TOMAS T. REYES, PETITIONER, VS. COURT OF APPEALS AND SUN INSURANCE OFFICE, LTD., RESPONDENTS.

Reyes versus Sun Insurance Office

The Case

This is a petition for certiorari brought by Tomas T. Reyes against the Court of Appeals and Sun Insurance Office, Limited. The question is whether a party who has already obtained one writ of preliminary injunction may be barred, under the doctrine of res adjudicata, from applying for a second writ in another proceeding over the same subject matter. The case matters because it draws a bright line between the true requisites of res adjudicata and the mere procedural discouragement of renewing an injunction motion, and because it teaches that a second injunction may lie where it is directed against a different act.

Procedural History

Sun Insurance obtained a writ of possession over the mortgaged properties from the Mandaue court. Tomas Reyes then filed a petition for annulment of the deed of assignment and extrajudicial sale, with an application for a writ of preliminary injunction, before Judge Julio Logarta. After notice and hearing, Judge Logarta issued a writ of preliminary injunction. Sun Insurance challenged that writ before the Intermediate Appellate Court, which dismissed the petition and declared that Sun Insurance, being a foreign corporation, cannot bid in the extrajudicial foreclosure sale.

Sun Insurance thereafter filed a new petition for extrajudicial foreclosure before the Regional Trial Court at Mandaue City, Branch 28. Tomas Reyes applied anew for injunctive relief, and the trial court issued a temporary restraining order and later a writ of preliminary injunction. His motion for reconsideration was denied by the new presiding judge. Sun Insurance then filed a second petition for certiorari and prohibition before the Court of Appeals, which applied the rule on res judicata and set aside the trial court's orders, restraining further proceedings in the civil case except to dismiss it. Tomas Reyes elevated the matter to the Supreme Court by petition for certiorari.

Facts

In August 1979, Sun Insurance designated Luis A. Reyes as a general agent, and in October 1979 he appointed his son, Tomas T. Reyes, as attorney-in-fact to manage the agency. In March 1980, Tomas Reyes and his wife mortgaged three parcels of land in favor of United Coconut Planters Bank to guarantee a loan, later increased by an additional credit agreement. The agency later incurred an accountability in favor of Sun Insurance, which Tomas Reyes assumed with Sun's consent, and in June 1985 the parties entered into a compromise agreement providing for payment through withheld commissions and a monthly sum. In August 1985, upon Sun's insistence, Tomas Reyes executed a second and third mortgage on one of the properties in favor of Sun Insurance.

In March 1986, the bank assigned the Reyes mortgages to Sun Insurance, which paid the remaining balance and claimed subrogation. Sun Insurance then applied for extrajudicial foreclosure, but a restraining order was issued. A second application for foreclosure followed, and in November 1986 the three properties were sold at public auction, with Sun Insurance as the sole bidder. Sun Insurance obtained a writ of possession, and the sheriff gave Tomas Reyes a period to vacate. On the morning of February 20, 1987, the sheriffs with military personnel went to the premises and threatened to eject the Reyes family. That same afternoon, Tomas Reyes filed an urgent motion to withhold implementation of the writ, and the court extended implementation for humanitarian reasons.

On February 23, 1987, Tomas Reyes filed a petition for annulment of the deed of assignment and extrajudicial sale, with damages and an application for a writ of preliminary injunction. A restraining order was issued, and after notice and hearing a writ of preliminary injunction followed. Sun Insurance challenged that writ, and the Intermediate Appellate Court ruled that Sun Insurance, being a foreign corporation, cannot bid in the extrajudicial foreclosure sale. Sun Insurance then filed a new petition for extrajudicial foreclosure, and Tomas Reyes sought a second writ of preliminary injunction, this time raising the nullity of the deed of mortgage, the deed of assignment, and the compromise agreement. The trial court granted the second writ, and the Court of Appeals set it aside on the ground of res judicata.

Issues

• Whether or not a prior grant of a writ of preliminary injunction operates as a bar, under the doctrine of res adjudicata, to another application by the same party for a second writ in another proceeding over the same subject matter.
• Whether or not a second application for injunction may be granted where it is directed against a different act than the one sought to be enjoined in the first application.

Applicable Provisions

The decision does not quote a specific statutory provision. It applies the doctrine of res adjudicata and the jurisprudential rule on second applications for injunction, which the Court states as follows:

A second application for injunction, which rests in the sound discretion of the court, will ordinarily be denied unless it is based on facts unknown at the time of the first application.

This rule governs whether a second application for injunctive relief may be entertained at all.

The Court also states the requisites of res adjudicata, which bear on whether the first injunction bars the second:

The latter principle requires inter alia, a former final judgment or order which has not only become final but must have been a judgment which disposed of the case on the merits.

These requisites determine whether the first injunction can operate as a bar.

Ruling

On the first issue, the Court held that the principle of res adjudicata has no application. A proceeding for a writ of preliminary injunction is merely an ancillary remedy and results in a provisional relief, not a final judgment or order arrived at after trial of the main case. Since the requisites of res adjudicata do not obtain, the first writ cannot bar the second application. The Court explained that the jurisprudential rule discouraging a second application is not based on res adjudicata, but on the same rationale as the prohibition on splitting a single cause of action, which is to avoid multiplicity of suits and vexation or harassment to a party.

On the second issue, the Court held that although the grounds relied upon in the second application existed even during the first, this did not argue against the second injunctive relief, because the two writs are directed against distinct acts. The first injunction was against the implementation of the writ of possession consequent to the invalidity of the sale to a disqualified foreign corporation; the second is against the new foreclosure proceeding subsequently instituted by Sun Insurance after the appellate court held that it was prohibited by law from bidding in the prior foreclosure sale. The Court noted that the alleged nullity of the deed of mortgage, deed of assignment, and compromise agreement could not have been ventilated in the controversy over the writ of possession, which was merely part of the executory process consequent to a concluded extrajudicial foreclosure. The Court also found that Tomas Reyes never abandoned his theory of nullity, as shown by his amended complaint and the hearing before the appellate court.

Doctrine

A Bar candidate should retain these rules. First, res adjudicata requires a former final judgment or order that disposed of the case on the merits; a writ of preliminary injunction is merely an ancillary remedy and a provisional relief, so it cannot be the basis of res adjudicata. Second, a second application for injunction is ordinarily denied unless based on facts unknown at the time of the first application, but this rule is not absolute and applies only where the second application operates on the same act sought to be enjoined in the first; it cannot be invoked where relief is asked against a different act. Third, the rationale for the rule is the avoidance of multiplicity of suits and vexation, akin to the prohibition on splitting a single cause of action.

Disposition

The petition was granted; the decision of the Court of Appeals was reversed and set aside; the trial court was directed to hear and decide the civil case with deliberate dispatch; and the temporary restraining order issued was made permanent.

Remember This

Memorize this line: a writ of preliminary injunction is a provisional, ancillary remedy, so it can never be the final judgment on the merits that res adjudicata demands. Examiners use this case to test the requisites of res adjudicata and the exception allowing a second injunction directed against a different act.