment loss and ₱100,000 monthly rentals were capable of pecuniary estimation and mathematical computation and thus compensable in damages rather than irreparable, while claimed job losses and potential lessee suits were speculative and unsubstantiated.

• Interlocutory Order; Non-appealability — An interlocutory order does not completely dispose of the case but leaves something to be decided. An order granting or denying an application for preliminary injunction is interlocutory and not appealable under Section 1(c), Rule 41; the remedy is Certiorari and/or Prohibition under Rule 65. The rule was applied to treat petitioners’ improper Rule 45 petition as one under Rule 65.
• Preliminary Injunction and TRO; Requisites — To obtain the writ, the applicant must show (1) a clear and unmistakable right to be protected, (2) direct threat to that right by the act sought to be enjoined, (3) material and substantial invasion thereof, and (4) urgent and paramount necessity to prevent serious and irreparable damage. A TRO requires extreme urgency and a showing by affidavits or verified application that great or irreparable injury would result before the injunction could be heard. Failure to satisfy these requisites justified denial.
• Judicial Discretion in Injunction; Grave Abuse — The grant or denial of preliminary injunction rests on the sound discretion of the court, involving factual assessment left to its conclusive determination, and is not to be interfered with absent grave abuse of discretion — capricious and whimsical exercise equivalent to lack of jurisdiction, or arbitrary or despotic exercise by reason of passion, prejudice or personal aversion amounting to evasion of duty. No such abuse attended the CA’s evaluation of urgency and injury.
• Clear Legal Right — A clear legal right is one clearly founded in or granted by law or enforceable as a matter of law. Possibility of damage without proof of an actual existing right is insufficient, and where the complainant’s right or title is doubtful or disputed, injunction is improper. Petitioners’ MOA rights, having been voided by final judgment and disputed by respondent, were not clear and unmistakable.
• Execution of Final Judgment; Ministerial Duty — After judgment gains finality, execution becomes the ministerial duty of the court, and no court should interfere by injunction or otherwise to restrain it, except when supervening facts render execution inequitable or unjust or when a change in the parties’ situation warrants relief. Neither exception was present after finality of the RTC Decision.
• Irreparable Injury — Damages are irreparable where there is no standard by which their amount can be measured with reasonable accuracy. Losses subject to mathematical computation and compensable by damages, such as quantified investments and rental income, do not warrant preliminary injunction, and speculative unproven harms do not suffice.

• "to be entitled to injunctive relief, the petitioner must show, inter alia, the existence of a clear and unmistakable right and an urgent and paramount necessity for the writ to prevent serious damage." — States the threshold test for injunction relied upon by the CA in denying the status quo order, TRO and preliminary injunction for lack of urgency and irreparable injury.
• "to be entitled to the injunctive writ, petitioners must show that (1) there exists a clear and unmistakable right to be protected; (2) this right is directly threatened by an act sought to be enjoined; (3) the invasion of the right is material and substantial; and (4) there is an urgent and paramount necessity for the writ to prevent serious and irreparable damage." — Lays down the four requisites for preliminary injunction applied to reject petitioners’ reliance on disputed MOA rights.
• "The general rule is that after a judgment has gained finality, it becomes the ministerial duty of the court to order its execution. No court should interfere, by injunction or otherwise, to restrain such execution." — Defines why execution of the final RTC judgment nullifying the MOA could not be enjoined absent a recognized exception.
• "Damages are irreparable where there is no standard by which their amount can be measured with reasonable accuracy." — Provides the measure of irreparability used to hold that petitioners’ quantifiable investment and rental losses were compensable and not irreparable.

• Ong Ching Kian Chuan vs. Court of Appeals — Cited by the CA as basis for requiring a clear and unmistakable right and urgent paramount necessity before injunctive relief may issue.
• Medina vs. City Sheriff of Manila, 342 Phil. 90 (1997) — Cited for the four requisites of preliminary injunction and for the effect of a final judgment on the claimed MOA right.
• Bachrach Corporation vs. Court of Appeals, 357 Phil. 483 (1998) — Cited for the rule that execution of a final judgment is ministerial and for its exceptions involving supervening inequity or changed situation.
• Social Security Commission vs. Bayona, 115 Phil. 105 (1962) — Cited for the definition of irreparable damages as those not measurable with reasonable accuracy.
• Power Sites and Signs, Inc. vs. United Neon, G.R. No. 163406, 24 November 2009, 605 SCRA 196 — Cited to hold that pecuniarily estimable, mathematically computable losses compensable by damages do not warrant preliminary injunction.
• Ocampo vs. Sison vda. de Fernandez, G.R. No. 164529, 19 June 2007, 525 SCRA 79 — Cited for the rule that injunction is improper where the complainant’s right or title is doubtful or disputed.
• Denso (Phils.) Inc. vs. Intermediate Appellate Court, 232 Phil. 256 (1987); City of Naga vs. Asuncion, G.R. No. 174042, 9 July 2008, 557 SCRA 528; Tambaoan vs. Court of Appeals, 417 Phil. 683 (2001) — Cited for the interlocutory, non-appealable nature of orders granting or denying preliminary injunction and the propriety of Rule 65.

• Section 1(c), Rule 41, Rules of Court — Prohibits appeal from an interlocutory order; applied to hold that denial of preliminary injunction is not appealable under Rule 45 and must be challenged via Rule 65.
• Section 5, Rule 58, Rules of Court — Allows ex parte TRO only upon affidavit or verified showing that great or irreparable injury would result before the injunction can be heard, effective for twenty days; applied to assess urgency and irreparability.
• Rule 45 and Rule 65, Rules of Court — Rule 45 governs review on certiorari of final judgments, while Rule 65 governs certiorari/prohibition for grave abuse; the improper Rule 45 petition was treated as a Rule 65 petition.
• R.A. 6957 and R.A. 7718 — Build-Operate-Transfer laws invoked by the RTC as basis for declaring the Memorandum of Agreement null and void for contrariety to law and public policy.

Carpio, J., Chairperson, Brion, J., Perez, J., Reyes, J.