MANUEL G. VIRAY AND JOSE EDUARDO J. ALARILLA, PETITIONERS, VS. COURT OF APPEALS (TENTH DIVISION), HON. DEMETRIO BATARIO, JR., PRESIDING JUDGE OF RTC-MANILA, BRANCH 48, LUISITO M…

The parties have been importuning this Court for the early
disposition of this case, which they themselves have cluttered with ponderous
pleadings.  From the very start, we have
been urged to act precipitately.  One
motion bordering on disrespect asked for the immediate resolution of this
controversy as if it were the only matter in our docket.  Some averments are marked with near hysteria
and sonorous predictions of violence and bloodshed.  One gathers the impression that we are being
stampeded into a rash decision, without the careful reflection and exhaustive
deliberation that should characterize a judicial proceeding.

I

This is not a simple ejectment
case.  It involves millions of pesos and affects
the livelihood of more than two thousand persons employed by the corporation
that is the subject of the disputed contract. 
The basis of the conflicting contentions of the parties is a Memorandum
of Agreement which, by hindsight, could probably have been more clearly
worded.  They differ now as to its
nature, one claiming it is a contract of sale and the other that it is merely a
contract to sell.  This in turn has triggered a conflict of
jurisdiction, which lies at the heart of all this controversy.

The MOA was concluded by Luisito C. Magpayo and Manuel G. Viray in
March 1989, on behalf of their respective groups, and called for the transfer
from the former to the latter of 99.91% of the shares of stock in the Ocean
Terminal Services, Inc. for the stipulated consideration of P68 million
to be paid according to a prescribed schedule.  Viray then became
chairman of the board of OTSI and Jose J. Alarilla
its president.  Later, alleging
non-compliance with the agreement, Magpayo
unilaterally rescinded it and demanded from the petitioners the return to him
of the control, management and assets of the company.  These acts were resisted by Viray, who maintained that he had not defaulted on the
prescribed payments or violated any of the conditions of the MOA.  Magpayo then sued
for judicial confirmation of the rescission and the enforcement of his demands
upon Viray for the surrender of OTSI.  Viray denied that
the contract was subject to rescission and questioned the jurisdiction of the
trial court.

Upon the filing of the complaint against Viray
and Alarilla on March 9, 1990, Presiding Judge Corona
Somera of the Regional Trial Court of Manila issued a
temporary restraining order effective only for five days or until the case
could be raffled to a regular branch of the court.  The TRO restrained the petitioners from
“negotiating and/or selling the corporation to third parties and/or
representing themselves as directors and officers of OTSI; and continuing to
exercise any of the powers or functions
pertaining to a director and officer of OTSI.”

The petitioners filed a motion to dismiss on the ground of lack
of jurisdiction and a motion for
partial lifting of the temporary restraining order insofar as it restrained
them from representing themselves and acting as officers and directors of
OTSI.  On the same date, consistently
with their position in the regional trial court, they filed with the Securities
and Exchange Commission a complaint, subsequently docketed as SEC Case No.
03735, seeking to prevent Magpayo and his group from
interfering with the management and control of OTSI.  They also
prayed for a temporary
restraining order.

On March 13, 1990,
Judge Demetrio Batario,
Jr., to whom Civil Case No. 90-52338 was raffled, renewed the TRO issued by
Judge Somera. 
The following day, this was challenged on certiorari and
prohibition in the Court of
Appeals, where the petitioners sought as ancillary relief the issuance of a
temporary restraining order to restrain the TRO of the regional trial
court.  This order was granted the same
day by the respondent court.

On March 15, 1990,
the private respondents filed a motion
to dismiss the SEC case for lack of jurisdiction and at the same time prayed to
lift the TRO of the respondent court on the same ground.  Both motions were opposed by the petitioners.

After conducting a hearing on the petition filed by Viray, the respondent court lifted its TRO on March 22, 1990, holding that Judge Batario had lawfully issued his TRO, but at the same time
declaring that “this has no bearing on the application for preliminary
injunction scheduled for hearing before the respondent judge on March 29, 1990.”

The petitioners came to this Court the following day and,
alleging grave abuse of discretion, urged us
to reverse the respondent court. 
However, in view of the complexity of the issues raised, let alone the
voluminous documents they had annexed to their petition, we decided to look
into the matter more carefully.

The hearing on the application for preliminary injunction was
held as scheduled before Judge Batario and lasted for
all of three hours.  After considering
the arguments of the parties, he granted the application and issued the writ,
which is now the object of the challenge in the supplemental petition for certiorari
and mandamus filed on April
2, 1990.  The validity of the
TRO earlier issued by him is no longer in issue.  What we deal with now is the propriety and
lawfulness of the writ of preliminary injunction which replaced the TRO on March 29, 1990.

It must also be
stated that on March 30, 1990,
Viray filed a petition for consignation against the
private respondents, together with Citibank, which was docketed as Civil Case
No. 90-909 in the Regional Trial Court of Makati.

To complete the picture, we also note that two motions for leave
to intervene were separately filed by Mila Perez, et al. and the
KAMADA, only to be withdrawn later.

II

As we see it, the basic issue before us is which as between the
Regional Trial Court of Quezon City and the
Securities and Exchange Commission has primary jurisdiction over the complaint
for rescission.

The trouble with some pleadings is that they are tiresomely
verbose and unnecessarily prolix, as if
they were intended more to impress the client than to convince this
Court.  The parties seem to have some
difficulty in identifying the basic questions and confining the narration of
facts and the discussion of their arguments within the relevant limits.  Counsel obviously do not realize that clarity
and simplicity can help considerably in the early decision of the case.  In many litigations, and this is one of them,
much of the task of the judge is devoted to separating the chaff from the
grain, which is essentially yeoman’s work and should not waste the time of the court.

As simply as we can deduce it, the petitioners’ position is as
follows:

In the MOA, the private respondents sold practically all the
shares of stock in OTSI to the Viray group for a
specified consideration payable in installments.  The transaction was a contract of sale that
immediately transferred ownership of the OTSI to them notwithstanding that the
contract price had not yet been fully paid. 
Upon their acquisition of the said shares, Viray
and Alarilla became stockholders of OTSI and so
qualified to be directors and officers thereof.  The MOA carried no provision for automatic
rescission and in any case there was no ground therefor
because they had not defaulted in the installment payments agreed upon.  Moreover, and most important, the Regional
Trial Court of Manila has no jurisdiction over the matter because it is an intra-corporate dispute that can be
settled only by the SEC under PD No. 902-A. 
The complaint does not ask only for judicial rescission but pleads other
issues requiring the expertise of
the SEC to decide.  The question of
ownership of the shares of stock cannot be resolved without applying
corporation law principles, with which the SEC is more familiar.  Furthermore, the private respondents are estopped from assailing the title of the petitioners after
having consistently acknowledged it for more than one year.  The respondent judge should therefore have
dismissed he complaint filed by the private respondents and declined to issue
the writ of preliminary injunction.

For their part, the private respondents argue as follows:

The MOA is not a contract of sale but merely a contract to
sell.  Title to the shares of stock was
not immediately transferred to the petitioners and could be acquired by them
only upon full payment of the stipulated consideration.  Automatic rescission of the contract for
breach of any of its conditions can be deduced from the terms thereof, and upon
such rescission the petitioners lost their right to remain as officers and
directors of OTSI.  They were designated to
these positions only as agents of the private respondents, who are the real
owners of the shares of stock.  This
agency could be terminated at will by the principals.  The petitioners could not have been elected
to their present positions because, not being stockholders of OTSI, their election would have been violative of the Corporation Code.  The private respondents are not estopped from raising this objection because it is based on
law and public policy.  Significantly, the petitioners had recognized
the jurisdiction of the civil court over the dispute when they filed the
consignation suit in the Regional Trial Court of Makati.  This is a clear admission that the dispute
between the parties is clearly not an intra-corporate dispute falling under the
jurisdiction of the SEC under PD No.
902-A.  It is an ordinary civil
action for rescission of a contract that can be resolved by the Regional Trial
Court of Manila as a court of general jurisdiction.

III

It would seem that the petitioners are begging the question.  They are assuming at the outset that they are stockholders of OTSI when that is
the very question that has yet to be resolved.

The fact is that as far as the private respondents are concerned,
the petitioners are neither officers not stockholders of OTSI.  The rescission of the MOA has reduced them to
outsiders and it is as such that they have sued in the Regional Trial Court of
Manila.  Their defense is that they
continue to be officers and stockholders of OTSI, but this has yet to be
proved.  Already, however, they would
have the case dismissed immediately and transferred to the SEC.

The provision they invoke is Section 5 of PD No. 902-A, which vests in the SEC
original and exclusive jurisdiction to hear and decide cases involving:

(a) Devices or schemes employed by, or any acts of, the Board of
Directors, business associations, its officers or partners, amounting to fraud
and misrepresentation which may be detrimental to the interest of the public
and/or of the stockholders, partners, members of associations or organizations registered with the
Commission.

(b) Controversies arising out of intra-corporate or partnership
relations, between and among stockholders, members, or associates; between any
and/or all of them and the corporation, partnership or association of which
they are stockholders, members or associates, respectively; and between such
corporation, partnership or association and the state insofar as it concerns
their individual franchise or right to exists as such entity.

(c) Controversies in the election or appointments of directors,
trustees, officers or managers of such corporations, partnerships, or
associations.

(d) Petitions of corporations, partnerships or associations to be
declared in the state of suspension of payments in cases where the corporation,
partnership or association possesses sufficient property to cover all its debts
but foresees the impossibility of meeting them when they respectively fall due
or in cases where the corporation, partnership or association has no sufficient
assets to cover its liabilities but is under the management of a rehabilitation
receiver or management committee created pursuant to this Decree.

In support of their position, the petitioners invoke DBP v. Ilustre,^[1]
where it was held that a case instituted in the guise of a complaint for the
rescission of a contract was actually an action for recovery of the control and
management of a corporation and so came under the jurisdiction not of the
courts but of the SEC.

Attention is also called to Boman Environmental
Development Corporation v. Court of Appeals,^[2]
where the Regional Trial Court of Makati was
sustained by the respondent court for assuming jurisdiction over a case
involving the balance of the payment for shares of stock due from the corporation
to the seller.  The decision was reversed
by this Court, which held that the claim was an intra-corporate dispute coming
under the original and exclusive jurisdiction of the SEC.

The petitioners especially cite Saavedra
v. SEC,^[3]
also involving a complaint for rescission, this time filed with the SEC, which
was challenged on the ground that the case came under the jurisdiction of the
ordinary civil courts.  In sustaining the
denial of the motion to dismiss, this Court observed as follows:

As aptly held by the SEC, the dispute at bar is an intra-corporate
that has arisen between and among the principal stockholders of the corporation
due to the refusal of the defendants (now petitioners) to fully comply with
what has been convenanted by the parties.  Such dispute involves a controversy
“between and among stockholders” specifically as to plaintiff’s right
as stockholder over unpaid assignment of shares and the validity of defendant’s
acquisition of the same.  In other words,
the present case involves an intra-corporate dispute as to who has the right to remain and act as owners-stockholders of
the corporation.

Viray’s reliance on this case is
understandable, as the facts are strikingly similar to those in the case at
bar.  However, a closer examination of
the records^[4]
of the case reveals that the Amended Complaint filed with the SEC was for
“Delivery of Shares of Stocks, Specific Performance Damages, With Prayer
for Preliminary Restraining Order, Preliminary Injunction, Permanent
Injunction, Attachment with Preliminary
Attachment,” with the following pertinent allegations:

x        x          x

9.  As clearly stated above,
in case of violation of the subject MOA, specifically the payment of the
consideration of the sale, the same shall automatically rescind the subject
agreement including the two other documents, Contract of Lease and Deed of
Assignment executed in consideration thereof;

10. In view of the breach and non-compliance with the provisions of
the subject contract, the herein plaintiff
rescinded the subject MOA, the Contract of Lease, and the Deed of
Assignment all dated 2 July 1987 through a notarial
rescission entitled “Rescission of Memorandum of Agreement” dated 16
September 1987 (xerox copy thereof is hereto attached
as Annex “D” and made an integral part hereof).

11. The subject rescission of MOA together with the two other
documents, was preceded by a formal request upon Mr. Honorio
Saavedra, Jr., to peacefully vacate, pack-up and
leave the company premises prior to the expiration of the grace period within
which to comply therewith in a letter dated September 14, 1987 (xerox copy of which is hereto attached as Annex
“E” and made an integral part hereof).

12. After the execution of the Rescission of Memorandum of
Agreement, the corresponding notice together with copies thereof was delivered
and sent to the defendants through Mr. Honorio Saavedra, Jr., in a letter dated 11 September 1987 and
served on October 16, 1987 (xerox copy of which is
hereto attached as Annex “F” and made an integral part hereof).

13. Despite the Rescission of the MOA and despite the full
knowledge by defendants that their failure to observe and comply with the
subject MOA has resulted in the rescission of their rights and authority over
the subject corporation, they refused to acknowledge the same and still
continued to hold on to the company properties and premises to the great damage
and prejudice of the corporation.

14. Not contented with that, the herein defendant, Honorio Saavedra, Jr., knowingly,
willfully and unlawfully gave malicious representations before the various
government entities, thereby preventing the herein plaintiffs from peacefully
taking over the full and complete control of the management of the corporation.

15. Likewise, despite such knowledge and awareness of the fact
that they have no more rights and authority over the subject corporation, the
herein defendants refused to deliver and turn over the subject shares of stocks
to the herein plaintiffs
again to the great damage and prejudice of the corporation. (Underscoring
supplied.)

16. As of the present, the operations and activities of the
corporation has been grounded in view of the malicious and unwarranted refusal
by the herein defendants in preventing complainants from entering the company
offices and taking control of the company books, properties and equipments
therein.

17. The corresponding demands, requests and pleas were made, done
and resorted to by the herein plaintiffs, but to no avail; defendants still
unlawfully, and unjustifiably refused to turn-over the company premises,
properties, machineries, equipment, and other paraphernalia to the herein
plaintiffs who are now the lawful owners and stockholders of the subject
corporation.

It is clear from these allegations that the complaint was not
merely for rescission of the MOA. 
Petitioners pleaded the issue of control over the corporation which was
clearly a matter falling under PD No. 902-A. 
There was therefore need to enlist SEC’s expertise and technical
know-how for a proper determination of the same.

It will also be noted that the MOA upon which the complaint with
the SEC was based was precisely worded. 
Par. 7 thereof provided as follows:

That the second party in turn shall faithfully comply with his
obligations under the Agreement, particularly the payment of the consideration
of the transfer and sale of the company, and which failure shall be a violation
of the agreement including all other documents purporting to assign and
transfer the equity interests of the First Party to the corporation including
the contract of lease over the property of Mr. Gregorio M. Ramos where the
plant and equipment of the company are housed and located, all payments so
far made by the Second Party to the First Party at the time of the violation
shall be automatically forfeited in favor of the First Party to compensate for
whatever damages the latter may have suffered by reason of the non-payment of
the consideration of the sale.  x x x (Emphasis supplied.)

The intention of the parties was easily discernible, leaving no
room for conflicting interpretations. 
The stipulation left no doubt that the buyer’s non-compliance with his
obligations under the MOA, particularly the payment of the consideration, was
to be considered a violation of the agreement and would automatically cancel
it.

By contrast, the provisions of the MOA in the case at bar admit
of different interpretations of the intention of the parties as expressed in
the following provisions;

2.  Delivery of Stock
Certificate to Buyer.

Upon the execution of this Agreement, the SELLER shall deliver to
the Escrow Agent the certificates of stocks endorsed in blank, covering all the
Shares.  The Escrow Agent shall hold on
to the certificates of stocks and shall deliver or release the same to the
BUYER only in accordance with the following schedules:

a) TWENTY FOUR THOUSAND TWO
HUNDRED SIXTY FIVE (24,265) shares covered
by certificates duly endorsed in blank, upon payment by the BUYER of the
P15 million downpayment;

b) TWENTY NINE THOUSAND ONE HUNDRED EIGHTEEN (29,118) shares
covered by certificates duly endorsed in blank, upon payment by the BUYER of
the amount of P18 million on 6 May 1989; and

c) FIFTY SIX THOUSAND ONE HUNDRED SEVENTEEN (56,117) shares covered
by certificates duly endorsed in blank, when all the amortizations on the loans
referred to in Section 1(c) hereof are fully paid or when the collaterals
presently securing the same have been released.

8.  Transfer of Ownership.

When full payment is made by the BUYER in accordance with the
provision of par. (1) hereof, the SELLER shall execute and deliver a final Deed of Sale of Shares and such
other documents that may be necessary or required to effect the cancellation of
the existing certificates of stock covering the Shares and new ones be issued in the name of the
BUYER or his assigns.  It further agreed
that all transfer and documentary taxes with respect to the sale of the shares
covered by this Agreement shall be paid by the SELLER.

The petitioners assert that Par. 2 entitles Viray
to ownership over such number of shares as may be covered by the installment
payments as they are made, because the MOA actually provides for three (3)
separate sales of shares of stock.  The
private respondents say otherwise, contending that the MOA is a mere contract
to sell where ownership of the shares is reserved with the seller, to be
transferred only upon full payment of the purchase price.  In the disposition of these differences in
interpretation, there is no need to enlist SEC’s expertise or technical
know-how.

The difference between Saavedra and the
case before us is that in the former, the status of the defendants as stockholders of the corporation was
not in issue and was in fact admitted by both parties.  The MOA on that matter was clear enough,
unlike in the case at bar.  The herein
private respondents have gone to the regular court and not the SEC precisely
because they do not recognize the petitioners as stockholders of OTSI under the
provisions of the MOA.  In the present
case, the only concern of the private respondents is the judicial confirmation
of their rescission of the MOA, which would not need the expertise of SEC to
resolve.  It is a purely civil matter
resoluble by civil law principles.

As in Saavedra, it was not claimed that
the complainant in the Ilustre case and the private
respondents in the Boman case were not
stockholders.  The status of the parties
was not an issue in those cases.  It is
so in the case at bar.

The petitioners argue that it is impossible for the RTC to resolve
the issue of ownership of the OTSI controlling shares without resolving the
applicable corporation law principles like the effect of endorsement of the shares of stocks, of
registration on the stocks and transfer, which are matters which the law precisely reserve for SEC
jurisdiction.  This is an untenable
contention.

In DMRC
Enterprises v. Este del Sol Mountain Reserve, Inc,^[5]
the Court said:

The purpose and the wording of the law escapes the respondent.  Nowhere in said decree do we find even so
much an intimidation that absolute jurisdiction and control is vested in the
SEC in all matters affecting corporations. 
To uphold the respondents’ arguments would remove without legal
imprimatur from the regular courts all conflicts
over matters involving or affecting corporations, regardless of the nature of
the transactions which give rise to such dispute.  The Courts would then be divested of
jurisdiction not by reason of the nature of the dispute submitted to them for
adjudication, but solely for the reason that the dispute involves a corporation.  This cannot be done.  To do so would not only be to encroach on the
legislative prerogative to grant and revoke jurisdiction of the courts but such
a sweeping interpretation may suffer constitutional infirmity.  Neither can we reduce jurisdiction of the
courts by judicial fiat.  (Art. X, Sec.
1, 1973 Constitution; emphasis supplied.)

Curiously, the petitioners aver that jurisdiction cannot be made
to depend on the exclusive characterization of the case by one of the parties
and contend that the allegations in the complaint cannot be the basis of the Court’s assumption of
jurisdiction over the subject matter of the case.

In the same case, the Court declared:

Jurisdiction of a court is conferred by the Constitution and by the
laws in force at the time of the commencement of the action.  (People v. Maisno,
71 SCRA 600; Villamayor v. Luciano,
88 SCRA 156.) However, whether or not a court has jurisdiction over the
subject matter of a case is determined from the allegations of the complaint.  (Magay v. Estiandan, 69 SCRA 456; Republic v. Sebastian, 72 SCRA
222.) Therefore, to resolve the issue raised to us, an interpretation of the
law on jurisdiction, must be made vis-a-vis
the averments of the petitioner’s complaint. 
(Emphasis supplied.)

In Republic v. Sebastian,^[6]
the Court had occasion to restate the settled rule that “the subject
matter of given case is determined not by
the nature of the action that a party is entitled under the facts and
the law to bring but by the nature and character of the pleadings and issues
submitted by the parties to the court for trial and judgment.  To ascertain the jurisdiction of the trial
court over the subject matter, We have to rely on the allegations, the truth of which
is to be theoretically admitted in considering the motion to dismiss.”
(Emphasis supplied.)

In fact, the herein private respondents deny the claimed status
of the petitioners as stockholders of OTSI on the ground alone of their
interpretation of the provisions of the MOA. 
As previously noted, it is the private respondents’ contention that
title to the shares covered by the agreement would pass to the petitioners only
upon their payment in full of the stipulated consideration, and not
before.  Pending such payment, they cannot
be regarded as stockholders of the corporation and so are also not qualified to
be directors and officers thereof.  When Viray and Alarilla became
chairman of the board of directors and president of OTSI, respectively, it was
only by virtue of their designation as such by the private respondents, who
remained the controlling stockholders. 
The petitioners were mere agents of the private respondents.  That was the reason the private respondents
sued the petitioners before the Regional Trial Court of Manila and not the SEC.

According to Union Glass and Container Corporation v. SEC:^[7]

x x x in order
that the SEC can take cognizance of a case, the controversy must pertain to any
of the following relationships:  (a)
between the corporation, partnership or association and the public; (b) between
the corporation, partnership or association and its stockholders, partners,
members, or officers; (c) between the corporation, partnership or association
and the state insofar as its franchise, permit or license to operate is
concerned; and (d) among the stockholders, partners and associates themselves.

It would not
necessarily follow from the above criteria that the complaint for rescission
filed by the private respondents should come automatically under the
jurisdiction of the SEC.  It is not clear
at this point that the petitioners are stockholders of OTSI.  That status has yet to be clarified at the
trial of the said complaint.  That status
cannot be assumed without a hearing.  The
petitioners cannot divest the regional trial court of jurisdiction by simply
asserting that they are stockholders of OTSI and their dispute with the private
respondents is intra-corporate in nature.

The establisment of any of the
relationships mentioned in Union will not necessarily always confer
jurisdiction over the dispute on the SEC to the exclusion of the regular
courts.  The statement made in one case^[8] that the rule admits of no exceptions
or distinctions is not that
absolute.  The better policy in
determining which body has jurisdiction over a case would be to consider not
only the status or relationship of the parties but also the nature of the
question that is the subject of their controversy.

It should be obvious that not every conflict between a
corporation and its stockholders involves corporate matters that only the SEC
can resolve in the exercise of its adjudicatory or quasi-judicial powers. 
If, for example, a person
leases an apartment owned by a corporation of which he is a stockholder, there should
be no question that a complaint for his ejectment for
non-payment of rentals would still come under the jurisdiction of
the regular courts and not of the SEC. 
By the same token, if one person injures another in a vehicular
accident, the complaint for damages filed by the victim will not come under the
jurisdiction of the SEC simply because of the happenstance that both parties
are stockholders of the same corporation. 
A contrary interpretation would dissipate the powers of the regular
courts and distort the meaning and intent of PD No. 902–A.

It is true that the trend is toward vesting administrative bodies
like the SEC with the power to adjudicate matters coming under their particular
specialization, to insure a more knowledgeable solution of the problems submitted to them.  This would also relieve the regular courts of
a substantial number of cases that would otherwise swell their already clogged
dockets.  But as expedient as this policy
may be, it should not deprive the courts of justice of their power to decide
ordinary cases in accordance with the general laws that do not require any
particular expertise or training to interpret and apply.  Otherwise, the creeping take-over by the administrative agencies of the
judicial power vested in the courts would render the Judiciary virtually
impotent in the discharge of the duties assigned to it by the Constitution.

In the case before us, we see no need for any special preparation or skill in the
interpretation of the MOA.  The
controversy is an ordinary civil litigation. 
To resolve it, the court simply has to apply the rules of civil law and
the canons of construction usually employed to discover the intent of the
parties who executed the contract.  The
fact that the subject matter of the MOA is shares of stock is not the
controlling consideration as no complicated question of corporation law is
involved.  If the subject matter of the
MOA had been a house and lot instead, any conflict arising therefrom
would not necessarily be cognizable only by the Housing and Land Use Regulatory
Board.  The suggestion in the case at bar
that the interpretation of the MOA should be left to the SEC because it has
more expertise on the matter is not only erroneous; it disparages the regular
court and belittles their competence to render justice according to the general
laws and the applicable jurisprudence.

We do not find that the regional trial courts lack the necessary
ability to interpret an ordinary contract such as the MOA in the case at
bar.  There is nothing complicated about
the document that requires any special aptitude or expertise and justifies its
referral to another entity like the SEC for a more definitive
interpretation.  In the first instance,
the complaint for rescission should be heard by the Regional Trial Court of
Manila, primarily to determine if the petitioners are stockholders and
directors of OTSI and if their differences with the private respondents are in
the nature of an intra-corporate dispute cognizable only by the SEC.  Whatever its decision may be is, of course,
subject to review by this Court.

It bears stressing that the findings of the trial court in its
order granting the writ of preliminary injunction are merely tentative pending
a closer examination of the issues at the trial of the complaint for judicial
rescission of the MOA.  As the order
clearly stated, it was based on prima facie evidence, which may
be rebutted at the trial.

We turn now to the preliminary injunction, which the petitioners
argue was issued with grave abuse of discretion, besides lack of
jurisdiction.  Their contention is that
the basic function of a preliminary injunction is to preserve the status
quo and not, as in the case at bar, to restrain the petitioners from
acting as directors and officers of OTSI
and to transfer its ownership to the private respondents.  The petitioners also fault the respondent
judge for issuing the writ despite the petition now pending before us, unlike
the SEC, which suspended all proceedings out of deference for this Court.

These arguments are unacceptable.

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

SEC. 3.  Grounds for issuance of preliminary
injunction. – A preliminary injunction may be granted at any time after the
commencement of the action and before judgment, when it is established:

(a) That the plaintiff 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 the performance of an act or acts, either for a limited period or
perpetually;

(b) That the commission or continuance of some act complained of
during the litigation or the non-performance thereof would probably work
injustice to the plaintiff; or

(c) That the defendant is doing, threatens, or is about to do, or
is procuring or suffering to be done, some act probably in violation of the
plaintiff’s rights respecting the subject of the action, and tending to render
the judgment ineffectual.”

Interpreting this Rule, this Court said in Ortigas
& Co., Court clearly provides:^[9]

Two requisites are necessary if a preliminary injunction is to
issue, namely, the existence of the right to be protected, and the facts
against which the injunction is to be directed, are violative
of said right.  In particular, for a writ
of preliminary injunction to issue, the existence of the right and the
violation must appear in the allegation of the complaint and a preliminary
injunction is proper only when the plaintiff appears to be entitled to the
relief demanded in his complaint.  x x x.

A review of the records of this case shows that the respondent court has not acted precipitately
or arbitrarily in issuing the
writ of preliminary injunction.  The
hearing on the application for the writ took three hours and was participated
in by the parties, who actively argued in favor of their respective
positions and submitted evidence
in support thereof.  There was no lack of
basis for its pronouncement
after the hearing that:

Considering all the foregoing, the Court holds that it has been
established prima facie that the plaintiffs, led by plaintiff Araneta, are entitled to the relief demanded; that the
actuations of defendants, if not restrained, would probably work injustice to
the plaintiffs, especially plaintiff Araneta; and
that if the writ of preliminary injunction prayed for is not granted, the plaintiffs’ rights as to the subject of the
action would be rendered ineffectual.

Among the acts which the trial court felt the petitioners should be
restrained from committing were the disposition of the assets of OTSI, the
withdrawal of its funds, the transfer or destruction of its records, the cut-off of its power and communication
lines, and the removal of its forklifts, furniture and other equipment, all to
the prejudice of the private respondents. 
As we held in Madrigal v. Rodas,^[10]
injunction is the remedy to prevent one party from taking advantage of his
favored position to the damage of the other party.  The petitioners were in a favored position because
they were actually in physical control of OTSI at the time the TRO was issued by Judge Bataria.

We find that the lower court committed no disrespect for this
Court in issuing the writ of preliminary injunction after determining the
urgent need therefor on the basis of the evidence
submitted to it at the
hearing.  Significantly, we issued no temporary restraining order against the issuance of such
writ.  But we must make it clear that,
after the order granting the writ of preliminary injunction was questioned
before this Court in the
supplemental petition dated April 2, 1990, the lower court had no more
jurisdiction to act on the motion to dissolve the writ of preliminary
injunction filed by the petitioners on May
7, 1990.  As we held in Corpuz v. Court of Appeals:^[11]

We also find that the questioned orders of respondent Judge Leviste were issued without jurisdiction, notwithstanding
the fact that the writ of possession was not in order.  It was presumptuous on his part to grant the
motion for reconsideration when he knew very well that the subject matter of
said motion was still pending with this Court in a petition for certiorari.  The
act of issuing the orders constituted disrespect and disregard of the authority
and jurisdiction of this Court.

In filing that
motion, the petitioners were in effect arguing against their position that the
lower court had no more right to act on the complaint with the filing of the
petition with this Court.  Moreover, they
were pleading the same proposition on two fronts, the Regional Trial Court of
Manila and this Court.  In other words,
they were forum-shopping and so were no less disrespectful to this Court than
the trial judge in the aforecited Corpuz
case.  For such an attitude, we
pronounced the following sanction in Buan v. Lopez:^[12]

Indeed, the petitioners in both actions, x x
x have incurred not only the sanction of dismissal of
their case before this Court in accordance
with Rule 16 of the Rules of Court, but also the punitive measure of dismissal
of both their actions, that in this Court and that in the Regional Trial Court
as well.  Quite recently, upon
substantially identical factual premises, the Court en banc had
occasion to condemn and penalize the act of litigants of filing the same suit in
different courts, aptly described as “forum-shopping.” viz:

x                    x                      x

x x x That same
identity puts into operation the sanction of twin dismissals just
mentioned.  x x
x.

In our discretion, however, we shall not impose a similar sanction on the herein petitioners, to permit
the resolution on the merits of the important issues presented in this case.

It is not the function of this Court to determine at this time
the merits of the complaint for rescission now pending before the Regional
Trial Court of Manila.  Decision of that
case will depend not only on the legal considerations involved but also on the
factual evidence that has yet to be adduced by the parties at the trial
proper.  In this petition, we simply rule
on the question of jurisdiction
and the lawfulness of the writ of preliminary injunction.  We sustain the trial court on both counts.

WHEREFORE, the
petition and the supplemental petition are DISMISSED, with costs against the
petitioners.  The Regional Trial Court of
Manila is directed to proceed with the trial of Civil Case No. 90-52338 and to decide it with
deliberate dispatch.  It is so ordered.

Narvasa, (Chairman), Gancayco, Griño-Aquino, and Medialdea, JJ., concur.

^[1]
138 SCRA 111.

^[2]
167 SCRA 541.

^[3]
159 SCRA 57.

^[4]
Rollo, pp. 25, 27-28.

^[5]
132 SCRA 293.

^[6]
72 SCRA 222.

^[7]
126 SCRA 31.

^[8]
Philex Mining Corp.
v. Reyes, 118 SCRA 602.

^[9]
148 SCRA 326.

^[10]
80 Phil. 252.

^[11]
90 SCRA 424.

^[12]
145 SCRA 34.