SM Investments Corporation and Prime Metroestate, Inc. v. Mac Graphics Carranz International Corp.

A writ of preliminary mandatory injunction issues only upon a showing of a clear and unmistakable right in esse that is free from substantial challenge or contradiction; where the opposing party presents substantial legal defenses that place the existence of the claimed right in genuine doubt, the writ is improper because its issuance would constitute prejudgment of the very issues to be tried on the merits.

Mac Graphics Carranz International Corp., engaged in the advertising business, entered into a 20-year Contract of Lease with Pilipinas Makro, Inc. (later renamed Prime Metroestate, Inc.) for exclusive use of billboard sites located at Makro EDSA Cubao and Makro Makati City. The contract, executed on November 24, 2006, required Mac Graphics to secure necessary government permits and comprehensive all-risk property insurance with third party liability coverage prior to the commencement of operations on January 15, 2007. The contract allowed pre-termination by either party for non-remediable breaches, or for remediable breaches if uncured within 90 days after written notice. SM Investments Corporation held substantial shareholdings in Makro (10% directly and 50% through a subsidiary) but was not a party to the lease contract.

The Lease Contract: On November 24, 2006, Mac Graphics and Makro executed a Contract of Lease for billboard sites at Makro-Cubao and Makro-Makati for a term of 20 years commencing January 15, 2007. The contract obligated Mac Graphics to secure at its own expense all necessary licenses and permits (barangay, business, building/sign) and to obtain comprehensive all-risk property insurance with third party liability coverage of not less than P10 million per site prior to construction. Makro agreed to assist in securing the specified permits. The contract permitted pre-termination by either party for non-remediable breaches, or for remediable breaches if not cured within 90 days after written notice.

Performance and Alleged Breaches: Mac Graphics undertook repairs and improvements on the sites. On October 6, 2008, Makro sent a letter terminating the contract effective immediately, alleging that Mac Graphics failed to obtain MMDA and local government permits and had not secured the required comprehensive insurance. Makro asserted that these violations were non-remediable because they constituted conditions precedent to the lease commencement, or alternatively, that Mac Graphics failed to cure within the 90-day period. Mac Graphics objected, claiming that Makro was responsible for obtaining permits since the billboard towers were on Makro's private land, and that compliance with the insurance requirement was rendered impossible by typhoon Milenyo. Mac Graphics invoked the 90-day cure period under Section 14(c) of the contract and Articles 1266 and 1267 of the Civil Code.

Dismantling and Conversion: In 2009, Makro and SMIC removed Mac Graphics' billboards and prevented access to the sites. Makro subsequently amended its corporate name to Prime Metroestate, Inc. (PMI) in December 2012. The Makro outlets were converted to SM Hypermart outlets.

Proceedings Below: In its application for WPMI, Mac Graphics presented evidence of lost client contracts, reduced revenue (having lost two of seven Metro Manila billboards), and damage to business reputation built since 1984. The RTC granted the WPMI, finding that Makro pre-terminated the 20-year contract without allowing the 90-day cure period and that SMIC, as majority shareholder, influenced the termination. The CA affirmed, finding no grave abuse of discretion and holding that Mac Graphics demonstrated irreparable injury to its goodwill and continuing loss of profits.

Lack of Clear Legal Right: PMI argued that Mac Graphics admitted non-compliance with the permit and insurance requirements prior to the lease commencement date, constituting non-remediable breaches that justified immediate termination under Section 2 of the lease contract. The 90-day cure period under Section 14(c) applied only to ongoing obligations, not to conditions precedent. Mac Graphics failed to demonstrate a clear and unmistakable right in esse because the validity of the pre-termination and the applicability of the impossibility defense under Articles 1266 and 1267 presented genuine legal issues requiring full trial on the merits.

Reparable Injury: PMI maintained that the alleged damages—loss of profits from two billboard sites and reputational harm—were purely economic and susceptible to mathematical computation. Mac Graphics continued to operate five other billboards, and the injury was therefore compensable by damages, not irreparable.

Impossibility of Compliance: PMI asserted that the leased properties had been sold to Super Shopping Market, Inc. prior to the rendition of the RTC Order, rendering the mandatory injunction impossible to comply with.

Corporate Separateness (SMIC): SMIC contended that it was not a party to the lease contract, did not operate SM Hypermart, and that its mere shareholdings in Makro did not justify piercing the corporate veil or treating it as a successor-in-interest subject to injunctive relief.

Breach of Contract and Cure Period: Mac Graphics argued that Makro pre-terminated the contract without observing the 90-day cure period for remediable breaches. It maintained that Makro failed to assist in securing the DPWH permit, which was necessary for operation, and that the insurance requirement was excused under Articles 1266 and 1267 of the Civil Code due to the impossibility caused by typhoon Milenyo.

Irreparable Injury: Mac Graphics maintained that the termination caused the loss of client contracts, severe damage to business reputation and goodwill built over 25 years, and loss of marketing credibility. Citing Republic v. Principalia Management and Semirara Coal Corporation, it argued that injury to goodwill and business reputation constitutes irreparable injury that cannot be compensated by money damages.

Piercing the Corporate Veil: Mac Graphics asserted that SMIC controlled Makro's decisions and directly benefited from the termination by converting the sites to SM Hypermart, warranting injunctive relief against SMIC despite its non-party status.

Requisites for Writ of Preliminary Mandatory Injunction: Whether the Court of Appeals erred in affirming the grant of a Writ of Preliminary Mandatory Injunction despite respondent's failure to establish (a) a clear and unmistakable right in esse, and (b) irreparable injury.

Prejudgment of Main Case: Whether the lower courts effectively prejudged the validity of the lease pre-termination by granting the injunctive relief, thereby reversing the burden of proof.

Injunction Against Non-Party: Whether SMIC, not being a privy to the lease contract, was properly subject to the mandatory injunction merely by virtue of its shareholdings in the lessor corporation.

Impossibility of Performance: Whether the injunctive relief was proper given that the leased properties had been sold to a third party prior to the issuance of the writ.

Requisites for Writ of Preliminary Mandatory Injunction: The WPMI was improperly granted. The issuance of a preliminary mandatory injunction requires a clear and unmistakable right in esse, free from doubt or substantial challenge. While the right need not be conclusively established, it must be shown tentatively to exist without vitiation by substantial contradiction. Here, PMI presented substantial legal defenses: Mac Graphics admitted non-compliance with permit and insurance requirements, and PMI argued these were conditions precedent constituting non-remediable breaches. The applicability of the 90-day cure period and the validity of the impossibility defense under Articles 1266-1267 presented genuine legal questions that could not be resolved in a preliminary proceeding. The lower courts' determination that Mac Graphics had a clear right effectively prejudged the validity of the pre-termination, constituting the precise evil cautioned against in Searth Commodities Corp. v. Court of Appeals.

Irreparable Injury: No irreparable injury was shown. The alleged damages—lost profits from two of seven billboard sites and reputational harm—were susceptible to mathematical computation and pecuniary compensation, as evidenced by Mac Graphics' own damage estimates and revenue projections. Unlike cases involving business suspension or license revocation, Mac Graphics continued operating its remaining billboards. The injury was therefore reparable, and the remedy of damages adequate.

Corporate Separateness and Other Issues: Resolution of whether SMIC was properly joined or whether the sale of properties rendered the injunction impossible was rendered superfluous by the determination that the WPMI was improper due to the absence of a clear right and irreparable injury.

Requisites for Writ of Preliminary Mandatory Injunction — To justify issuance, the applicant must demonstrate: (1) a clear and unmistakable right in esse; (2) material and substantial violation of that right; and (3) urgent and permanent necessity for the writ to prevent serious and irreparable damage. The standard is higher than for prohibitory injunctions because the writ commands the performance of an act rather than merely preserving the status quo.

Clear and Unmistakable Right Defined — The right must be founded clearly on law or enforceable as a matter of law. It need not be conclusively established, but must be shown tentatively to exist without substantial challenge or contradiction. Where the respondent presents a substantial legal defense that casts doubt on the existence of the right—such that the validity of the applicant's claim is the very issue in the main case—the writ is improper because it would constitute prejudgment.

Irreparable Injury — Injury is irreparable only where there is no standard by which the amount can be measured with reasonable accuracy, or where the property has a peculiar quality or use that monetary value cannot fairly recompense. Mere loss of profits or damage to business reputation, where quantifiable, does not constitute irreparable injury warranting injunction.

Grave Abuse of Discretion in Injunctions — The grant or denial of injunctive relief rests on the sound discretion of the trial court; appellate courts will not interfere except upon a finding of grave abuse of discretion, defined as a capricious, whimsical, arbitrary, or despotic exercise of judgment equivalent to lack of jurisdiction.

• "A preliminary mandatory injunction is more cautiously regarded than a mere prohibitive injunction since, more than its function of preserving the status quo between the parties, it also commands the performance of an act. Accordingly, the issuance of a writ of preliminary mandatory injunction is justified only in a clear case, free from doubt or dispute."
• "When the complainant's right is doubtful or disputed, he does not have a clear legal right and, therefore, the issuance of a writ of preliminary mandatory injunction is improper."
• "Damages are irreparable within the meaning of the rule relative to the issuance of injunction where there is no standard by which their amount can be measured with reasonable accuracy."
• "The very foundation of the jurisdiction to issue the writ rests in the probability of irreparable injury, the inadequacy of pecuniary compensation, and the prevention of the multiplicity of suits, and where facts are not shown to bring the case within these conditions, the relief of injunction should be refused."

Heirs of Melencio Yu v. Court of Appeals, 717 Phil. 284 (2013) — Controlling precedent enumerating the requisites for a writ of preliminary mandatory injunction; followed for the standard that the right must be clear and unmistakable.

Sps. Dela Rosa v. Heirs of Juan Valdez, 670 Phil. 97 (2011) — Controlling precedent; followed for the principle that mandatory injunction is justified only in clear cases free from doubt, and that a doubtful or disputed right precludes issuance.

Power Sites and Signs, Inc. v. United Neon, 620 Phil. 205 (2009) — Controlling precedent; followed for the definition of irreparable injury as one not susceptible of mathematical computation and the requirement that damages be inadequate compensation.

Searth Commodities Corp. v. Court of Appeals, G.R. No. 64220, March 31, 1992, 207 SCRA 622 — Controlling precedent; followed for the prohibition against issuing writs that would effectively dispose of the main case without trial or prejudgment of the issues.

Republic v. Principalia Management and Personnel Consultants, Inc., 521 Phil. 718 (2006) — Distinguished; involved suspension of business license threatening closure and loss of clientele, unlike the present case of mere revenue reduction from loss of two billboard sites.

Semirara Coal Corporation v. HGL Development Corporation, 539 Phil. 532 (2006) — Distinguished; involved threat to business standing under a 25-year pasture lease agreement where the respondent had a clear right to possession, unlike the disputed lease validity here.

Rule 58, Section 1, Rules of Court — Defines preliminary mandatory injunction as an order requiring the performance of a particular act or acts.

Rule 58, Section 3, Rules of Court — Enumerates the grounds for issuance of preliminary injunction.

Article 1191, Civil Code — The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.

Article 1266, Civil Code — The debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor.

Article 1267, Civil Code — When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part.

Carpio (Chairperson), Peralta, Perlas-Bernabe, and A. Reyes, Jr., JJ.