City of Iloilo vs. Honrado

A writ of preliminary injunction that in effect disposes of the main case without trial is void as a prejudgment on the merits and as grave abuse of discretion. Where the main relief sought is to restrain a local government from exercising its permitting power based on still-controverted capacity under a DOTC order, injunction may not be granted at the initial stage to virtually accept the plaintiff's claim before evidence is received.

JPV Motor Vehicle Emission Testing and Car Care Center, Co. was a partnership authorized to operate a Private Emission Testing Center (PETC) in Iloilo City, while the City of Iloilo, represented by its Mayor, exercises the statutory power to issue or deny business/mayor's permits within its territory. The DOTC regulated PETC authorization through Department Order No. 2002-31, which rationalized the number of PETC lanes against vehicle population to avoid ruinous competition and degradation of service. Grahar Emission Testing Center was another PETC operator with a pending application for a mayor's permit in the same city.

JPV Motor Vehicle Emission Testing and Car Care Center, Co., represented by Jim P. Velez, was authorized to operate a Private Emission Testing Center in Iloilo City with four lanes. Under Item No. 2 of DOTC Department Order No. 2002-31, one PETC lane was authorized for every 15,000 registered vehicles in an LTO registering district, giving JPV a total capacity for 60,000 motor vehicles. At the time of suit there were 53,647 registered motor vehicles in Iloilo City, and JPV averred that no additional PETC was needed because its capability already covered the entire vehicle population pursuant to the Department Order.

Thereafter JPV filed Civil Case No. 03-27648 in the Regional Trial Court to prevent the City of Iloilo from acting on the pending application for the operation of another PETC in the city. In its answer the City opposed injunctive relief. On June 18, 2003 Grahar Emission Testing Center, another PETC operator with a pending application for a business/mayor's permit, sought leave to intervene. On June 24, 2003 the RTC allowed the intervention but simultaneously granted JPV's application for a writ of preliminary prohibitory injunction ordering the City, its agents and representatives to refrain from issuing a mayor's permit to operate a PETC, subject to dissolution upon DOTC authorization of another PETC and to a P100,000 injunction bond.

Because no dissolution followed, the City moved for reconsideration and dissolution of the writ, while Grahar filed its own urgent motion bringing to the RTC's attention DOTC Department Order No. 2003-24 issued April 10, 2003 amending Department Order No. 2002-31 to reduce the required vehicle capacity per lane from 15,000 to 12,000 vehicles, contending JPV's capacity was no longer sufficient. On August 15, 2003 the RTC denied reconsideration, reasoning that the amendment did not require an additional PETC because the LTO's two-lane facility serving 24,000 vehicles plus JPV's four-lane facility accommodating 72,000 vehicles remained more than enough for the 53,647 registered vehicles, and that an additional PETC would produce unhealthy competition contrary to Department Order No. 2002-31. In its reply before the Supreme Court the City additionally adverted to DOTC Department Order No. 2003-51 issued October 13, 2003 nullifying Sections 2 and 3 of Department Order No. 2002-31 upon the Solicitor General's opinion favoring open competition.

• Discretionary Power to Issue Permits: Petitioner argued that the June 24, 2003 order prevented the exercise by the City Mayor of a discretionary power granted by law to issue or not to issue business permits, absent any showing of abuse in the exercise thereof.
• Absence of Right in Esse and Monopoly: Petitioner maintained that JPV did not establish the existence of its right in esse to be protected, and that the injunction would create a monopoly in favor of JPV in the operation of a PETC.
• Lack of Basis in DOTC Order: Petitioner argued that DOTC Order No. 2002-31 provided no basis for issuance of the writ of preliminary prohibitory injunction against the City Mayor.
• Supervening Nullification: Petitioner submitted that Sections 2 and 3 of Department Order No. 2002-31 were nullified by Department Order No. 2003-51 dated October 13, 2003, pursuant to the Solicitor General's opinion that open competition would better serve public needs and that the quota per lane could be eliminated.

• Sufficiency of Capacity and Absence of Abuse: Respondent JPV countered that petitioner made no showing of grave abuse of discretion by the RTC because JPV had established its capability to serve the entire needs of Iloilo City for PETC services.

• Prejudgment of Merits: Whether the RTC committed grave abuse of discretion in issuing the June 24, 2003 order enjoining the City Mayor from issuing a mayor's permit to operate a PETC, thereby preventing exercise of discretionary power and prejudging the main case.
• Basis in Department Order: Whether the RTC committed grave abuse of discretion in holding that DOTC Order No. 2002-31 provides a basis for issuance of the writ of preliminary prohibitory injunction in favor of respondent.
• Denial of Reconsideration: Whether the RTC committed grave abuse of discretion in denying petitioner's motion for reconsideration through the August 15, 2003 order.

• Prejudgment of Merits: Yes. The injunction was improper because it virtually accepted JPV's still-controverted entitlement and disposed of the main relief without trial, in violation of the preservative function of preliminary injunction.
• Basis in Department Order: Yes. Department Order No. 2002-31 could not justify the writ where capacity and need remained controverted and required reception of evidence from all parties, including the intervenor.
• Denial of Reconsideration: Yes. Denial of reconsideration perpetuated the prejudgment and the denial of the right to be heard, constituting grave abuse warranting certiorari, annulment, and dissolution.

• Prejudgment of Merits: The essential role of preliminary injunction is preservative and preventive — to protect the court's ability to render a meaningful decision and guard against irreparable injury pending litigation, not to determine the merits or decide controverted facts. Although the RTC had broad discretion, issuance was bound by Section 3, Rule 58 and by the exhortation not to dispose of the main case without trial. Because the main relief in Civil Case No. 03-27648 was to enjoin the City from considering and passing upon business-permit applications, granting the writ at the initial stage on the basis of JPV's still-controversial capability was a virtual acceptance of its claim and a reversal of the burden of proof. An interlocutory injunction is preliminary and preparatory and must still look to a future final hearing, not settle its result.
• Basis in Department Order: Reliance on Department Order No. 2002-31 to bar other PETCs required resolution of contested facts on vehicle population, lane capacity, the April 10, 2003 amendment reducing capacity from 15,000 to 12,000 vehicles per lane, and the effect of the LTO's own testing lanes. Granting the writ on June 24, 2003, the same date intervention was allowed, denied the City the opportunity to substantiate its defense of regulatory power and denied intervenor Grahar the opportunity to prove insufficiency of capacity. The main relief therefore could not be resolved without receiving evidence from all parties.
• Denial of Reconsideration: The August 15, 2003 denial maintained an order tainted with capricious exercise of judgment equivalent to lack of jurisdiction, exercised in a manner so patent and gross as to evade positive duty. Certiorari lies against a tribunal exercising judicial functions that acts without or in excess of jurisdiction or with grave abuse of discretion where no plain, speedy and adequate remedy exists, the petition specifying the acts constituting abuse. The requisites were satisfied, warranting annulment of both orders, dissolution of the writ, and remand for proceedings as if the orders had not issued.

• Preliminary injunction as preservative and preventive provisional remedy — Injunction is not a cause of action in itself but merely a provisional remedy, an adjunct to a main suit, resorted to only upon pressing necessity to avoid injurious consequences not redressable by compensation and to prevent threatened or continuous irremediable injury before claims can be investigated and adjudicated. Applied to hold that the RTC's writ exceeded preservation by granting the very restraint sought as main relief.
• Requisites for issuance under Section 3, Rule 58 of the Rules of Court — A writ may issue (a) when applicant is entitled to the relief demanded and such relief consists in restraining or requiring an act; (b) when commission, continuance or non-performance during litigation would probably work injustice to applicant; or (c) when a party, court, agency or person is doing or threatening an act probably in violation of applicant's rights respecting the subject matter and tending to render judgment ineffectual. Applied as the guideline the RTC contravened in granting the writ at the initial stage.
• Prohibition against prejudgment by preliminary injunction — Courts should avoid issuing a writ which would in effect dispose of the main case without trial, for such issuance virtually accepts the plaintiff's claim, prejudges the merits, decides controverted facts, and reverses the burden of proof. Applied to annul the order barring the City from issuing any PETC mayor's permit based on unresolved capacity under the DOTC order, as reiterated from Searth Commodities Corp. vs. Court of Appeals.
• Grave abuse of discretion and certiorari — Grave abuse means capricious or whimsical exercise of judgment equivalent to lack of jurisdiction, exercised arbitrarily or despotically by passion or hostility, so patent and gross as to amount to evasion of positive duty or virtual refusal to perform duty enjoined by law. Certiorari requires direction against a tribunal exercising judicial or quasi-judicial functions, action without or in excess of jurisdiction or with grave abuse, and absence of appeal or plain, speedy and adequate remedy. Applied to sustain direct resort to certiorari and dissolve the injunction, following Pahila-Garrido vs. Tortogo.

• "The essential office of preliminary injunction is to preserve the rights of the parties before the final adjudication of the issues." — States the controlling preservative function that the RTC violated by granting main relief at the provisional stage.
• "Generally, injunction, being a preservative remedy for the protection of substantive rights or interests, is not a cause of action in itself but merely a provisional remedy, an adjunct to a main suit." — Defines injunction's provisional character and the requirement of pressing necessity to prevent irremediable injury, quoted from Pahila-Garrido vs. Tortogo.
• "The prevailing rule is that courts should avoid issuing a writ of preliminary injunction which would in effect dispose of the main case without trial." — Articulates the anti-prejudgment rule that grounded annulment, quoted from Searth Commodities Corp. vs. Court of Appeals.
• "Grave abuse of discretion means such capricious or whimsical exercise of judgment which is equivalent to lack of jurisdiction." — Provides the canonical test for certiorari applied to the RTC's disregard of the right to be heard and controverted facts.

• Pahila-Garrido vs. Tortogo, G.R. No. 156358, August 17, 2011, 655 SCRA 553, 575-576 — Followed as controlling on the preservative character of injunction and on the requisites and office of certiorari against grave abuse of discretion.
• Searth Commodities Corp. vs. Court of Appeals, G.R. No. 64220, March 31, 1992, 207 SCRA 622, 629-630 — Followed for the rule that preliminary injunction must not dispose of the main case without trial or reverse the burden of proof.
• Feliciano vs. Villasin, G.R. No. 174929, June 27, 2008, 556 SCRA 348, 363; Uy vs. Office of the Ombudsman, G.R. Nos. 156399-400, June 27, 2008, 556 SCRA 73, 93 — Cited for the definition of grave abuse of discretion as capricious exercise equivalent to lack of jurisdiction.
• Vergara vs. Ombudsman, G.R. No. 174567, March 12, 2009, 580 SCRA 693, 713; Nationwide Security and Allied Services, Inc. vs. Court of Appeals, G.R. No. 155844, July 14, 2008, 558 SCRA 148, 153 — Cited to require that the abuse be grave, patent and gross, amounting to evasion of duty, to justify certiorari.

• Section 3, Rule 58, Rules of Court — Sets the three alternative grounds for preliminary injunction; applied as the guideline the RTC contravened by enjoining the City's permitting function before trial.
• Item No. 2, DOTC Department Order No. 2002-31 — Rationalized PETC authorization at one lane per 15,000 registered vehicles to avoid cut-throat competition; invoked by JPV and the RTC as basis for exclusivity but held insufficient to support prejudgment of controverted capacity.
• DOTC Department Order No. 2003-24 dated April 10, 2003 — Amended Department Order No. 2002-31 to reduce required capacity to 12,000 vehicles per lane; raised by intervenor to show JPV's capacity was no longer sufficient, underscoring the factual controversy.
• DOTC Department Order No. 2003-51 dated October 13, 2003 — Nullified Sections 2 and 3 of Department Order No. 2002-31 on the Solicitor General's view that open competition better serves public needs; cited by petitioner to negate the quota basis for the injunction.

Sereno, C.J., Leonardo-De Castro, J., Perez, J., and Perlas-Bernabe, J., concur.