UNIVERSAL MOTORS CORPORATION REPRESENTED BY GERARDO M. GELLE, COMPLAINANT, VS. JUDGE FRANCISCO G. ROJAS, SR., REGIONAL TRIAL COURT, BRANCH 41, CAGAYAN DE ORO CITY, RESPONDENT.

Universal Motors versus Judge Rojas

The Case

This is an administrative complaint filed by Universal Motors Corporation, represented by its dealer operations manager Gerardo Gelle, against Judge Francisco Rojas, Senior, presiding judge of the Regional Trial Court of Cagayan de Oro City, Branch 41. The complaint charges the judge with serious misconduct, gross ignorance of the law, manifest partiality, and grave abuse of discretion arising from a series of orders he issued in a dealership dispute. The case matters because it is the Supreme Court's clearest teaching on the temporary restraining order under the 1997 Rules of Civil Procedure: that it may issue only upon a verified application showing great or irreparable injury, and that the applicant must post a bond unless the court exempts him. It is also a lesson on when an erroneous order crosses the line from a mere error of judgment into grave abuse of authority warranting discipline.

Procedural History

The controversy began in the Regional Trial Court of Cagayan de Oro City, where the dealership dispute was raffled to the sala of the respondent judge. From his orders granting a temporary restraining order without a bond and later issuing a writ of preliminary injunction, Universal Motors went up to the Court of Appeals on a petition for certiorari and prohibition. The Court of Appeals found that the trial court committed grave abuse of discretion in issuing the writ of preliminary injunction and noted the irregularities in the proceedings below. Universal Motors then filed this administrative complaint directly with the Supreme Court. The Office of the Court Administrator investigated, found the judge guilty of grave abuse of discretion, and recommended a fine of twenty thousand pesos with a warning. The Supreme Court agreed with that recommendation and decided the case in May 2005.

Facts

Universal Motors was the exclusive assembler and distributor in the Philippines of Nissan light commercial vehicles and spare parts, selling through a network of authorized dealers. One of its dealers was Nissan Specialist Sales Corporation, covering Misamis Oriental and the northern Mindanao market, including Cagayan de Oro City. In November 2000, that dealer ordered vehicles and spare parts worth five million four hundred seventy six thousand five hundred pesos and paid with several postdated checks. The checks were dishonored for insufficient funds, and the dealer repeatedly failed to pay despite demand. Universal Motors stopped transacting with it, appointed another distributor to co-exist as dealer, and on the thirtieth of October 2001 terminated the dealership agreement. It also filed a criminal complaint against the dealer's officers.

On the twenty second of February 2002, the dealer sued Universal Motors and its officers, the new distributor and its officers, for breach of contract. The case was raffled to the respondent judge. On the first of March 2002, the judge issued an order setting a summary hearing on the propriety of a temporary restraining order, even though the original complaint contained no prayer for one. To cure the defect, the dealer filed an amended complaint on the sixth of March 2002 inserting that prayer, and the judge admitted it the same day. After a hearing on the eighth of March, the judge issued a temporary restraining order on the eleventh of March 2002, enjoining Universal Motors and the other defendants from selling Nissan vehicles and spare parts, from terminating the dealer agreement, and from allowing the new distributor to do business in the old dealer's territory. He issued it without requiring any bond.

When Universal Motors moved to fix the plaintiff's bond and to accept its counterbond, the judge denied the motion, saying he had already exercised his discretion in issuing the order without fixing a bond. He later issued a writ of preliminary injunction upon a bond of one million pesos, and denied Universal Motors' motion to dissolve it. The Court of Appeals thereafter found grave abuse of discretion in the issuance of the injunction. Hence this administrative complaint.

Issues

• Whether or not the respondent judge is administratively liable for grave abuse of authority in ordering a hearing on, and issuing, a temporary restraining order that was never prayed for in the complaint and unsupported by any showing of great or irreparable injury.
• Whether or not the respondent judge is administratively liable for issuing the temporary restraining order without requiring the applicant to post a bond.
• Whether or not the remaining charges of serious misconduct and manifest partiality were substantiated by evidence.

Applicable Provisions

Section 4 of Rule 58 of the 1997 Rules of Civil Procedure provides:

Section 4. Verified application and bond for preliminary injunction or temporary restraining order. — A preliminary injunction or temporary restraining order may be granted only when: (a) The application in the action or proceeding is verified, and shows facts entitling the applicant to the relief demanded; and (b) Unless exempted by the court, the applicant files with the court where the action or proceeding is pending, a bond executed to the party or person enjoined, in an amount to be fixed by the court, to the effect that the applicant will pay to such party or person all damages which he may sustain by reason of the injunction or temporary restraining order if the court should finally decide that the applicant was not entitled thereto. Upon approval of the requisite bond, a writ of preliminary injunction shall be issued.

This provision supplies both requirements the respondent judge failed to observe: a verified application showing entitlement to the relief, and the posting of a bond unless the court exempts the applicant.

Section 5 of Rule 58 of the 1997 Rules of Civil Procedure provides:

Section 5. Preliminary injunction not granted without notice; exception. — No preliminary injunction shall be granted without hearing and prior notice to the party or person sought to be enjoined. If it appears from the facts shown by affidavits or by the verified application that great or irreparable injury would result to the applicant before the matter can be heard on notice, the court to which the application for preliminary injunction was made, may issue ex parte a temporary restraining order to be effective only for a period of twenty days from date of service on the party or person sought to be enjoined, unless ordered otherwise by the Supreme Court or the Court of Appeals, or the Sandiganbayan.

This provision is the source of the great or irreparable injury requirement, which the Court found absent from the dealer's complaint.

Ruling

On the first issue, the Court held that the respondent judge committed grave abuse of authority. It rejected his argument that the caption and body of the complaint showed an intent to pray for a temporary restraining order. Nowhere in the allegations was it shown that great or irreparable injury would result to the plaintiff pending the hearing on the preliminary injunction, as Section 5 of Rule 58 requires. The relief actually sought was reinstatement as dealer and the termination of the new distributor, and no urgent need for a restraining order was alleged. The Court also noted that the dealer had already been validly terminated as of October 2001 for failure to pay, so the act sought to be restrained had long been consummated.

On the second issue, the Court held that the judge gravely abused his discretion in issuing the temporary restraining order without a bond. While Section 4 of Rule 58 gives the presiding judge discretion to require a bond, that discretion may not be exercised arbitrarily to the prejudice of the defendant. The Court put the rule thus: unless it appears that the enjoined party will not suffer any damage, the presiding judge must require the applicant to post a bond, otherwise the courts could become instruments of oppression and harassment. The Court stressed that the 1997 Rules elevated the temporary restraining order to the same level as the preliminary injunction, requiring both a hearing and a bond precisely to prevent abuse. It found it telling that the order froze the operations of established businesses in Northern Mindanao, yet the judge refused even to fix a bond despite the defendant's willingness to post a counterbond. This was not a mere error of judgment.

On the third issue, the Court found that the complainant failed to adduce evidence to support the remaining charges of serious misconduct and manifest partiality, and these were dismissed. The Court nevertheless reminded the Bench that while not every erroneous act of a judge renders him liable absent fraud, dishonesty, or corruption, a judge must still observe propriety, discreetness, and due care, and behave at all times so as to promote public confidence in the integrity and impartiality of the judiciary.

Doctrine

A temporary restraining order may issue only upon a verified application showing facts entitling the applicant to the relief demanded, including great or irreparable injury that would result before the preliminary injunction can be heard. The requirement of a bond is the rule, not the exception: unless it appears that the enjoined party will suffer no damage, the judge must require the applicant to post a bond, and the judge's discretion under Section 4 of Rule 58 may not be exercised arbitrarily. A judge who grants relief never prayed for, and who issues a temporary restraining order without a bond to the prejudice of the defendant, is guilty of grave abuse of authority and may be fined. Not every erroneous order is disciplinable, but an error so patent and so prejudicial, made without the care the Rules demand, crosses into grave abuse.

Disposition

The respondent judge was ordered to pay a fine of twenty thousand pesos and warned that the commission of the same or similar acts would be dealt with more severely.

Remember This

Memorize the line that unless it appears the enjoined party will suffer no damage, the judge must require a bond, for the temporary restraining order is now regulated like the preliminary injunction. Examiners use this case to test the requisites and bond requirement of the temporary restraining order under Rule 58, and the boundary between a mere error of judgment and grave abuse of authority in judicial conduct.