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PHILIPPINE LEISURE v. CA

FACTS:

The Philippine Leisure and Retirement Authority (PLRA) is a government-owned corporation created to develop and promote the Philippines as a retirement haven. The PLRA implemented the Philippine Retirement Program to attract former Filipinos who are now foreigners (balikbayans) to invest in the Philippines. In 1989, the Philippine Retirement Authority Members Association, Inc. (PRAMAI) was organized and registered by 12 principal retirees of PLRA. In 1994, Atty. Ramon M. Collado, a principal retiree, registered another association called the P.R.A. Members Association Foundation, Inc. (PRAMA). PLRA and PRAMA executed several Memoranda of Agreement with banks to promote their services among PRAMA members, who were principal retirees of PLRA.

PLRA issued a resolution requiring PLRA principal retirees to become PRAMA members and collect an annual membership fee. PLRA remitted the membership fees it collected to PRAMA. In 1999, PLRA and PRAMA entered into a MOA with the approval of the Office of the Government Corporate Counsel. In March 2000, PLRA informed PRAMA that it would continue to collect PRAMA's membership fees and impose a service fee for their collection. In August 2000, derogatory allegations and pejorative remarks were published in PRAMA's newsletter against PLRA, prompting PLRA to complain and object. On August 24, 2000, PLRA and PRAMA officers held a meeting to reconcile their records on the number of principal retirees and the annual membership fee collections. In September 2000, PRAMA informed PLRA that its accountant would reconcile the records of member-retirees with the remittances to PRAMA.

During the reconciliation, PLRA allegedly did not provide all the records to PRAMA's accountant. In October 2000, PLRA requested photocopies of PRAMA's receipt books to verify the figures and identify retirees who have not paid their membership fees. PRAMA explained that it still needed to reconcile and update its records, as PLRA did not provide accurate data.

ISSUES:

  1. Whether the court can compel a party to execute and/or renew a contract.

  2. Whether the MOA can be unilaterally rescinded.

  3. Whether the preliminary mandatory injunctive writ was issued with grave abuse of discretion.

  4. Whether PRAMA has a clear and unmistakable right to be protected.

  5. Whether the trial court's orders exceeded the scope of the preliminary mandatory injunction.

  6. Whether the trial court can order the banks directly without them being impleaded in the case.

  7. Whether the trial court's order to remit all monies due to PRAMA is premature.

  8. Whether the Court of Appeals (CA) erred in upholding the trial court's April 30, 2001 Order.

  9. Whether the trial court gravely abused its discretion in granting the preliminary mandatory injunction.

RULING:

  1. The court can compel a party to execute and/or renew a contract if one of the obligors fails to comply with their obligations. The right to rescind is provided for in Article 1191 of the Civil Code.

  2. The MOA can be unilaterally rescinded, but the cancellation is subject to judicial scrutiny if contested and brought to court.

  3. The issuance of the preliminary mandatory injunctive writ was irregular and constituted grave abuse of discretion.

  4. PRAMA failed to show a clear and unmistakable right that must be protected. The arrangement for PLRA to collect membership fees for PRAMA was merely an accommodation and not a contractual obligation. PRAMA does not have a right in esse to the collection scheme.

  5. The trial court exceeded the scope of the preliminary mandatory injunction by ordering the reinstatement of Atty. Collado as consultant to PLRA and by ordering PLRA to remit the 0.5% commissions received from short-listed banks. These matters were not covered by the MOA between PRAMA and PLRA and cannot be the subject of an injunctive writ.

  6. The trial court cannot order the banks directly as they have not been impleaded in the case. PLRA, being not privy to the MOA between PRAMA and the banks, cannot interfere with their contractual relationship and obligations.

  7. The trial court's order to remit all monies due to PRAMA is premature and resolves one of the main issues in the case which should be heard and resolved on its merits. Allowing PRAMA to receive all monies through a preliminary mandatory injunction would result in PRAMA obtaining its objective without a trial on the merits.

  8. The CA committed reversible error in upholding the trial court's April 30, 2001 Order.

  9. The trial court gravely abused its discretion in granting the preliminary mandatory injunction.

PRINCIPLES:

  • The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. (Article 1191, Civil Code)

  • A party may rescind a contract even if there is no specific provision allowing for rescission, should one of the obligors fail to comply with their obligations.

  • The cancellation of a contract is subject to judicial scrutiny if contested and brought to court.

  • The issuance of a writ of preliminary injunction is addressed to the sound discretion of the trial court and should be granted only when the court is fully satisfied that the law permits it and the emergency demands it.

  • The writ of preliminary injunction is issued to prevent threatened or continuous irremediable injury to some of the parties before their claims can be thoroughly studied and adjudicated. Its sole aim is to preserve the status quo until the merits of the case can be heard fully.

  • To issue a preliminary injunction, the trial court must satisfy the strict requirements of the law and must not abuse its discretion.

  • A party seeking a preliminary injunction must show a clear and unmistakable right that must be protected.

  • A preliminary mandatory injunction should not exceed the scope of the main case and should only aim to maintain the status quo.

  • The trial court cannot order parties who have not been impleaded in the case directly.

  • A preliminary mandatory injunction should not prematurely resolve major issues of the main case before the merits can be passed upon.

  • Premature resolution of a major issue of the main case before the merits can be passed upon is not allowed.

  • A trial court may be said to have acted with grave abuse of discretion when it acts in a capricious, whimsical, arbitrary, or despotic manner in exercising its discretion.