View full case

EVY CONSTRUCTION v. VALIANT ROLL FORMING SALES CORPORATION

FACTS:

Evy Construction and Development Corporation (Evy Construction) filed a Petition for Review on Certiorari to challenge the denial of its application for a temporary restraining order (TRO). This application aimed to prevent the Register of Deeds from compelling Evy Construction to surrender its owner's copy of Transfer Certificate of Title (TCT) No. 168590 and from annotating encumbrances related to a civil case. Prior to the sale of a parcel of land in Batangas to Evy Construction, a notice of adverse claim was filed by the seller but no other encumbrances were annotated on the title. However, after the sale, a notice of levy on attachment and two other encumbrances were annotated on TCT No. 134890. Despite these encumbrances, Evy Construction registered the Deed of Absolute Sale with the Register of Deeds, resulting in the issuance of TCT No. 168590 in its name. Subsequently, the Regional Trial Court rendered a decision in favor of the attaching party in a separate case, leading to the issuance of a writ of execution and a notice of levy against the property covered by TCT No. 134890. Evy Construction filed a Notice of Third-Party Claim and sought the issuance of a TRO and/or preliminary injunction to prevent further transactions related to the civil case from being annotated on its title. Both the Regional Trial Court and the Court of Appeals denied Evy Construction's application for a TRO, with the latter concluding that Evy Construction failed to establish the urgency and the existence of an actual right to be protected by the TRO.

The petitioner, Evy Construction and Development Corporation, also applied for a preliminary injunction in a summary proceeding alongside its request for a TRO. It contends that it was deprived of due process since it was not given the opportunity to present its arguments and witness for the TRO application. Furthermore, Evy Construction claims that the denial of the injunction caused investors to withdraw their investments from its housing development project, causing damage to its business reputation and goodwill as a real estate developer. Whereas, the respondent argued that the trial court never actually set or resolved the application for a preliminary injunction. It further maintains that the Court of Appeals was correct in finding that Evy Construction did not satisfy the requirements for the issuance of a TRO and that the indemnity bond provided by the respondent was sufficient.

The court is tasked to resolve two issues: first, whether Evy Construction was denied due process; and second, whether the trial court committed grave abuse of discretion in denying the application for injunctive relief. The court explains that an injunction is a judicial proceeding that orders a party to either perform or refrain from performing a certain action. It can be filed as a main action or as a provisional remedy. Evy Construction argues that no valid hearing was scheduled for its application for a preliminary injunction, and it was not allowed to present its arguments and witness for the TRO. The court clarifies that a TRO can be issued ex parte to preserve the status quo until the hearing of the application for a preliminary injunction. In this situation, a separate summary hearing was only needed to determine whether to extend the 72-hour TRO. Furthermore, the court explains that a trial court can issue a TRO for up to 20 days if the applicant would suffer great or irreparable injury before the application for a preliminary injunction can be heard. The trial court has a span of 20 days to resolve the application for a preliminary injunction, and a hearing is not necessary within this period.

ISSUES:

  1. Whether the sale between petitioner and the registered owners of the property is binding against third persons.

  2. Whether the registered attachment liens are superior to the unregistered sale.

  3. Whether injunctive relief should be granted in this case.

  4. Whether the petitioner has established the urgent and paramount necessity of preventing further annotations on its title.

  5. Whether the trial court acted within the bounds of its discretion in denying the petitioner's application for the issuance of a temporary restraining order and writ of preliminary injunction.

RULING:

  1. The sale between petitioner and the registered owners of the property is binding only between the buyer and the seller and does not affect innocent third persons.

  2. Registered attachment liens have preference over a prior unregistered sale. However, if the judgment creditor had knowledge of the valid sale, that knowledge would have the effect of registration on the judgment creditor.

  3. Injunctive relief cannot be granted pending a final determination of petitioner's right over the property. The urgent and paramount necessity to enjoin further annotations on the title was not proven.

  4. The Supreme Court denied the petition and upheld the trial court's decision to deny the petitioner's application for the issuance of a temporary restraining order and writ of preliminary injunction. The trial court acted within the bounds of its discretion in finding that the petitioner would still have sufficient relief in its prayer for damages in its Complaint. If the annotations on the petitioner's title are found to be invalid, the petitioner would have adequate relief in the removal of the annotations and in the award of damages.

PRINCIPLES:

  • A trial court may issue a temporary restraining order even without a prior hearing for a limited period of 72 hours "if the matter is of extreme urgency and the applicant will suffer grave injustice and irreparable injury."

  • A trial court may also issue ex parte a temporary restraining order for 20 days "[i]f it shall appear from facts shown by affidavits or by the verified application that great or irreparable injury would result to the applicant before the matter can be heard on notice."

  • While Rule 58, Section 4(d) requires that the trial court conduct a summary hearing in every application for temporary restraining order regardless of a grant or denial, Rule 58, Section 5 requires a hearing only if an application for preliminary injunction is granted.

  • The issuance of a writ of preliminary injunction is considered an "extraordinary event," being a "strong arm of equity or a transcendent remedy." Thus, the power to issue the writ "should be exercised sparingly, with utmost care, and with great caution and deliberation.''

  • An injunctive writ is granted only to applicants with "actual and existing substantial rights" or rights in esse. The applicant must show "that the invasion of the right is material and substantial and that there is an urgent and paramount necessity for the writ to prevent serious damage." The writ will not issue to applicants whose rights are merely contingent or to compel or restrain acts that do not give rise to a cause of action.

  • Under the Torrens system of registration, a person dealing with the registered owner is not bound to look beyond the title for any liens or encumbrances that have not been annotated.

  • A sale of property that is not registered under the Torrens system is binding only between buyer and seller and does not affect innocent third persons.

  • A registered attachment lien takes preference over a prior unregistered sale. However, if the judgment creditor had knowledge of the valid sale, that knowledge has the effect of registration.

  • Injunctive relief may be granted to prevent grave and irreparable damage to a business entity's goodwill and reputation that cannot be quantified. However, the urgency of the application must be established to justify the restraint.

  • A temporary restraining order is a provisional remedy designed to preserve the status quo until the merits of the case can be heard. Its objective is to prevent further injury or damage pending the final disposition of the principal action.

  • The grant or denial of a writ of preliminary injunction rests in the sound discretion of the court. The assessment and evaluation of evidence towards the grant or denial involve findings of facts left to the court for its conclusive determination.

  • The court's discretion in granting or denying a preliminary injunction is not interfered with unless there is a showing that the grant or denial was tainted with grave abuse of discretion.