GOTESCO PROPERTIES, INC., PETITIONER, VS. TERESITA REYES, RESPONDENT.

Gotesco Properties versus Reyes

The Case

This is a petition for review on certiorari brought by Gotesco Properties, a domestic corporation engaged in real estate development, against Teresita Reyes, a private individual who held a bank account with the United Coconut Planters Bank. Gotesco had sued the Carpio family for specific performance over a contract to sell several parcels of land in Calamba, Laguna, and had paid forty percent of the purchase price by check. When the proceeds of that check were later traced into Teresita Reyes's own account, Gotesco impleaded her and asked the trial court to order the bank to release the money to it. The case matters because it fixes the proper office of the writ of preliminary injunction: it preserves the status quo and cannot be used to transfer possession or control of a contested thing to a party who did not have it at the outset of the litigation.

Procedural History

Gotesco filed a complaint for specific performance with damages before the Regional Trial Court of Calamba, Laguna, Branch 92, against Isabel Carpio and the other members of the Carpio family, with a prayer for a temporary restraining order and a writ of preliminary injunction. Gotesco later amended its complaint to implead Teresita Reyes and the United Coconut Planters Bank. Teresita Reyes moved to dismiss on the ground that she was not a party to the contract to sell and was therefore not a party in interest. The trial court denied her motion to dismiss, admitted Gotesco's second amended complaint, and ruled as moot a joint compromise agreement filed by Gotesco and the Carpios. After hearing the prayer for injunctive relief, the trial court issued a writ of preliminary injunction enjoining the bank from allowing any withdrawal from Teresita Reyes's account. By its order of September 2, 1996, the trial court dismissed the complaint against the Carpios, denied Teresita Reyes's motion for reconsideration, lifted the preliminary injunction, and ordered the bank to release the amount to Gotesco, subject to the posting of a bond. Teresita Reyes went to the Court of Appeals on certiorari, and the appellate court granted her petition, annulled the portion of the order directing the release of the money, ordered Gotesco to return the amount to her account, placed the money in custodia legis, that is, in the custody of the court, to await the outcome of the civil case, and reinstated the writ of preliminary injunction. Gotesco's motion for reconsideration was denied, so it came to the Supreme Court by petition for review on certiorari.

Facts

Gotesco and the Carpios entered into a contract to sell covering certain parcels of land in Calamba, Laguna, for a total purchase price of sixty million seven hundred ninety thousand pesos. Through its agent, Peter Sy, Gotesco issued a Metrobank check for twenty four million three hundred sixteen thousand three hundred twenty pesos, representing forty percent of the purchase price, for the account of Isabel Carpio. Gotesco claimed that the Carpios failed to comply with their undertaking to free the property from tenants and to present proof of payment of property disturbance compensation.

Gotesco later amended its complaint to implead Teresita Reyes and the United Coconut Planters Bank, alleging that the check had been deposited in the Carpios' account with the bank, and that part or all of the proceeds could have been deposited to Teresita Reyes's account. It appeared that the amount of twenty four million three hundred ten thousand pesos was withdrawn from the Carpios' account and transferred to an account in the name of Teresita Reyes. The trial court then issued a writ of preliminary injunction enjoining the bank from allowing any withdrawal from that account.

In its second amended complaint, Gotesco alleged that Teresita Reyes had represented herself as the broker of the Carpios and had introduced a person whom she represented to be Isabel Carpio. Gotesco prayed for rescission of the contract to sell, the return of the amount deposited in Teresita Reyes's account with interest, and damages. Teresita Reyes maintained that the amount had been paid to her by the Carpios in settlement of an obligation in her favor. The trial court eventually lifted the injunction and ordered the bank to release the money to Gotesco, prompting her petition before the Court of Appeals.

Issues

• Whether or not the Court of Appeals erred in setting aside the trial court's order lifting the writ of preliminary injunction and directing the release of the contested amount to Gotesco.
• Whether or not the absence of any objection from Isabel Carpio, the intended payee of the check, justified the release of the proceeds to Gotesco pending trial.
• Whether or not a writ of preliminary injunction may be used to transfer possession or control of a contested fund to a party who did not have such possession or control at the inception of the case.

Applicable Provisions

The decision does not quote a statutory text; it applies the settled doctrine on the writ of preliminary injunction, which the Court states in these words:

The trial court issued the writ of preliminary injunction, which is interlocutory, to preserve the threatened or continuous irremediable injury to petitioner before its claims could be thoroughly studied and adjudicated.

This defines the office of the writ as a preservative, not a dispositive, remedy, which governs the whole disposition of the case.

The Court then states the limiting rule:

It was issued to maintain the status quo and can not, therefore, be used to transfer the possession or control of the thing to a party who did not have such possession or control at the inception of the case.

This is the rule the trial court violated when it ordered the bank to release the deposit to Gotesco.

Ruling

On the first issue, the Court held that the petition fails and that the Court of Appeals correctly found grave abuse of discretion in the trial court's order lifting the injunction and releasing the deposit. The very gravamen of the litigation is the ownership of the amount, with Gotesco claiming it belongs to it and Teresita Reyes maintaining that it was paid to her by the Carpios on account of an obligation. To order the release of the money pending the determination of who is rightfully entitled to it is premature.

On the second issue, the Court held that the absence of objection from Isabel Carpio is immaterial, because she is not the depositor. The amount is deposited in Teresita Reyes's account, and she has at the very least a color of title over it, which ought not to be disturbed until after a full blown trial and not a summary one. Gotesco itself conceded that Teresita Reyes must still prove during trial her right to the proceeds.

On the third issue, the Court held that the writ of preliminary injunction is interlocutory and exists to preserve the threatened or continuous irremediable injury before the claims can be thoroughly studied and adjudicated. It maintains the status quo and cannot be used to transfer possession or control of the thing to a party who did not have such possession or control at the inception of the case. The Court also rejected the argument that a corporate bond sufficiently protected Teresita Reyes, observing that there is nothing like cold cash, since the bonding firm may become bankrupt while cash in the bank is guaranteed by the bank and, to a certain extent, by the Philippine Deposit Insurance Corporation. The better course was to keep the money in the bank in custodia legis to await the outcome of the litigation.

Doctrine

A writ of preliminary injunction is interlocutory. It is issued to preserve the threatened or continuous irremediable injury to a party before its claims can be thoroughly studied and adjudicated, and to maintain the status quo. It cannot be used to transfer possession or control of the thing in litigation to a party who did not have such possession or control at the inception of the case. Where the ownership of a deposited fund is the very gravamen of the litigation, the release of that fund to one claimant before trial is premature, and the deposit should be kept in custodia legis, that is, in the custody of the court, to await the outcome. The intended payee of a check who is not the depositor has no standing to consent to the release of funds held in another person's account, and a depositor with at least a color of title over the deposit is entitled to have it undisturbed until a full blown trial.

Disposition

The petition was denied, with costs against Gotesco, so Teresita Reyes prevailed and the money remained in custodia legis under the reinstated writ of preliminary injunction pending the resolution of the civil case.

Remember This

Memorize this line: a writ of preliminary injunction maintains the status quo and cannot be used to transfer possession or control of the contested thing to a party who did not have it at the inception of the case. Examiners use this case in remedial law and civil procedure to test the nature and limits of injunctive relief, and in civil law on the deposit of a check's proceeds into a third person's account.