G.R. No. 86683 January 21, 1993
PHILIP S. YU, petitioner, vs. THE HONORABLE COURT OF APPEALS, THE HONORABLE PRESIDING JUDGE, RTC OF MANILA, BRANCH XXXIV (34) and UNISIA MERCHANDISING CO., INC., respondents.

FACTS

Petitioner Philip S. Yu is the exclusive distributor of House of Mayfair wallcovering products in the Philippines under a 1987 exclusive sales agency agreement. Private respondent Unisia Merchandising Co., Inc., which was previously petitioner’s dealer, imported identical House of Mayfair goods via FNF Trading in West Germany and sold them in the domestic market. Petitioner filed a suit for injunction before the Regional Trial Court, alleging that private respondent, in concert with FNF Trading, misled Mayfair into believing the goods were for shipment to Nigeria when they were actually shipped to and sold in the Philippines, thereby bypassing his exclusive distributorship. The trial court denied petitioner’s motion for a writ of preliminary injunction, finding no privity of contract between petitioner and private respondent and that the controversy arose from a breach by FNF Trading. The Court of Appeals affirmed, holding petitioner failed to demonstrate an unequivocal right to protect and that private respondent was a stranger to the contract, also noting petitioner could be fully compensated for his loss as Mayfair had sought restitution from FNF Trading. Petitioner secured a temporary restraining order from the Supreme Court, but private respondent’s manager, Frank Sia, admitted to continuing sales in violation thereof, leading to a contempt fine.

ISSUE

Did respondent appellate court correctly agree with the lower court in disallowing the writ of preliminary injunction solicited by petitioner?

RULING

No. The Supreme Court granted the petition, reversing and setting aside the decision of the Court of Appeals and the order of the trial court. The Court held that injunction is an appropriate remedy to prevent wrongful interference with contracts by strangers where the legal remedy is insufficient and the injury is irreparable. The right to perform an exclusive distributorship and reap its profits is a proprietary right that can be protected. The Court found that private respondent’s act of utilizing FNF Trading to obtain goods from the supplier, allegedly by misleading Mayfair about the shipment destination, constituted a ploy akin to a third person inducing a breach of contract under Article 1314 of the Civil Code, and demonstrated a species of unfair competition causing irreparable injury through continuous trade diversion and damage to goodwill, which could not be fairly redressed by multiple suits for each sale. The case was remanded to the trial court for issuance of a writ of preliminary injunction upon petitioner posting a bond. Frank Sia was ordered to pay the previously imposed contempt fine.