Evy Construction and Development Corporation vs. Valiant Roll Forming Sales Corporation

An application for preliminary injunction may be denied in the same summary hearing as an application for temporary restraining order without violating due process where the applicant has been afforded an opportunity to be heard, and a party seeking injunctive relief must establish not only an actual and existing right but also the urgent and paramount necessity to prevent further grave and irreparable injury, which requirement is not satisfied where the alleged injury consists of annotations and sales already executed rather than threatened future acts.

Evy Construction and Development Corporation acquired a parcel of land in Lipa, Batangas from Linda N. Ang and Senen T. Uyan through a Deed of Absolute Sale executed on September 4, 2007. Prior to the registration of this sale, Valiant Roll Forming Sales Corporation had obtained a Writ of Preliminary Attachment in Civil Case No. 13442 against Ang, which resulted in the annotation of a Notice of Levy on Attachment on the property's title on September 18, 2007, followed by additional encumbrances on October 2 and November 8, 2007. Evy Construction registered the sale only on November 20, 2007, receiving Transfer Certificate of Title No. 168590 which carried the prior annotations. Subsequently, Valiant secured a favorable judgment in its civil case, leading to the issuance of a Writ of Execution and a Notice of Sale on Execution, pursuant to which Valiant became the winning bidder and obtained a Certificate of Sale.

• The Property Acquisition: On September 4, 2007, Evy Construction purchased a parcel of land covered by Transfer Certificate of Title No. 134890 from Linda N. Ang and Senen T. Uyan. The Deed of Absolute Sale was notarized on September 11, 2007. At the time of execution, the title contained no liens or encumbrances except for a notice of adverse claim filed by Ang.
• Prior Annotations and Registration: On September 18, 2007, prior to the registration of Evy Construction's purchase, the Register of Deeds annotated a Notice of Levy on Attachment on TCT No. 134890 pursuant to a Writ of Preliminary Attachment issued by the Regional Trial Court of San Fernando, Pampanga in Civil Case No. 13442 (Valiant Roll Forming Sales Corporation v. Angeli Lumber and Hardware, Inc., and Linda Ngo Ang). Additional encumbrances were annotated on October 2, 2007 and November 8, 2007. Evy Construction registered the sale only on November 20, 2007, receiving Transfer Certificate of Title No. 168590 in its name, which carried the prior annotations.
• Execution Proceedings: The Regional Trial Court rendered a Decision in favor of Valiant in Civil Case No. 13442, followed by a Writ of Execution and Notice of Levy. Evy Construction filed a Notice of Third-Party Claim and an Affidavit of Title/Ownership on May 20, 2008. Valiant posted an Indemnity Bond of ₱745,700.00. Pursuant to the Writ of Execution, the Sheriff issued a Notice of Sale on Execution, and Valiant eventually obtained a Certificate of Sale as the winning bidder.
• Injunctive Application: In its application for temporary restraining order and preliminary injunction, Evy Construction alleged that it would suffer grave and irreparable injury because potential investors would back out of investment plans due to the cloud on the title, damaging its business reputation and goodwill as a real estate developer. It claimed that the indemnity bond was inadequate to restore investor confidence.

• Due Process Violation: Petitioner maintained that it was denied due process because no valid hearing for the application for preliminary injunction was ever set, and it was not allowed to present its witness in support of the temporary restraining order application.
• Entitlement to Injunctive Relief: Petitioner argued that it was entitled to the writ because real estate development depends on trust and public perception; the doubt cast by the auction sale and annotations caused investors to withdraw, and its business reputation, once tarnished, could not be restored.
• Inadequacy of Indemnity Bond: Petitioner contended that the respondent's indemnity bond of ₱745,700.00 was insufficient compared to its investment and was immaterial because monetary compensation could not restore buyer and investor confidence or its reputation as a property developer.

• Procedural Defect: Respondent countered that the application for preliminary injunction was never actually set for hearing or resolved by the trial court, rendering petitioner's due process argument misleading.
• Failure to Establish Requisites: Respondent argued that the Court of Appeals correctly found that petitioner failed to establish the requisites for a temporary restraining order and that petitioner still had adequate remedies through the indemnity bond.
• Prejudgment of Main Case: Respondent maintained that petitioner's arguments touched on the merits of its Complaint for Quieting of Title, effectively prejudging the case, and that the trial court did not commit grave abuse of discretion.

• Due Process in Summary Proceedings: Whether petitioner was denied due process when its application for a writ of preliminary injunction was denied in the same summary proceeding as its application for a temporary restraining order.
• Grave Abuse of Discretion in Denying Injunctive Relief: Whether the trial court committed grave abuse of discretion in denying petitioner Evy Construction and Development Corporation's application for injunctive relief.

• Due Process in Summary Proceedings: No denial of due process occurred. Rule 58, Section 5 of the Rules of Court requires a hearing only if an application for preliminary injunction is granted; conversely, it may be denied even without a hearing separate from the summary hearing for a temporary restraining order. The November 9, 2009 hearing was denominated as a hearing on both applications; petitioner's counsel was allowed to present arguments and a witness, but conceded the issues were purely legal, leading the court to dispense with the witness presentation. Petitioner accepted this submission without objection, and thus had been afforded an opportunity to be heard.
• Grave Abuse of Discretion in Denying Injunctive Relief: The trial court did not commit grave abuse of discretion. Injunctive relief requires the applicant to establish (a) an actual and existing substantial right or right in esse, and (b) an urgent and paramount necessity for the writ to prevent serious damage. Petitioner failed to establish an actual existing right because the validity of its claim versus respondent's registered attachment liens required a determination of which party had the better right over the property—the very issue in the main case. Moreover, petitioner failed to prove urgency or necessity to prevent further injury, as the alleged damage (withdrawal of investors, impairment of housing development) was caused by annotations and the execution sale that had already been effected, rather than by threatened future acts. The proper remedy was to litigate the merits of the Complaint for Quieting of Title, not to seek injunctive relief that would have no practical preventive effect.

• Requisites for Preliminary Injunction — Under Rule 58, Section 3 of the Rules of Court, a preliminary injunction may be granted only upon a showing that: (a) the applicant is entitled to the relief demanded, and the relief consists in restraining the commission or continuance of an act or requiring performance of an act; (b) the commission, continuance, or non-performance of the act would probably work injustice to the applicant; or (c) a party is doing, threatening, or attempting to do an act probably in violation of the applicant's rights. The Court applied this by finding that petitioner failed to establish an actual and existing right because the determination of superiority between the registered lien and the unregistered sale required resolution of the main case.
• Hearing Requirements for Provisional Remedies — While Rule 58, Section 4(d) requires a summary hearing for every application for temporary restraining order, Section 5 mandates a hearing for preliminary injunction applications only when the writ is to be granted; denial may be made without a separate hearing. The Court applied this distinction to hold that the trial court could deny the preliminary injunction in the same proceeding where it denied the temporary restraining order, provided the applicant had opportunity to be heard.
• Preference of Registered Liens over Unregistered Sales — A registered levy on attachment has preference over a prior unregistered sale, and even if the unregistered sale is subsequently registered before the execution sale but after the levy, the execution sale should be upheld because it retroacts to the date of levy. Knowledge of an unregistered sale by the judgment creditor operates as an exception, having the effect of registration. The Court applied this doctrine to find that petitioner could not establish a clear right to injunctive relief without first proving the validity of its title over the registered encumbrances.
• Grave and Irreparable Injury — Injury is considered grave and irreparable if there is no standard by which its amount can be measured with reasonable accuracy, such as the loss of goodwill and business reputation. However, the applicant must demonstrate the urgency and paramount necessity of preventing the specific act complained of; the writ will not issue to cure injuries already sustained or to adjudicate the main action. The Court applied this to find that while loss of reputation may be irreparable, petitioner failed to show the necessity of preventing further annotations when the damage alleged had already been done.

• "In every application for provisional injunctive relief, the applicant must establish the actual and existing right sought to be protected. The applicant must also establish the urgency of a writ's issuance to prevent grave and irreparable injury. Failure to do so will warrant the court's denial of the application."
• "While Rule 58, Section 4(d) requires that the trial court conduct a summary hearing in every application for temporary restraining order regardless of a grant or denial, Rule 58, Section 5 requires a hearing only if an application for preliminary injunction is granted. Thus, Section 5 states that '[n]o preliminary injunction shall be granted without hearing and prior notice to the party or person sought to be enjoined.' Inversely stated, an application for preliminary injunction may be denied even without the conduct of a hearing separate from that of the summary hearing of an application for the issuance of a temporary restraining order."
• "A levy on attachment, duly registered, has preference over a prior unregistered sale and, even if the prior unregistered sale is subsequently registered before the sale on execution but after the levy is made, the validity of the execution sale should be upheld because it retroacts to the date of levy."
• "In applications for provisional injunctive writs the applicant must also prove the urgency of the application. The possibility of a grave and irreparable injury must be established, at least tentatively, to justify the restraint of the act complained of."

• Bacolod City Water District v. Hon. Labayen, 487 Phil. 335 (2004) — Distinguished the main action for injunction from the provisional remedy of preliminary injunction, explaining that the latter seeks only to preserve the status quo until the merits can be heard.
• Spouses Chua v. Hon. Gutierrez, 652 Phil. 84 (2010) — Established that a registered levy on attachment has preference over a prior unregistered sale, and that knowledge of an unregistered sale is equivalent to registration.
• Yu v. Court of Appeals, 291 Phil. 336 (1993) — Cited for the principle that injunctive relief may be granted to prevent grave and irreparable damage to business goodwill and reputation.
• Cortez-Estrada v. Heirs of Samut, 491 Phil. 458 (2005) — Held that the grant or denial of a writ of preliminary injunction rests in the sound discretion of the trial court, not to be interfered with unless tainted with grave abuse of discretion.

• Rule 58, Sections 1, 2, 3, 4, and 5 of the Rules of Court — Governing the issuance of preliminary injunction and temporary restraining orders, including the requisites for issuance and hearing requirements.
• Presidential Decree No. 1529, Section 51 (Property Registration Decree) — Providing that a sale of unregistered land is binding only between the parties and does not affect innocent third persons.
• Section 13, Article VIII of the 1987 Constitution — Certification by the Division Chairperson that conclusions were reached in consultation.

Presbitero J. Velasco, Jr. (Chairperson)
Lucas P. Bersamin
Samuel R. Martires
Alexander G. Gesmundo