Prosperity Credit Resources, Inc. vs. Court of Appeals

A writ of preliminary mandatory injunction requires that the complainant's right be clear and unmistakable, and where the right claimed depends on the interpretation of an ambiguous contractual phrase, the issuance of the writ before trial constitutes grave abuse of discretion. The phrase "for whatever kind of passage" does not clearly and unmistakably include the right to excavate the access road for the installation of water pipes, and the determination of the parties' intention must await the presentation of evidence during trial.

Petitioner Prosperity Credit Resources, Inc. was a lending corporation that extended a loan to private respondent Metropolitan Fabrics, Inc., a manufacturing company. The loan was secured by a real estate mortgage over seven parcels of land comprising a commercial compound located at 685 Tandang Sora Avenue, Bo. Banlat, Quezon City, with Tandang Sora Avenue as the nearest public road. When private respondent defaulted, petitioner foreclosed the mortgage and purchased the lots at public auction. The parties subsequently entered into a redemption agreement for three of the seven lots, conditioned upon petitioner being granted a right of way over an existing private road on the area to be redeemed.

On August 3, 1984, petitioner Prosperity Credit Resources, Inc. gave a loan to private respondent Metropolitan Fabrics, Inc. To secure the payment of the loan, private respondent mortgaged to petitioner seven parcels of land located at 685 Tandang Sora Avenue, Bo. Banlat, Quezon City. The lots comprise a commercial compound with Tandang Sora Avenue as the nearest public road. By October 27, 1987, private respondent's loan amounted to P10.5 million. As private respondent defaulted in the payment of the loan, petitioner foreclosed the mortgage and, in the ensuing public bidding, became the highest bidder and purchaser of the seven lots subject of the mortgage.

Later, private respondent negotiated with petitioner for the redemption of three lots covered by TCT Nos. 317705, 317706, and 317707, all located on the southern and middle portions of the compound. As the reacquisition of these three lots by private respondent would leave the remaining four lots on the northwestern side without access to Tandang Sora Avenue, petitioner acceded to private respondent's request on the condition that petitioner be given a right of way on the existing private road which forms part of the area to be redeemed by private respondent. The parties' agreement was embodied in a Memorandum of Undertaking, dated September 18, 1987, which provided that the lot, being an existing private road, "will remain open to ingress and egress for whatever kind of passage in favor of PROSPERITY FINANCIAL RESOURCES, INC. or its successors-in-interest."

On November 7, 1991, petitioner filed an injunctive suit in the Regional Trial Court of Quezon City (Branch 95). Petitioner alleged that, in violation of the terms of the Memorandum of Agreement, private respondent refused to allow petitioner to make excavations on one side of the access road for the installation of water pipes; that it banned entry of petitioner's trucks and those of its tenants between 11:30 A.M. to 1:00 P.M. and 10:00 P.M. to 7:00 A.M.; and that it subjected the vehicles to unnecessary searches. Petitioner sought the issuance of a writ of preliminary mandatory injunction requiring private respondent to allow petitioner to proceed with the MWSS installation project over the road lot, to allow petitioner's and its tenants' delivery trucks and other vehicles access at any time without undergoing unnecessary searches, and to otherwise recognize petitioner's right of way over the lot.

Private respondent filed an answer with counterclaim, alleging that petitioner's right to undertake excavations on the access road was not provided for in the Memorandum of Undertaking. As counterclaim, private respondent alleged that it was petitioner which caused damage to private respondent's tenants by undertaking, without its consent, construction works on the access road which raised its level to about a meter and caused serious flooding of the nearby buildings whenever it rained, and that its tenants demanded compensation for damage to their merchandise and equipment occasioned by the flooding. Private respondent prayed for P2.1 million as counterclaim.

The trial court required the parties to submit position papers in connection with petitioner's prayer for a preliminary mandatory injunction. After the parties had done so, the trial court granted, on February 14, 1992, petitioner's prayer for a preliminary writ, conditioned upon the filing by petitioner of a bond in the amount of P500,000.00. The trial court found that to deny petitioner's application would be to disregard its right of way in respect of the road lot, a right clearly set forth in the memorandum of undertaking, and that no cogent reason appeared to warrant treating the terms "for whatever kind of passage" as nothing more than a useless, meaningless redundancy. On March 2, 1992, the trial court issued the writ upon filing of the required bond by petitioner. Private respondent filed a motion for reconsideration, which the trial court denied, but it increased the injunction bond to P2.1 million.

Private respondent filed a petition for certiorari and prohibition with the Court of Appeals to annul the orders of the trial court. On November 26, 1993, the appellate court granted the petition and set aside the questioned orders after finding that the trial court had acted with grave abuse of discretion in issuing them. Its motion for reconsideration having been denied on February 28, 1994, petitioner filed the present petition for review on certiorari.

• Error of Judgment vs. Grave Abuse of Discretion: Petitioner argued that the Court of Appeals gravely erred when it exercised certiorari powers to reverse an error of judgment committed by the Regional Trial Court, upon finding that the lower court "misunderstood" petitioner's right over the road lot in question.

• Misapplication of Precedent: Petitioner argued that the Court of Appeals grossly erred when it applied the doctrine enunciated in Rivas vs. SEC (190 SCRA 295) despite the diversity in factual setting of the instant case vis-à-vis that obtaining in the cited case.

• Premature Decision on the Merits: Petitioner argued that the Court of Appeals gravely erred when it decided the merits of the main case in a certiorari proceeding, practically rendering academic the hearing proper yet to be conducted by the Regional Trial Court.

• Findings Based on Incomplete Record: Petitioner argued that the Court of Appeals gravely erred when it made findings of facts on the basis of the representation and recital of facts made in the MFI petition and proceeded to interpret the Memorandum of Undertaking without considering facts and circumstances surrounding its execution which were yet to be established in a full-blown trial.

• Interpretation According to Circumstances: Petitioner contended that resort should be made to facts surrounding the execution of the Memorandum of Undertaking which, according to it, shows the intention of the parties to give petitioner the right to install water pipes along the side of the access road, citing Rule 130 §11 of the 1964 Rules of Court.

• No Right to Excavate Under the Agreement: Private respondent alleged that petitioner's right to undertake excavations on the access road was not provided for in the Memorandum of Undertaking.

• Damages from Unauthorized Construction: As counterclaim, private respondent alleged that petitioner caused damage to its tenants by undertaking, without its consent, construction works on the access road which raised its level to about a meter and caused serious flooding of the nearby buildings whenever it rained, resulting in tenants demanding compensation for damage to their merchandise and equipment.

• Grave Abuse of Discretion in Issuing the Writ: Whether the Regional Trial Court gravely abused its discretion in issuing a writ of preliminary mandatory injunction ordering private respondent to allow petitioner to undertake excavations along the access road for the purpose of installing water pipes.

• Propriety of Certiorari: Whether the Court of Appeals properly exercised its certiorari powers to set aside the trial court's orders, notwithstanding petitioner's contention that the error sought to be corrected was merely an error of judgment.

• Grave Abuse of Discretion in Issuing the Writ: Yes. The trial court gravely abused its discretion in issuing the writ of preliminary mandatory injunction because petitioner's alleged right to install water pipes was not clear and unmistakable, the phrase "for whatever kind of passage" not conveying a meaning that includes such a right.

• Propriety of Certiorari: Yes. Certiorari properly lay because the lower court acted with grave abuse of discretion in issuing the writ of preliminary mandatory injunction despite the doubt on petitioner's right to it.

• Grave Abuse of Discretion in Issuing the Writ: The Court applied the doctrine in Pelejo vs. Court of Appeals, which requires the following to justify the issuance of a writ of preliminary mandatory injunction: (1) that the complainant has a clear legal right; (2) that his right has been violated and the invasion is material and substantial; and (3) that there is an urgent and permanent necessity for the writ to prevent serious damage. The right of the complainant must be clear and unmistakable because, unlike an ordinary preliminary injunction, the writ of preliminary mandatory injunction requires the performance of a particular act or acts and thus tends to do more than maintain the status quo. In this case, petitioner anchored its alleged right on the Memorandum of Undertaking providing that the road lot "will remain open to ingress and egress for whatever kind of passage." While there is no question as to the meaning of "ingress" and "egress," which give petitioner the right to use the private road as a means of entry into and exit from its property, the question concerns the meaning of the phrase "for whatever kind of passage." The trial court read this phrase to mean that petitioner had the right to make excavations on the side of the access road to install a network of water pipes. However, the word "passage" does not "clearly and unmistakably" convey a meaning that includes a right to install water pipes on the access road. The ordinary meaning of the word, as defined in Webster's Dictionary, is "the act or action of passing: movement or transference from one place or point to another." Its legal meaning is not different, meaning, according to Black's Law Dictionary, the "act of passing; transit; transition." To achieve a meaning such as that which petitioner proposes requires the consideration of evidence showing the parties' intention in using the word, which can only be done during trial on the merits. Until such time, petitioner cannot claim to have a "clear and unmistakable" right justifying the issuance of a writ of preliminary mandatory injunction. Thus, the trial court should have observed caution and denied petitioner's application for the preliminary writ.

• Propriety of Certiorari: The Court rejected petitioner's contention that resort should be made to facts surrounding the execution of the Memorandum of Undertaking, citing Rule 130 §11 of the 1964 Rules of Court, which provides that for the proper construction of an instrument, the circumstances under which it was made, including the situation of the subject thereof and of the parties to it, may be shown. The Court stated that this is precisely what the Court was saying — the recourse petitioner proposes must await the presentation of the parties' evidence during trial, and the determination of their intention must be made by the trial court, not by the Supreme Court. Petitioner cannot circumvent the process by asking the Court to determine the facts surrounding the execution of their agreement. For the Court to undertake such inquiry would be to expand the scope of the present review and intrude into the domain of the trial court. Rule 130 §11, which petitioner invokes, is actually a rule for interpretation of documentary evidence formally offered at the trial; it does not apply to preliminary proceedings concerning the issuance of ancillary remedies. Anent petitioner's contention that the writ of certiorari does not lie because the error sought to be corrected is an error of judgment, the Court held that the lower court acted with grave abuse of discretion in issuing the writ of preliminary mandatory injunction despite the doubt on petitioner's right to it.

• Requisites for Preliminary Mandatory Injunction — To justify the issuance of a writ of preliminary mandatory injunction, the following must be shown: (1) that the complainant has a clear legal right; (2) that his right has been violated and the invasion is material and substantial; and (3) that there is an urgent and permanent necessity for the writ to prevent serious damage. The right of the complainant must be clear and unmistakable because, unlike an ordinary preliminary injunction, the writ of preliminary mandatory injunction requires the performance of a particular act or acts and thus tends to do more than maintain the status quo. In this case, the Court applied this doctrine to find that petitioner's right to install water pipes was not clear and unmistakable, as the phrase "for whatever kind of passage" did not convey such a meaning.

• Interpretation of Ambiguous Contractual Terms in Preliminary Proceedings — Rule 130 §11 of the 1964 Rules of Court, which allows the consideration of circumstances under which an instrument was made for its proper construction, is a rule for interpretation of documentary evidence formally offered at the trial. It does not apply to preliminary proceedings concerning the issuance of ancillary remedies. Where the right claimed depends on the interpretation of an ambiguous contractual phrase, the determination of the parties' intention must await the presentation of evidence during trial on the merits.

• "The word 'passage' does not, however, 'clearly and unmistakably' convey a meaning that includes a right to install water pipes on the access road. The ordinary meaning of the word, as defined in Webster's Dictionary, is that it is 'the act or action of passing: movement or transference from one place or point to another.' Its legal meaning is not different. It means, according to Black's Law Dictionary, the 'act of passing; transit; transition.'" — This passage articulates the core reasoning of the decision: the ambiguity of the contractual phrase prevents a finding of a clear and unmistakable right, which is essential for the issuance of a preliminary mandatory injunction.

• "To achieve a meaning such as that which petitioner proposes requires the consideration of evidence showing the parties' intention in using the word which can only be done during trial on the merits. Until such time, petitioner cannot claim to have a 'clear and unmistakable' right justifying the issuance of a writ of preliminary mandatory injunction in this case." — This passage establishes the principle that where contractual interpretation is required to establish a right, the issuance of a preliminary mandatory injunction before trial constitutes grave abuse of discretion.

• "Rule 130 §11, which petitioner invokes, is actually a rule for interpretation of documentary evidence formally offered at the trial. It does not apply to preliminary proceedings concerning the issuance of ancillary remedies." — This passage clarifies the scope of the rule on interpretation according to circumstances, limiting its application to trial proceedings rather than preliminary proceedings.

• Pelejo vs. Court of Appeals, 117 SCRA 665 (1982) — Controlling precedent establishing the requisites for the issuance of a writ of preliminary mandatory injunction: clear legal right, violation of that right that is material and substantial, and urgent and permanent necessity for the writ to prevent serious damage. The Court applied this doctrine to the facts of the case.

• Manila Electric Railroad and Light Company vs. Del Rosario, 22 Phil. 433 (1912) — Cited to support the proposition that a writ of preliminary mandatory injunction tends to do more than maintain the status quo, unlike an ordinary preliminary injunction.

• Bautista vs. Barcelona, 100 Phil. 1078 (1957) — Cited together with Manila Electric Railroad and Light Company to support the principle that a preliminary mandatory injunction requires more than the maintenance of the status quo.

• Rule 58, §1, Rules of Court — The provision governing preliminary injunctions, cited to note that the rules on preliminary mandatory injunction are substantially the same under the 1964 and 1997 Rules of Civil Procedure.

• Rule 130, §11, 1964 Rules of Court (now Rule 130, §13, Revised Rules on Evidence) — The rule on interpretation according to circumstances, which provides that for the proper construction of an instrument, the circumstances under which it was made, including the situation of the subject thereof and of the parties to it, may be shown. The Court held that this rule applies to the interpretation of documentary evidence formally offered at trial, not to preliminary proceedings concerning the issuance of ancillary remedies.

Bellosillo, Puno, and Martinez, JJ., concurred. Buena, J., took no part.