ALLURE MANUFACTURING, INC., EDGAR KROHN, JR., AND HON. JOSE P. COSCOLLUELA, JR., AS PRESIDING JUDGE OF REGIONAL TRIAL COURT, BRANCH 146, MAKATI, PETITIONERS, VS. HON. COURT OF A…

Allure Manufacturing versus Court of Appeals

The Case

This is a petition for review by certiorari of a decision of the Court of Appeals that nullified two orders of a trial court granting a writ of preliminary mandatory injunction. Allure Manufacturing, Incorporated and Edgar Krohn, Junior, the plaintiffs in the court below, ask the Supreme Court to reinstate those orders. The case matters because it fixes the standard for the extraordinary remedy of preliminary mandatory injunction — when a court may, before final judgment, order one person to surrender property to another — and it teaches how the status quo is measured and how the rule of caveat emptor applies to execution sales.

Procedural History

In the Regional Trial Court of Makati, Branch 146, presided over by Judge Jose P. Coscolluela, Junior, Allure and Krohn sought a writ of preliminary mandatory injunction to recover twelve sewing machines. The trial court first denied the prayer, then later granted it in an order dated 27 May 1986, and denied reconsideration in an order dated 1 September 1986. Servicewide Specialists, Incorporated, the party then holding the machines, went up to the Court of Appeals on certiorari. The Court of Appeals granted the writ of certiorari, nullified both orders of the trial court, and allowed the main case to proceed to final termination. Allure and Krohn then filed the present petition for review with the Supreme Court, which gave due course to the petition and required the parties to submit memoranda.

Facts

Sometime in 1983 the Bank of the Philippine Islands filed a collection suit against the spouses Jaime and Ana Marie Miguel and Filmerco Commercial Company, Incorporated. The defendants failed to answer, were declared in default, and judgment by default was rendered. The decision became final and executory, a writ of execution issued, and on 3 December 1984 the levied properties were sold at public auction. The bank, as highest bidder, bought the properties, including the sewing machines, and a certificate of sale was issued.

Shortly before the auction, on 13 November 1984, Allure and Krohn filed a separate action for recovery of personal property, annulment of the writ of attachment, and damages. They later filed a supplemental complaint praying that the sewing machines be returned to them, claiming ownership and prior possession. On 12 July 1985, while that case was pending, the bank sold the sewing machines by private sale to Servicewide Specialists, Incorporated.

The trial court initially refused the injunction because possession had already passed to Servicewide, but later granted it upon a bond of 80,000 pesos, ordering Servicewide to turn over the twelve sewing machines to Allure. Meanwhile, the Supreme Court, in a separate decision of 9 April 1987, set aside the default judgment in the collection suit for lack of valid service of summons and remanded that case for proper service and trial. Allure then argued that everything that flowed from the void judgment, including the auction sale, was likewise void.

Issues

• Whether or not the nullity of the default judgment in the collection suit, decreed after the injunction orders were issued, retroactively stripped Servicewide of any right over the sewing machines for purposes of the injunction.
• Whether or not the trial court committed grave abuse of discretion in granting the writ of preliminary mandatory injunction in favor of Allure.
• Whether or not the Court of Appeals correctly applied the requirements for a preliminary mandatory injunction laid down in Manila Electric Railroad and Light Company versus Del Rosario.

Applicable Provisions

Article 1547 of the Civil Code provides:

The implied warranties enumerated in this article do not apply to a sheriff professing to sell, by virtue of authority in fact or law, for the sale of a thing in which a third person has a legal or equitable interest.

This provision supports the Court's holding that a buyer at an execution sale takes the property subject to the risk that another may have a better right to it, so the sheriff's sale carries no warranty of title.

Ruling

On the first issue, the Court held that the validity of the injunction orders must be judged on the facts existing when they were issued, not on the later vicissitudes of the collection suit. At that time Servicewide held a contract of sale from the bank. The proper recourse after the later decision was to file an appropriate pleading for relief in the trial court, not to attack the injunction collaterally.

On the second issue, the Court found no reversible error. Allure had preliminarily established a clear legal right to the machines and a better right to possession. Servicewide bought the property during the pendency of the case and was a purchaser in litigation. The Court stressed that in execution sales the sheriff does not warrant title, and the rule of caveat emptor applies.

On the third issue, the Court held that the Court of Appeals strained the Meralco doctrine. The trial court never declared Servicewide a buyer in good faith; it merely said Servicewide "appears to be a buyer in good faith." And the absence of any transaction between Allure and Servicewide did not negate a willful invasion of Allure's right, because, as the Court put it, the existence of a right in favor of one imposes upon others the duty and responsibility to respect it. The Court also clarified the measure of status quo:

In the instant case, if status quo is to be maintained, in the interest of justice and equity, it is the status quo before the commencement of Civil Case No. 8993, under which possession of the sewing machines was with petitioner Allure.

Doctrine

A preliminary mandatory injunction may issue where the complainant makes out a clear case free from doubt and dispute, where the right is very clear, and where the effect is to restore a pre-existing relation recently and arbitrarily interrupted rather than to create a new one. The status quo to be preserved is that existing before the commencement of the action, not the situation created by the defendant's act. A buyer at an execution sale acquires no warranty of title, and caveat emptor governs. The validity of an injunction order is tested on the facts at the time of its issuance, unaffected by later developments in a related case.

Disposition

The Supreme Court granted the petition, set aside the decision of the Court of Appeals, reinstated the trial court's orders of 27 May 1986 and 1 September 1986, and directed consolidation of the two civil cases, with costs against Servicewide.

Remember This

Memorize this line: the status quo for a preliminary mandatory injunction is the situation before the action was filed, and an execution-sale buyer takes the property at his own risk under caveat emptor. Examiners use this case to test the requisites of preliminary mandatory injunction and the effect of a void judgment on a subsequent execution sale.