PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT, PETITIONER, VS. SANDIGANBAYAN (SECOND DIVISION), TOURIST DUTY FREE SHOPS, INC., BANK OF AMERICA AND RIZAL COMMERCIAL BANKING CORPORAT…

Presidential Commission on Good Government versus Sandiganbayan

The Case

This is a special civil action for certiorari and prohibition brought by the Presidential Commission on Good Government, the PCGG, against the Second Division of the Sandiganbayan, Tourist Duty Free Shops, Incorporated, the Bank of America, and the Rizal Commercial Banking Corporation. The PCGG asks the Supreme Court to annul the orders of the Sandiganbayan that granted a writ of preliminary mandatory and prohibitory injunction, restraining the PCGG from implementing its Sequestration Order of March 11, 1986 against Tourist Duty Free Shops. The case matters because it draws the line between the power to sequester and the provisional remedy of injunction, and it teaches that a preliminary injunction cannot rest on a premature declaration that a sequestration order is void.

Procedural History

Tourist Duty Free Shops first went to the Supreme Court in a petition for certiorari, prohibition, and injunction to annul the Sequestration Order. The Court, in its Resolution of May 27, 1986, refused to issue a temporary restraining order and allowed the sequestration to stand, subject to conditions on the conduct of the business. After Executive Order Number 14 vested the Sandiganbayan with jurisdiction over ill-gotten wealth cases, the Court dismissed that petition without prejudice to the filing of a case before the Sandiganbayan.

Tourist Duty Free Shops then filed a complaint for injunction and specific performance before the Sandiganbayan, docketed as Civil Case Number 0142. The Sandiganbayan initially dismissed it on the ground of litis pendentia with the separate reconveyance case, but the Supreme Court reversed that dismissal and remanded the case for further proceedings. On remand, the Sandiganbayan granted the injunctive writ, issued the writ itself, later suspended its implementation, then denied the PCGG's motion for reconsideration and set the case for pre-trial and trial. The PCGG came to the Supreme Court by petition for certiorari and prohibition under Rule 65.

Facts

By virtue of Presidential Decree Number 1193, as amended by Presidential Decree Number 1394, then President Ferdinand Marcos authorized Tourist Duty Free Shops to establish, operate, and maintain duty and tax free stores at international airports and seaports and at selected hotels, tourist resorts, and commercial centers throughout the country.

On March 11, 1986, the PCGG issued a Sequestration Order signed by then Commissioner Mary Concepcion Bautista, sequestering the facilities, assets, and funds of Tourist Duty Free Shops to prevent any disposition to the prejudice of the people. On the same day, the PCGG issued a Freeze Order directing the Rizal Commercial Banking Corporation to freeze withdrawals, transfers, or remittances from the corporation's funds.

Tourist Duty Free Shops challenged the orders before the Sandiganbayan, claiming that the Sequestration Order was signed by only one of the five commissioners, that no investigation was conducted, that no list of sequestered assets was made, and that no recovery case had been filed against it. The Sandiganbayan found merit and issued the injunctive writ, enjoining the PCGG from implementing the sequestration and enjoining the banks from requiring prior PCGG approval before allowing withdrawals. The PCGG moved for reconsideration, and when denied, elevated the matter to the Supreme Court.

Issues

• Whether or not the May 27, 1986 Resolution of the Supreme Court, and the denial of the earlier injunctive application, bar the present action under the principles of res judicata, litis pendentia, or law of the case.
• Whether or not the Sandiganbayan gravely abused its discretion in issuing the writ of preliminary mandatory and prohibitory injunction against the implementation of the Sequestration and Freeze Orders.

Applicable Provisions

Section 3, Rule 58 of the Rules of Court provides:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually; (b) That the commission, continuance or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant; or (c) That a party, court or agency or a person is doing, threatening, or attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the judgment ineffectual.

This provision supplies the requisites for injunctive relief, which the Court distills into a clear and unmistakable right and an urgent necessity to prevent serious damage.

Ruling

On the first issue, the Court held that res judicata, litis pendentia, and law of the case do not apply. The May 27, 1986 Resolution merely disposed of the preliminary question of whether a temporary restraining order should issue. It was an interlocutory order, and the case was later dismissed without prejudice. A judgment on the merits is one rendered after a determination of which party is right, as distinguished from a judgment rendered upon some preliminary or formal or merely technical point. The dismissal without prejudice left the parties free to litigate anew, and the provisional remedy did not survive the main case of which it was but an incident.

On the second issue, however, the Court held that the Sandiganbayan gravely abused its discretion. The evidence presented by Tourist Duty Free Shops merely showed that it is a corporation, that a sequestration order signed by one commissioner was issued against it, and that no recovery case had yet been filed against it. These did not show a clear and unmistakable right to be protected. The Court stressed that the validity of the Sequestration Order is the very issue yet to be decided in the main case, and the Sandiganbayan could not pre-empt that determination by declaring the order void as a justification for the writ.

Doctrine

A preliminary injunction requires a clear and unmistakable legal right and an urgent necessity for the writ to prevent serious damage. A trial court cannot, in resolving an application for a provisional remedy, make a definitive ruling on the principal issue of the case. An interlocutory order, such as a resolution on an application for a restraining order, does not survive the dismissal of the main case and cannot be the basis of res judicata or law of the case. A dismissal without prejudice is not a judgment on the merits and leaves the parties free to litigate the matter in a subsequent action.

Disposition

The Supreme Court granted the petition, set aside the assailed resolutions and writ of preliminary injunction, and restrained the Sandiganbayan from enforcing them, leaving the validity of the Sequestration Order to be decided in the main case.

Remember This

Memorize this line: a preliminary injunction needs a clear and unmistakable right, and a court cannot declare a sequestration order void as a mere incident of an injunctive application. Examiners use this case to test the requisites of injunction and the non-applicability of res judicata to interlocutory orders in dismissed cases.