Detective & Protective Bureau, Inc. vs. Cloribel

A writ of preliminary injunction is an interlocutory order that remains under the control of the court before final judgment, and the court may dissolve or modify it as justice may require. The dissolution of a preliminary injunction issued after hearing, even without giving the other party an opportunity to be heard, does not constitute grave abuse of discretion and may be cured not by certiorari but by appeal. Moreover, certiorari will not lie where the petitioner failed to file a motion for reconsideration with the trial court, absent any of the recognized exceptions.

Petitioner Detective & Protective Bureau, Inc. was a domestic corporation, and respondent Fausto S. Alberto served as its managing director from 1952 until January 14, 1964. The dispute concerned control of the corporation: petitioner alleged that Alberto had illegally seized corporate assets and refused to vacate his office after being removed, while Alberto claimed he owned the controlling interest in the business. The case arose in the Court of First Instance of Manila, where petitioner sought accounting, preliminary injunction, and receivership against Alberto.

Petitioner Detective & Protective Bureau, Inc. filed a complaint for accounting with preliminary injunction and receivership against respondent Fausto S. Alberto, who had been its managing director from 1952 until January 14, 1964. The complaint alleged that in June 1963, Alberto illegally seized and took control of all the corporation's assets, books, records, vouchers, and receipts from the accountant-cashier, concealed them, and refused to allow any member of the corporation to examine them. On January 14, 1964, the stockholders met and removed Alberto as managing director, electing Jose de la Rosa in his stead. Alberto allegedly refused to vacate his office and deliver the assets and books to de la Rosa, continued to perform unauthorized acts for the corporation, failed to render an accounting of his administration from 1952, and had been illegally disposing of corporate funds contrary to a Board resolution adopted on November 24, 1963. Petitioner prayed for a preliminary injunction ex-parte restraining Alberto from exercising the functions of managing director, the appointment of Jose M. Barredo as receiver, and, after judgment, a permanent injunction and an accounting.

Respondent Judge Cloribel set the prayer for ancillary relief for hearing and required the parties to submit memoranda. On June 18, 1964, the judge granted the writ of preliminary injunction conditioned upon petitioner's filing a P5,000.00 bond. While the bond was pending approval, Alberto filed a motion to admit a counter-bond to lift the injunction. Despite petitioner's opposition, respondent Judge issued an order on August 5, 1964, admitting the counter-bond and setting aside the writ. Petitioner then filed the instant petition for certiorari with the Supreme Court, praying for a writ of preliminary injunction and the nullification of the August 5, 1964 order.

The record did not contain the controverted motion to admit the counter-bond. The record did show, however, that Alberto had filed a verified answer to the complaint and a verified opposition to the issuance of the writ. There was also no showing in the record that Jose de la Rosa owned any share of stock in the corporation, which would be required for him to serve as director under Section 30 of the Corporation Law. Alberto contended that he was the owner of the controlling interest in the business, having invested P57,727.29 as against only P4,000.00 invested by Jose M. Barredo.

• Verification Requirement: Petitioner contended that the setting aside of the writ was contrary to law because the motion to admit the counter-bond was not supported by affidavits showing why the counter-bond should be admitted, as required by Section 6 of Rule 58 of the Rules of Court.
• Injunction After Hearing: Petitioner argued that a preliminary injunction issued after hearing and in accordance with Rule 58 could not be set aside, and that the admission of the counter-bond rendered the writ ineffective.
• Public Interest: Petitioner maintained that public interest required that the writ be maintained because respondent Alberto had arrogated unto himself all the powers of the corporation, to its irreparable damage.
• Inadequacy of Counter-Bond: Petitioner argued that the counter-bond could not compensate for the irreparable damage the corporation would suffer by reason of Alberto's continued service as managing director.

• Qualification of Successor: Respondent Alberto disputed that Jose de la Rosa could be elected managing director because de la Rosa did not own any stock in the corporation, and thus could not be a director under Section 30 of the Corporation Law.
• Controlling Interest: Respondent Alberto contended that he was the owner of the controlling interest in the business, having invested P57,727.29 as against P4,000.00 invested by Jose M. Barredo, and that he should not be deprived of control or possession until the court adjudicated the controverted right.

• Verification of Motion to Dissolve: Whether the motion to admit the counter-bond and lift the preliminary injunction was required to be verified and supported by affidavits under Section 6 of Rule 58 of the Rules of Court.
• Dissolution of Injunction Issued After Hearing: Whether a preliminary injunction issued after hearing may be dissolved by the trial court upon the filing of a counter-bond.
• Grave Abuse of Discretion: Whether respondent Judge committed grave abuse of discretion in admitting the counter-bond and setting aside the writ of preliminary injunction.
• Exhaustion of Remedies: Whether the petition for certiorari should be dismissed for petitioner's failure to file a motion for reconsideration with the trial court before resorting to certiorari.

• Verification of Motion to Dissolve: Not determinable. The motion to admit the counter-bond did not appear in the record, so the Court could not determine the grounds alleged therein; the Court relied on the respondent Judge's order stating that "the filing of the counter-bond is in accordance with law."
• Dissolution of Injunction Issued After Hearing: Yes. A writ of preliminary injunction is an interlocutory order always under the control of the court before final judgment, and Section 6 of Rule 58 does not outlaw dissolution of an injunction issued after hearing.
• Grave Abuse of Discretion: No. Petitioner failed to show manifest abuse of discretion by respondent Judge in setting aside the writ of preliminary injunction.
• Exhaustion of Remedies: Yes. The petition was dismissed because petitioner went directly to the Supreme Court without filing a motion for reconsideration with the trial court, and none of the recognized exceptions applied.

• Verification of Motion to Dissolve: The Court noted that whether an application for dissolution of a writ of preliminary injunction must be verified depends upon the ground upon which the application is based. Citing Sy Sam Bio vs. Barrios, the Court held that Section 169 of Act 190 (a source of Section 6 of Rule 58) does not prescribe the manner of filing the application to annul or modify a writ of preliminary injunction. In Caluya vs. Ramos, even an indirect verbal application for dissolution of an ex-parte order was held sufficient compliance. However, in Canlas vs. Aquino, the Court ruled that a motion for dissolution based on the ground that the injunction would cause great damage to the defendant while the plaintiff can be fully compensated should be verified. Because the motion in the instant case did not appear in the record, the Court could not determine the grounds alleged and had to rely on the respondent Judge's order.

• Dissolution of Injunction Issued After Hearing: The Court rejected petitioner's contention that an injunction issued after hearing cannot be set aside. Section 6 of Rule 58 provides that "the injunction may be refused, or, if granted ex parte, may be dissolved," but this cannot be construed as putting beyond the reach of the court the dissolution of an injunction granted after hearing. A writ of preliminary injunction is an interlocutory order always under the control of the court before final judgment. Citing Clarke vs. Philippine Ready Mix Concrete Co., Inc., the Court held that dissolving a preliminary injunction issued after hearing, even without giving the other party an opportunity to be heard, does not constitute lack or excess of jurisdiction or abuse of discretion, and any irregularity may be cured not by certiorari but by appeal.

• Grave Abuse of Discretion: The Court found no manifest abuse of discretion. The record showed no evidence that Jose de la Rosa owned a share of stock in the corporation, and under Section 30 of the Corporation Law, every director must own at least one share of capital stock. If de la Rosa could not be a director, he could not be managing director under the corporation's by-laws, and Alberto could not be compelled to vacate his office. The Court also noted that where ownership is in dispute, the party in control or possession of the disputed interest is presumed to have the better right until the contrary is adjudged. If Alberto were the controlling stockholder, the damages he would suffer would be the same as, if not more than, the damages the corporation would suffer if the injunction were maintained. The issuance of a writ of preliminary injunction is entirely within the discretion of the court taking cognizance of the case, and the exercise of sound judicial discretion should not be interfered with except in cases of manifest abuse.

• Exhaustion of Remedies: The Court held that petitioner went directly to the Supreme Court without giving the respondent Judge an opportunity to correct any error through a motion for reconsideration. This omission justifies denial of the writ. The exceptions to this rule — where the question of jurisdiction has been squarely raised and decided, where the questioned order is a patent nullity, and where there is deprivation of fundamental right to due process — did not apply to the instant case.

• Interlocutory nature of preliminary injunctions — A writ of preliminary injunction is an interlocutory order that remains under the control of the court before final judgment. The court may dissolve or modify the injunction as justice may require, regardless of whether it was issued after hearing or ex-parte. The trial court, not the appellate court, exercises the discretion in injunctive matters, and appellate interference is warranted only in cases of manifest abuse.

• Verification requirement for motions to dissolve injunctions — Whether a motion for dissolution of a writ of preliminary injunction must be verified depends upon the ground upon which the application is based. If the application is based on the insufficiency of the complaint, the motion need not be verified. If the motion is based on the ground that the injunction would cause great damage to the defendant while the plaintiff can be fully compensated, the motion should be verified.

• Exhaustion of remedies in certiorari — A petition for certiorari will be denied where the petitioner failed to file a motion for reconsideration with the lower court, unless the case falls within recognized exceptions: (1) where the question of jurisdiction has been squarely raised, argued before, submitted to, and met and decided by the respondent court; (2) where the questioned order is a patent nullity; and (3) where there is a deprivation of the petitioner's fundamental right to due process.

• Presumption in favor of party in possession — Where ownership is in dispute, the party in control or possession of the disputed interest is presumed to have the better right until the contrary is adjudged, and that party should not be deprived of control or possession until the court is prepared to adjudicate the controverted right in favor of the other party.

• "The provision of Section 6 of Rule 58 that 'the injunction may be refused, or, if granted ex parte, may be dissolved' can not be construed as putting beyond the reach of the court the dissolution of an injunction which was granted after hearing. The reason is because a writ of preliminary injunction is an interlocutory order, and as such it is always under the control of the court before final judgment." — This passage states the core ratio decidendi on the dissolution of preliminary injunctions, establishing that the trial court retains control over such interlocutory orders regardless of how they were issued.

• "The action of a trial court in dissolving a writ of preliminary injunction already issued after hearing, without giving petitioner an opportunity to be heard, does not constitute lack or excess of jurisdiction or an abuse of discretion, and any irregularity committed by the trial court on this score may be cured not by certiorari but by appeal." — This quotation from Clarke vs. Philippine Ready Mix Concrete Co., Inc. defines the standard for when certiorari is an available remedy against an order dissolving a preliminary injunction.

• "It is a settled rule that the issuance of the writ of preliminary injunction as an ancillary or preventive remedy to secure the rights of a party in a pending case is entirely within the discretion of the court taking cognizance of the case — the only limitation being that this discretion should be exercised based upon the grounds and in the manner provided by law, and it is equally well settled that a wide latitude is given under Section 7 of Rule 58 of the Rules of Court to the trial court to modify or dissolve the injunction as justice may require." — This passage articulates the discretionary nature of injunctive relief and the wide latitude granted to trial courts in modifying or dissolving injunctions.

• "From the order dissolving the writ of preliminary injunction, the petitioner has gone directly to this Court without giving the respondent Judge (or trial court) a chance or opportunity to correct his error, if any, in an appropriate motion for reconsideration. An omission to comply with this procedural requirement justifies a denial of the writ applied for." — This passage states the procedural ground for dismissal, emphasizing the requirement of exhausting remedies before the trial court prior to filing a petition for certiorari.

• Sy Sam Bio, et al. vs. Barrios and Buyson Lampa, 63 Phil. 206 — Cited as controlling on the question of verification of motions to dissolve preliminary injunctions; held that the statute does not prescribe the manner of filing the application to annul or modify a writ of preliminary injunction.
• Caluya, et al. vs. Ramos, et al., 79 Phil. 640 — Followed; held that even an indirect verbal application for dissolution of an ex-parte order of preliminary injunction is sufficient compliance with Section 6 of Rule 60 (now Rule 58), and that an injunction issued after hearing may be dissolved because it is an interlocutory order under the control of the court.
• Canlas, et al. vs. Aquino, et al., L-16815, July 24, 1961 — Distinguished; ruled that a motion for dissolution of a writ of preliminary injunction based on the ground of great damage to the defendant should be verified, establishing the ground-dependent nature of the verification requirement.
• Clarke vs. Philippine Ready Mix Concrete Co., Inc., et al., 88 Phil. 460 — Followed; held that dissolving a preliminary injunction issued after hearing without giving the other party an opportunity to be heard does not constitute abuse of discretion and may be cured by appeal, not certiorari.
• Gordillo, et al. vs. Del Rosario, et al., 39 Phil. 829 — Cited for the rule that a court should not, by means of a preliminary injunction, transfer property in litigation from the possession of one party to another where the legal title is in dispute and the party having possession asserts ownership in himself.
• Agno River Gold Dredging Co., Inc. vs. De Leon, et al., 61 Phil. 190 — Cited for the rule that the issuance of a writ of preliminary injunction is within the discretion of the court taking cognizance of the case.
• North Negros Sugar Co. vs. Hidalgo, 63 Phil. 664 — Cited for the rule that the exercise of sound judicial discretion by the lower court in injunctive matters should not be interfered with except in cases of manifest abuse.
• Herrera vs. Barreto, et al., 25 Phil. 245 — Cited among authorities for the rule that failure to file a motion for reconsideration justifies denial of a writ of certiorari.

• Section 6, Rule 58, Rules of Court — Provides that an injunction may be refused, or if granted ex-parte, may be dissolved. The Court interpreted this provision as not prohibiting the dissolution of an injunction issued after hearing, since a preliminary injunction is an interlocutory order under the control of the court.
• Section 7, Rule 58, Rules of Court — Grants the trial court wide latitude to modify or dissolve an injunction as justice may require; cited to support the discretionary nature of injunctive relief.
• Section 30, Corporation Law — Requires every director to own in his own right at least one share of the capital stock of the stock corporation of which he is a director. Applied to determine that Jose de la Rosa, who had no shown share ownership, could not be a director and therefore could not be managing director.
• Article V, Section 3, By-Laws of the Corporation — Provides that the manager shall be elected by the Board of Directors from among its members; applied to conclude that a non-director could not serve as managing director.
• Article IV, Section 1, By-Laws of the Corporation — Provides that directors shall serve until the election and qualification of their duly qualified successor; applied to conclude that Alberto could not be compelled to vacate his office if the managing director-elect was not qualified.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Sanchez, Castro, Fernando, and Capistrano, JJ., concurred.