G.R. No. 162575 ; December 15, 2010
BEATRIZ SIOK PING TANG, Petitioner, vs. SUBIC BAY DISTRIBUTION, INC., Respondent.

FACTS

Petitioner Beatriz Siok Ping Tang, doing business as Able Transport, entered into Distributorship Agreements with respondent Subic Bay Distribution, Inc. (SBDI). Under these agreements, petitioner was required to secure her obligations by providing bank undertakings and a standby letter of credit from several banks. When petitioner allegedly failed to pay her obligations, respondent sought to draw on these financial instruments. Petitioner then filed petitions in the Regional Trial Court (RTC) seeking to declare the bank undertakings and letter of credit null and void, alleging they were oppressive, unconscionable, and unreasonable because they allowed respondent to draw funds based merely on its own certification of non-payment without verification. Petitioner also applied for a temporary restraining order and a writ of preliminary injunction to prevent the banks from releasing funds to respondent.
The RTC granted the preliminary injunction, directing petitioner to post a bond. It reasoned that the merits of the parties’ claims—whether the instruments were valid or oppressive—required a full trial, and denying injunctive relief could cause real injury to petitioner. Respondent filed a petition for certiorari with the Court of Appeals (CA), which annulled the RTC’s order and lifted the injunction. The CA found that the RTC’s injunction effectively disposed of the main case without trial by restraining the enforcement of the instruments whose validity was precisely the issue to be tried.

ISSUE

Whether the Court of Appeals erred in annulling the RTC’s order granting the writ of preliminary injunction.

RULING

The Supreme Court denied the petition and affirmed the CA’s decision. The Court explained that a writ of preliminary injunction is a provisional remedy to preserve the status quo pending litigation, not to adjudicate the main case. The RTC’s grant of the injunction, which restrained the banks from honoring the undertakings and letter of credit, effectively determined the principal issue of their validity and enforceability without a full trial on the merits. This was a prejudgment of the case. The legal logic is that injunctive relief should not be used to grant the principal relief sought in the complaint or to decide the merits before trial. Since petitioner’s core claim was the nullity of the bank instruments, enjoining their enforcement based solely on the allegations in the injunction hearing prematurely resolved that claim. The CA correctly found that the RTC committed a grave abuse of discretion by issuing an injunction that disposed of the main case. The Supreme Court upheld the CA’s ruling that the validity of the instruments should be determined in a full-blown trial, not through preliminary injunctive relief.