G.R. No. L-51651, L-51678, L-53493, L-53543 November 5, 1985
BENJAMIN LIMSO, EDUARDO ABOITIZ, ET AL., ANDREW GOTIANUN, and BANK OF AMERICA, petitioners, vs. COMMISSIONER DE GUZMAN, JR., ET AL., respondents.

FACTS

The consolidated petitions arose from SEC Case No. 1613, involving a dispute over the sale of shares in the Insular Bank of Asia and America (IBAA). The Bank of Asia (ASIA), First Insular Bank of Cebu (INSULAR), and Bank of America (BA) had executed a Consolidation Agreement, later incorporated into IBAA’s Articles, stipulating a right of first refusal. It provided that none of the parties could sell their IBAA shares without first offering them proportionately to the other two parties or their nominees. In December 1977, BA decided to sell its 30% IBAA stake. It communicated its offer to Eduardo Aboitiz and Edgardo Kalaw, the former chairmen of the now-dissolved INSULAR and ASIA, respectively, assuming they represented their groups’ successors-in-interest.
Kalaw, in a letter dated February 1, 1978, stated that neither the ASIA nor INSULAR groups were willing to increase their holdings at BA’s offered price. Aboitiz and Kalaw later confirmed this in writing on March 14, 1978, stating BA was “free to negotiate with prospective buyers.” However, on March 22, Aboitiz qualified that his group might exercise its option if the price dropped to P140-P150 per share. Despite this, BA proceeded and on July 14, 1978, sold all its shares to Andrew Gotianun. Members of the ASIA Group contested the sale, alleging violations of the right of first refusal and restrictions on share transfers to banks.

ISSUE

Whether the Securities and Exchange Commission (SEC) committed grave abuse of discretion in issuing and subsequently failing to lift its ex-parte temporary restraining order (TRO) of July 19, 1978, which enjoined the implementation of the BA-Gotianun share sale.

RULING

The Supreme Court ruled that the SEC did not commit grave abuse of discretion in initially issuing the TRO on July 19, 1978, but it did commit grave abuse in its prolonged failure to resolve motions to lift that TRO seventeen months later. The legal logic is bifurcated. First, at the time of the TRO’s issuance, there was a prima facie showing that the ASIA Group plaintiffs were entitled to injunctive relief. The complaint alleged a clear contractual breach of the right of first refusal under the Consolidation Agreement, and the immediate relief was essential to preserve the status quo and prevent irreversible transactions—such as Gotianun potentially reselling the shares—pending adjudication of the underlying contractual dispute. This Court implicitly recognized this necessity when it later issued its own injunction but prohibited further sales by Gotianun without court approval.
Second, the setting was radically different by December 1979. Motions to lift the TRO had been filed, extensive hearings had been conducted, and voluminous evidence and memoranda had been submitted. At that juncture, the SEC had a positive duty to resolve the motions with deliberate speed. Its protracted inaction and allowance of extended quibbling effectively converted a temporary, ex-parte measure into an indefinite injunction issued without a hearing and without bond. This evasion of duty constituted grave abuse of discretion, as it violated fundamental policy against prolonged temporary restraining orders, a principle later codified in P.D. No. 224 limiting such orders to twenty days. Consequently, the Court annulled the SEC’s T