Nerwin Industries Corporation vs. PNOC-Energy Development Corporation

No court except the Supreme Court may issue a temporary restraining order, preliminary injunction, or preliminary mandatory injunction against the bidding or award of a national government project, and any such writ issued in violation of the prohibition is void and of no force and effect.

Nerwin Industries Corporation is a manufacturer and bidder for woodpoles and crossarms used in rural electrification, while PNOC-Energy Development Corporation, purporting to be under the Department of Energy, procures wooden poles for electrification projects through its Bids and Awards Committee. Republic Act No. 8975, approved on November 7, 2000, expressly prohibits all courts except the Supreme Court from enjoining the acquisition, bidding, award, implementation, termination, or other lawful activity necessary for a national government project. The prohibition, reiterated in Administrative Circular No. 11-2000, superseded Presidential Decree No. 1818 on infrastructure and natural resource development projects.

In 1999, the National Electrification Administration published an invitation to pre-qualify and to bid under IPB No. 80 for the supply and delivery of about 60,000 pieces of woodpoles and 20,000 pieces of crossarms for the Rural Electrification Project. The contract consisted of four components, namely PIA, PIB and PIC for woodpoles and P3 for crossarms, for projected allocation in Luzon, Visayas and Mindanao. Bidders were required to submit applications for eligibility with technical proposals, with only those passing standard pre-qualification to be invited to submit financial bids. After review, only four bidders qualified, including Nerwin Industries Corporation, which emerged as the lowest bidder for all schedules and components.

Thereafter, the National Electrification Administration conducted a pre-award inspection of Nerwin’s manufacturing plants and facilities, including its identified supplier in Malaysia, to determine capability to supply and deliver. In the Recommendation of Award dated October 4, 2000, Administrator Conrado M. Estrella III recommended approval of award to Nerwin of all schedules because it was the lowest complying and responsive bidder, the price differences of $1.47 million for poles and $0.475 million for crossarms over the second lowest bidder were substantial and extremely advantageous and equivalent to 7,948 pieces of poles and 20.967 pieces of crossarms, the differences of approximately $2.36 million for poles and $0.475 million for crossarms over Tri-State Pole and Piling, Inc. were equivalent to additional 12.872 pieces of poles and 20.967 pieces of crossarms, and the bidder and manufacturer were capable based on inspection. On December 19, 2000, however, the Board of Directors passed Resolution No. 32 reducing by 50% the material requirements given time limitations for delivery and the loan closing date of October 2001 fast approaching, and resolved to award the four schedules at a reduced number to Nerwin.

Nerwin protested the 50% reduction as a ploy to accommodate a losing bidder, while losing bidders Tri State and Pacific Synnergy complained of alleged false or falsified documents submitted during pre-qualification. According to Nerwin, National Electrification Administration officials sought to nullify the prior bidding, sought the opinion of the Government Corporate Counsel which upheld Nerwin’s eligibility and qualification and later declared anew no legal impediment to award, yet allegedly held negotiations with other bidders, prompting Nerwin to file a complaint for specific performance with prayer for injunction, granted by Branch 36 of the RTC-Manila in Civil Case No. 01102000. In the interim, PNOC-Energy Development Corporation issued Requisition No. FGJ 30904R1, an invitation to pre-qualify and to bid for wooden poles needed for its Samar Rural Electrification Project (O-ILAW Project).

Upon learning of the requisition, Nerwin filed Civil Case No. 03106921 in the RTC in Manila against PNOC-Energy Development Corporation and Ester R. Guerzon as Chairman of the Bids and Awards Committee, alleging that the requisition was an attempt to subject a portion of the items covered by IPB No. 80 to another bidding and praying for a temporary restraining order. Respondents sought dismissal for lack of cause of action, violation of the prohibition on restraining government infrastructure projects, forum shopping, and lack of authority of the corporate president to file suit. The RTC nevertheless granted a temporary restraining order on June 27, 2003 and a writ of preliminary injunction on July 30, 2003 upon a ₱200,000.00 bond.

• Applicability of Republic Act No. 8975: Petitioner argued that the Court of Appeals erred in dismissing the case on the basis of Republic Act No. 8975 prohibiting issuance of temporary restraining orders and preliminary injunctions, except if issued by the Supreme Court, on government projects.
• Scope of Prohibition vs. Final Relief: Petitioner maintained that the Court of Appeals erred in ordering dismissal of the entire case on the basis of a statute that prohibits only the issuance of a preliminary injunction but not injunction as a final remedy.
• Claim for Damages: Petitioner argued that the Court of Appeals erred in dismissing the case considering that it was also one for damages.

• Lack of Cause of Action: Respondents countered that the complaint averred no cause of action.
• Statutory Prohibition on Injunctions: Respondents argued that the suit violated the rule that government infrastructure projects were not to be subjected to temporary restraining orders.
• Forum Shopping and Authority to Sue: Respondents maintained that the complaint contravened the mandatory prohibition against forum shopping and that the corporate president had no authority to sign and file the complaint.
• Grave Abuse of Discretion: Respondents argued in certiorari that the RTC committed grave abuse of discretion amounting to lack or excess of jurisdiction in entertaining and granting the TRO and preliminary injunction despite the express legal prohibition, in violating the Rules of Court and jurisprudence, in declaring respondents in default, and in disqualifying respondents’ counsel.

• Prohibition Under Republic Act No. 8975: Whether the Court of Appeals erred in dismissing the case on the basis of Republic Act No. 8975 prohibiting the issuance of temporary restraining orders and preliminary injunctions, except if issued by the Supreme Court, on government projects.
• Dismissal of Entire Case vs. Preliminary Relief Only: Whether the Court of Appeals erred in ordering dismissal of the entire case on the basis of a law that prohibits only a preliminary injunction but not injunction as a final remedy.
• Action for Damages: Whether the Court of Appeals erred in dismissing the case considering that it was also one for damages.

• Prohibition Under Republic Act No. 8975: No. The prohibition was violated because the O-ILAW bidding was a national government project covered by Section 3(b), with no showing of the extreme-urgency constitutional-issue exception.
• Dismissal of Entire Case vs. Preliminary Relief Only: No. Dismissal was proper because the complaint’s crux was the prohibited provisional relief and the assailed orders were void under Section 4 for grave abuse of discretion.
• Action for Damages: No. No separate viable damages action remained once the injunction suit was found to contravene the express statutory prohibition and was dismissed for lack of merit.

• Prohibition Under Republic Act No. 8975: The text and tenor of Sections 3 and 4 being clear and unambiguous, nothing was left except enforcement and obedience. Bidding or awarding of a contract or project of the national government as defined under Section 2 was expressly covered, and the prohibition applies in all cases instituted by a private party, including cases filed by bidders or those claiming rights through bidders. The O-ILAW rural electrification bidding fell within the ban, already existing when the July 30 and December 29, 2003 orders issued, and no endeavor was made to show the single exception of extreme urgency involving a constitutional issue where grave injustice and irreparable injury would otherwise arise. Awareness was further imputed through Administrative Circular No. 11-2000 instructing lower courts to respect the prohibition, and through predecessor Presidential Decree No. 1818 as upheld in administrative cases against judges.
• Dismissal of Entire Case vs. Preliminary Relief Only: The crux was the propriety of the TRO and preliminary injunction, and the trial judge gravely abused discretion in entertaining the application and enjoining the bidding in palpable violation of Republic Act No. 8975. Because a writ issued in violation of Section 3 is void and of no force and effect under Section 4, default could not have been legally declared on a complaint for injunction that should not have been given due course. With the assailed orders issued with grave abuse amounting to lack or excess of jurisdiction, annulment and dismissal for lack of merit followed without need to resolve other grounds.
• Action for Damages: Further treatment of other submissions was rendered superfluous once the statutory violation was established and the administrative liability of the presiding judge for gross misconduct and gross ignorance of the law had been confirmed in Sinsuat vs. Hidalgo. The nature of preliminary injunction as merely an ancillary or preventive remedy to preserve rights during pendency, requiring a prima facie right, violation thereof, and urgent necessity to prevent serious damage, underscored that no independent final relief or damages claim could sustain a suit whose sole mission was the prohibited restraint of bidding.

• Prohibition on injunctive writs against government projects — No court except the Supreme Court shall issue any temporary restraining order, preliminary injunction, or preliminary mandatory injunction against the Government, its subdivisions or officials, or any person or entity acting under Government direction, to restrain, prohibit, or compel acquisition, clearance and development of right-of-way or site, bidding or award of a national government contract or project, commencement, prosecution, execution, implementation or operation thereof, termination or rescission thereof, or any other lawful activity necessary therefor. Applied to void the TRO and preliminary injunction against PNOC-Energy Development Corporation’s O-ILAW bidding, there being no proof of extreme urgency involving a constitutional issue.
• Nullity of prohibited writs — Any temporary restraining order, preliminary injunction, or preliminary mandatory injunction issued in violation of Section 3 of Republic Act No. 8975 is void and of no force and effect. Applied to annul the July 30 and December 29, 2003 orders and to preclude a default declaration based on the injunction complaint.
• Nature and requisites of preliminary injunction — A preliminary injunction is an order granted at any stage prior to judgment requiring a party, court, agency, or person to refrain from particular acts; it is an ancillary or preventive remedy to protect or preserve rights during pendency, issued only when the applicant is entitled to the relief demanded consisting in restraint or performance, continuance or non-performance would probably work injustice, or a party is doing or threatening an act probably in violation of applicant’s rights tending to render judgment ineffectual. Existence of a right to be protected, prima facie shown and not merely contingent, violation of that right, and urgent paramount necessity to prevent serious damage are required; conclusive proof is not demanded, a sampling affording a present right directly threatened being sufficient. Reiterated to correct the failure to appreciate the true purpose of injunctive relief and to stress that the writ may not dispose of merits before trial but only prevent threatened wrong, further injury, and irreparable harm until rights are settled.

• "No court, except the Supreme Court, shall issue any temporary restraining order, preliminary injunction or preliminary mandatory injunction against the government, or any of its subdivisions, officials, or any person or entity, whether public or private, acting under the government’s direction, to restrain, prohibit or compel the following acts:" — States the controlling statutory prohibition in Section 3 of Republic Act No. 8975 applied to void the injunction against bidding.
• "Any temporary restraining order, preliminary injunction or preliminary mandatory injunction issued in violation of Section 3 hereof is void and of no force and effect." — States the nullity rule in Section 4 under which the trial court orders were annulled and set aside.
• "It is proper only when the applicant appears to be entitled to the relief demanded in the complaint, which must aver the existence of the right and the violation of the right, or whose averments must in the minimum constitute a prima facie showing of a right to the final relief sought." — Defines the threshold showing for injunctive relief, cited to reiterate norms for issuance of TROs and writs.
• "there must be an existing basis of facts affording a present right which is directly threatened by an act sought to be enjoined. And while a clear showing of the right claimed is necessary, its existence need not be conclusively established" — States the evidentiary standard for preliminary injunction at hearing, quoted from Saulog v. Court of Appeals to explain that only a sampling is required pending merits.

• Sinsuat vs. Hidalgo, A.M. No. RTJ-08-2133, August 6, 2008 — Controlling administrative precedent where the same presiding judge was found guilty of gross misconduct and gross ignorance of the law and fined ₱40,000.00 for issuing the TRO and injunction in violation of Presidential Decree No. 1818 and Republic Act No. 8975.
• National Housing Authority vs. Allarde — Cited for the definition of infrastructure projects and for the principle that Presidential Decree No. 1818 deprives courts of jurisdiction to issue injunctive writs against implementation of government infrastructure projects.
• Republic of the Philippines vs. Silverio cited as Republic of the Phil. vs. Salvador Silverio and Big Bertha Construction — Cited for the definition of infrastructure projects as construction, improvement, and rehabilitation of roads, bridges, railways, airports, seaports, communication facilities, irrigation, flood control, water supply, power facilities, and related government capital investment.
• Gov. Garcia vs. Hon. Burgos — Cited with National Housing Authority vs. Allarde for the prohibitory mandate depriving courts of jurisdiction over injunctive writs against government infrastructure projects.
• Atty. Caguioa vs. Judge Laviña — Cited as precedent faulting a judge for grave misconduct for issuing a TRO against a government infrastructure project in disregard of Presidential Decree No. 1818 and Supreme Court circulars.
• City Government of Butuan vs. Consolidated Broadcasting System (CBS), Inc., G.R. No. 157315, December 1, 2010 — Cited for the elaboration that injunction requires sufficient interest, prima facie right, violation, and urgent necessity, and will not issue to protect a right not in esse or merely contingent.
• Saulog vs. Court of Appeals, G.R. No. 119769, September 18, 1996 — Cited for the rule that existence of the right need not be conclusively established and that evidence at preliminary injunction hearing need only be a sampling.

• Section 3, Republic Act No. 8975 — Prohibits all courts except the Supreme Court from issuing TROs, preliminary injunctions, or preliminary mandatory injunctions against bidding or award of national government contracts or projects, among other acts; applied to hold the entertaining and granting of Nerwin’s injunction application unlawful absent extreme urgency involving a constitutional issue.
• Section 4, Republic Act No. 8975 — Declares any TRO or preliminary injunction issued in violation of Section 3 void and of no force and effect; applied to annul the trial court orders.
• Section 1, Rule 58, 1997 Rules of Civil Procedure — Defines preliminary injunction as an order granted at any stage prior to judgment requiring refraining from particular acts; cited to reiterate the ancillary and preventive character of the remedy.
• Section 3, Rule 58, 1997 Rules of Civil Procedure — Enumerates grounds for issuance relating to entitlement to restraint or performance, probable injustice, and acts in violation of rights tending to render judgment ineffectual; cited to frame requisites the trial court failed to properly appreciate.
• Presidential Decree No. 1818 — Earlier prohibition on courts issuing restraining orders or preliminary injunctions in cases involving infrastructure or natural resources development projects and public utilities; cited as superseded by Republic Act No. 8975 and as basis for administrative liability.
• Supreme Court Administrative Circular No. 11-2000 — Reiterates the ban on TROs and preliminary prohibitory or mandatory injunctions in cases involving government infrastructure projects; cited to show the trial court could not have been unaware of the prohibition.

Chief Justice Renato C. Corona (Chairperson), Associate Justice Teresita J. Leonardo-De Castro, Associate Justice Arturo D. Brion, Associate Justice Martin S. Villarama, Jr.