G.R. No. 80908 & 80909 May 24, 1989
EMERITO M. RAMOS, SR., ET AL., petitioners, vs. COURT OF APPEALS, GOVERNMENT SERVICE INSURANCE SYSTEM, ET AL., respondents.

FACTS

Petitioners filed a complaint for specific performance and damages against respondents GSIS and the Commercial Bank of Manila (COMBANK) before the Regional Trial Court (RTC) of Makati. They alleged that GSIS had no legal right to sell COMBANK to the First National Bank of Boston (FNBB) and a group of investors represented by Edgardo Tordesillas because GSIS and COMBANK had failed to comply with obligations under a prior 1980 agreement involving the petitioners’ shares. Petitioners claimed a proprietary interest in COMBANK, asserting their consent was necessary for any sale. The RTC, after hearing, issued a writ of preliminary injunction to enjoin the sale, upon petitioners’ posting of a P5-million bond.
Respondents FNBB and Tordesillas, and later GSIS and COMBANK, filed separate petitions for certiorari with the Court of Appeals (CA) to nullify the RTC’s injunction. The two petitions were consolidated before the CA’s Seventh Division. The CA Seventh Division issued a temporary restraining order (TRO) against the enforcement of the RTC’s writ and, after proceedings, granted a writ of preliminary injunction against the RTC, conditioned upon respondents posting a counter-bond. Petitioners then elevated the case to the Supreme Court via a petition erroneously labeled under Rule 45, which the Court treated as a special civil action for certiorari under Rule 65 due to jurisdictional issues raised.

ISSUE

Whether the Court of Appeals acted with grave abuse of discretion in issuing a writ of preliminary injunction to restrain the RTC from enforcing its own injunctive writ against the sale of COMBANK.

RULING

No, the Court of Appeals did not commit grave abuse of discretion. The Supreme Court upheld the CA’s authority to issue the injunctive relief. The core legal logic rests on the principle that a higher court, like the CA, has the inherent power to issue auxiliary writs, including injunctions, to prevent a lower court from committing a grave abuse of discretion or from acting in excess of its jurisdiction. The RTC’s injunction was premised on petitioners’ claim of a proprietary interest in COMBANK derived from a 1980 share agreement. However, the Supreme Court found that the petitioners’ right was not clear and unmistakable. Their claim was contingent and inchoate, essentially a money claim for damages against the seller, GSIS, for any alleged breach of the prior agreement. The Memorandum of Agreement for the sale of COMBANK to FNBB and Tordesillas expressly stipulated that GSIS would hold the buyers harmless from such claims. Therefore, the sale itself would not violate any clear legal right of the petitioners, as their recourse, if any, lies against GSIS for monetary compensation. Since the RTC’s injunction was based on an unsubstantiated claim of a right to block the sale, its order was potentially issued with grave abuse of discretion. The CA acted correctly in exercising its supervisory jurisdiction to prevent a miscarriage of justice and to allow a transaction of significant public interest involving a banking institution to proceed, pending the final resolution of the main case on its merits. The CA’s order was a proper exercise of its equitable powers to correct a lower court’s potentially erroneous application of injunctive relief.