Executive Secretary vs. Forerunner Multi Resources, Inc.

A preliminary injunction under Rule 58 will not issue to restrain enforcement of an executive issuance with the force and effect of law absent a clear legal right, especially where the issuance’s validity has been upheld and the applicant has not overcome the presumption of validity. Executive Order No. 418 did not repeal Executive Order No. 156.

Forerunner Multi Resources, Inc. is a corporation engaged in the importation of used motor vehicles through the ports of Aparri, Cagayan and San Fernando, La Union. The petitioners are the Executive Secretary, the Secretary of Finance, the Commissioner of Customs, the District Collectors of Customs for those ports, and the Head of the Land Transportation Office. Executive Order No. 156, issued by President Gloria Macapagal-Arroyo on 12 December 2002, imposed a partial ban on the importation of used motor vehicles as part of measures to accelerate the sound development of the motor vehicle industry in the Philippines. In Executive Secretary vs. Southwing Heavy Industries, Inc. and related petitions, the Supreme Court upheld EO 156 as a valid executive issuance enforceable throughout the Philippine customs territory, except in the Subic Special Economic and Freeport Zone in Zambales, which is a separate customs territory under Republic Act No. 7227. Executive Order No. 418, issued on 4 April 2005, modified the tariff nomenclature and rates of import duty on used motor vehicles.

Forerunner Multi Resources, Inc. was a corporation engaged in the importation of used motor vehicles through the ports of Aparri, Cagayan and San Fernando, La Union. The petitioners were public officials: the Executive Secretary, the Secretary of Finance, the Commissioner of Customs, the District Collector of Customs for the Port of Aparri, Cagayan, the District Collector of Customs for the Port of San Fernando, La Union, and the Head of the Land Transportation Office.

Executive Order No. 156, issued by President Gloria Macapagal-Arroyo on 12 December 2002, imposed a partial ban on the importation of used motor vehicles. The ban was part of several measures EO 156 adopted to accelerate the sound development of the motor vehicle industry in the Philippines. In Executive Secretary vs. Southwing Heavy Industries, Inc. and two related petitions, the Supreme Court found EO 156 a valid executive issuance enforceable throughout the Philippine customs territory, except in the Subic Special Economic and Freeport Zone in Zambales by virtue of its status as a separate customs territory under Republic Act No. 7227.

Respondent sued the government in the Regional Trial Court of Aparri, Cagayan to declare invalid EO 156, impleading petitioner public officials as respondents. Respondent attacked EO 156 for (a) having been issued by President Arroyo ultra vires; (b) trenching the Due Process and Equal Protection Clauses of the Constitution; and (c) having been superseded by Executive Order No. 418, issued by President Arroyo on 4 April 2005, modifying the tariff rates of imported used motor vehicles. Respondent sought a preliminary injunctive writ to enjoin enforcement of EO 156.

The Court of Appeals found that implementation of EO 156 would put respondent in a financial crisis.

• Southwing Controls: Petitioners argued that Southwing controls the case, precluding the Court of Appeals from recognizing a clear legal right of respondent to import used motor vehicles.
• Error of Law in Reinstating Injunction: Petitioners charged the Court of Appeals with having committed an error of law in reinstating the preliminary injunctive writ for respondent.

• Invalidity of EO 156: Respondent attacked EO 156 for having been issued by President Arroyo ultra vires, trenching the Due Process and Equal Protection Clauses of the Constitution, and having been superseded by EO 418.
• Repeal by EO 418: Respondent countered that the doctrinal import of Southwing was weakened by the subsequent issuance of EO 418, allegedly repealing EO 156.
• Feniz Resolution: Respondent invoked the minute Resolution of 15 November 2010 denying the petition in G.R. No. 187475 (Executive Secretary vs. Feniz [CEZA] International, Inc.) as judicial confirmation of the supposed repeal.

• Preliminary Injunction: Whether the Court of Appeals erred in granting preliminary injunctive relief to respondent to enjoin enforcement of EO 156.
• Clear Legal Right: Whether respondent had a clear legal right to import used motor vehicles despite EO 156.
• Repeal by EO 418: Whether EO 418 repealed EO 156, thereby removing the legal bar to respondent’s importation of used motor vehicles.

• Preliminary Injunction: Yes. The Court of Appeals erred in granting preliminary injunctive relief; the trial court’s Order of 7 July 2010 lifting the writ was reinstated.
• Clear Legal Right: No. Respondent had no clear legal right to import used motor vehicles; Southwing upheld EO 156’s validity, making any asserted right doubtful.
• Repeal by EO 418: No. EO 418 did not repeal EO 156; the Court had already rejected that construction in denying reconsideration in Southwing, and Feniz did not modify Southwing.

• Preliminary Injunction: Rule 58 requires the applicant to show a clear legal right being violated or under threat of violation by the defendant. “Clear legal right” contemplates a right clearly founded in or granted by law, and any hint of doubt or dispute on the asserted legal right precludes the grant of preliminary injunctive relief. For suits attacking the validity of laws or issuances with the force and effect of law, the applicant bears the added burden of overcoming the presumption of validity inhering in such laws or issuances. These procedural barriers are rooted in the equitable nature of preliminary injunction, which preserves the status quo while restricting the defendant’s course of action even before adverse judgment. Respondent sought preliminary injunctive relief as ancillary to its principal cause of action to invalidate EO 156, but its attack came on the heels of Southwing, where the Supreme Court passed upon and found EO 156 legally sound, albeit overextended in application. The narrow ambit of review precluded passing upon the merits of the constitutional and administrative issues respondent raised, but whatever legal right respondent may possess vis-à-vis EO 156 was doubtful by force of Southwing. The Court of Appeals dwelt on the grave and irremediable financial losses respondent was poised to sustain, but such risk was self-imposed; having miscalculated its chances, respondent could not look to courts for injunctive relief against self-inflicted losses in the nature of damnum absque injuria. Injunction will not issue on the mere possibility that a litigant will sustain damage without proof of a clear legal right. Filipino Metals did not furnish doctrinal support because there the petitioners established a strong case for the unconstitutionality of RA 8800, overcoming the presumption of validity; Southwing foreclosed a similar finding for respondent.
• Clear Legal Right: Southwing found EO 156 a valid police power measure addressing an urgent national concern. Until reversed or modified by the Supreme Court, Southwing makes conclusive the presumption of EO 156’s validity. Respondent failed to remove its case from the confines of that ruling. The Court of Appeals’ reliance on respondent’s anticipated financial losses was misplaced because the risk was self-imposed and the losses were in the nature of damnum absque injuria. Injunction will not issue on the mere possibility of damage without proof of a clear legal right entitling the litigant to protection. Filipino Metals was distinguishable because the petitioners there discharged the burden of overcoming the presumption of validity accorded to RA 8800 by establishing a strong case for its unconstitutionality.
• Repeal by EO 418: The question whether EO 418 repealed EO 156 was already settled in the Resolution dated 22 August 2006 denying reconsideration of the ruling in Southwing. The respondents in those cases, importers of used motor vehicles via the Subic Freeport, had espoused the same theory. The Court rejected the proffered construction: the subsequent issuance of EO 418 increasing import duties on used motor vehicles did not alter the policy of the executive department to prohibit the importation of said vehicles; there was nothing in the text of EO 418 which expressly repealed EO 156; the Congress, or the Office of the President, is presumed to know existing laws, such that whenever it intends to repeal a particular or specific provision of law, it does so expressly; and the failure to add a specific repealing clause indicated that the intent was not to repeal previous administrative issuances. EO 156 is explicit in its prohibition on the importation of used motor vehicles, while EO 418 merely modifies the tariff and nomenclature rates of import duty on used motor vehicles; nothing therein expressly revokes the importation ban. The minute Resolution dated 15 November 2010 denying the petition in Feniz did not modify, much less reverse, Southwing, because the petition in Feniz sought review of the trial court’s ruling striking down Section 2 of EO 418, and neither the validity of EO 156 nor the alleged repeal by EO 418 of EO 156 was the lis mota in Feniz.

• Clear Legal Right Requirement for Preliminary Injunction — Under Rule 58, a preliminary injunction issues only upon a showing of the applicant’s clear legal right being violated or under threat of violation by the defendant. “Clear legal right” means a right clearly founded in or granted by law; any hint of doubt or dispute on the asserted legal right precludes relief. The Court applied this doctrine to deny injunctive relief because respondent’s asserted right to import used motor vehicles was doubtful in light of Executive Secretary vs. Southwing Heavy Industries, Inc.
• Presumption of Validity of Laws and Executive Issuances — Laws or issuances with the force and effect of law are presumed valid. An applicant seeking to restrain enforcement while attacking validity bears the added burden of overcoming this presumption. Southwing made conclusive the presumption of EO 156’s validity until reversed or modified. Respondent failed to overcome it.
• Damnum Absque Injuria / Self-Inflicted Losses — Injunction will not issue on the mere possibility that a litigant will sustain damage, without proof of a clear legal right entitling the litigant to protection. Losses from importing used motor vehicles in contravention of EO 156 were self-imposed and in the nature of damnum absque injuria.
• Repeal by Implication Not Favored — Repeal by implication is not favored; the President or Congress is presumed to know existing laws and must expressly repeal a specific provision if intended. EO 418 did not expressly repeal EO 156; it merely modified tariff and nomenclature rates, so the importation ban remained.
• Stare Decisis / Conclusive Effect of Prior Holding — Until reversed or modified by the Supreme Court, a prior ruling upholding a challenged issuance controls and makes the presumption of validity conclusive. Southwing foreclosed a finding of clear legal right for respondent.
• Lis Mota and Minute Resolutions — A minute resolution denying a petition does not modify or reverse a prior holding where the issue sought to be relitigated was not the lis mota of the minute resolution case. The Feniz resolution did not affect Southwing because neither EO 156’s validity nor its alleged repeal by EO 418 was the lis mota in Feniz.

• "It is a deeply ingrained doctrine in Philippine remedial law that a preliminary injunctive writ under Rule 58 issues only upon a showing of the applicant’s “clear legal right” being violated or under threat of violation by the defendant." — States the threshold requirement for a preliminary injunction and frames the Court’s analysis of respondent’s asserted right.
• "Any hint of doubt or dispute on the asserted legal right precludes the grant of preliminary injunctive relief." — Defines the strictness of the clear-legal-right requirement and supports the denial of injunctive relief.
• "Until reversed or modified by this Court, Southwing makes conclusive the presumption of EO 156’s validity." — Explains why the prior Southwing ruling foreclosed respondent’s claim of a clear legal right.
• "There is nothing in the text of E.O. No. 418 which expressly repeals E.O. No. 156. The Congress, or the Office of the President in this case, is presumed to know the existing laws, such that whenever it intends to repeal a particular or specific provision of law, it does so expressly." — States the Court’s ratio for rejecting respondent’s claim that EO 418 repealed EO 156.

• Executive Secretary vs. Southwing Heavy Industries, Inc., 518 Phil. 103 (2006) — Controlling precedent. The Supreme Court upheld EO 156 as a valid executive issuance enforceable throughout the Philippine customs territory, except in the Subic Special Economic and Freeport Zone. It made respondent’s asserted legal right doubtful and made conclusive the presumption of EO 156’s validity until reversed or modified.
• Filipino Metals Corporation vs. Secretary of the Department of Trade and Industry, 502 Phil. 191 (2005) — Distinguished. There, preliminary injunction was sustained because petitioners established a strong case for the unconstitutionality of RA 8800, overcoming the presumption of validity. Southwing foreclosed a similar finding for respondent.
• Executive Secretary vs. Feniz [CEZA] International, Inc., G.R. No. 187475, Resolution dated 15 November 2010 — Respondent invoked this minute resolution as confirming EO 418’s repeal of EO 156. The Court held it did not modify or reverse Southwing because neither EO 156’s validity nor the alleged repeal was the lis mota in Feniz.
• Boncodin vs. National Power Corporation Employees Consolidated Union (NECU), 534 Phil. 741, 754 (2006) — Cited for the definition of “clear legal right” as a right clearly founded in or granted by law.
• Sps. Arcega vs. Court of Appeals, 341 Phil. 166 (1997) — Cited for the rule that any hint of doubt or dispute on the asserted legal right precludes preliminary injunctive relief.
• Talisay-Silay Milling Co., Inc. vs. CFI of Negros Occidental, 149 Phil. 676 (1971) — Cited for the rule that injunction will not issue on the mere possibility of damage absent proof of a clear legal right.

• Rule 58, 1997 Rules of Civil Procedure — Governs preliminary injunctions. The Court applied it to hold that a writ issues only upon showing of a clear legal right violated or under threat of violation; any doubt precludes relief, and attacks on laws require overcoming the presumption of validity.
• Rule 45, 1997 Rules of Civil Procedure — The petition was filed under this rule. The Supreme Court reviewed the Court of Appeals’ ruling via petition for review on certiorari.
• Executive Order No. 156 — Imposed a partial ban on importation of used motor vehicles. The Court treated it as a valid executive issuance under Southwing, making respondent’s asserted right to import doubtful.
• Executive Order No. 418 — Modified tariff nomenclature and rates of import duty on used motor vehicles. The Court held it did not repeal EO 156 because it contained no express repealing clause and merely modified tariff rates.
• Section 104, Tariff and Customs Code of 1978 (Presidential Decree No. 1464, as Amended) — The source law under which EO 418 modified the tariff nomenclature and rates of import duty on used motor vehicles. The Court held that this modification did not repeal EO 156’s importation ban.
• Republic Act No. 7227 — Established the Subic Special Economic and Freeport Zone as a separate customs territory. It was the basis for the exception in Southwing to EO 156’s enforceability.
• Article VI, Section 28(2), Constitution — Cited in Filipino Metals as limiting Congress’ delegation of the power to fix trade quotas to the President. The Court distinguished Filipino Metals because respondent did not establish a strong case for unconstitutionality as the petitioners there did.
• Republic Act No. 8800 — Delegated to a cabinet member the power to adopt measures to address prejudicial importations. In Filipino Metals, the Court found a strong case for its unconstitutionality; the Court distinguished it from respondent’s case.

Arturo D. Brion, Mariano C. Del Castillo, Jose Portugal Perez, and Estela M. Perlas-Bernabe.