G.R. No. 96825 July 3, 1992
RAVA DEVELOPMENT CORPORATION AND FRABAL FISHING AND ICE PLANT CORPORATION, petitioners-appellants, vs. HONORABLE COURT OF APPEALS, HONORABLE JUDGE LUCAS P. BERSAMIN of Regional Trial Court of Quezon City, Branch 96 and WHEELS DISTRIBUTORS, INCORPORATED, respondent-appellees.

FACTS

On February 16, 1983, Rava Development Corporation (RAVA) and Wheels Distributors, Inc. (WHEELS) executed a five-year lease contract for a property in Quezon City. The contract stipulated that the lease could be extended for another five years under new mutually acceptable conditions unless RAVA intended to rebuild or sell the property. It also granted WHEELS a right of first refusal should RAVA desire to sell the property during the lease term. On August 1, 1985, RAVA and Frabal Fishing & Ice Plant Corporation (FRABAL) merged, with RAVA being absorbed by FRABAL, and the leased premises were transferred to FRABAL. Near the lease’s expiration, FRABAL proposed a substantial rental increase for a renewal. WHEELS found the increase unreasonable, sought reconsideration, and on February 11, 1988, invoked its right of first refusal regarding the property transfer. FRABAL refused, stating no sale occurred, only a transfer via merger, and considered the lease expired as of February 16, 1988. On February 15, 1988, WHEELS filed a complaint for specific performance and damages against RAVA and FRABAL. The Regional Trial Court (RTC) issued a temporary restraining order and later a writ of preliminary injunction to prevent WHEELS’s ejectment and maintain the status quo. RAVA and FRABAL moved to dismiss the complaint for lack of cause of action, which the RTC initially granted but later reconsidered and reinstated the injunction. RAVA and FRABAL filed a petition for certiorari with the Court of Appeals, which initially granted it but, upon WHEELS’s motion for reconsideration, reversed itself and reinstated the RTC’s orders. RAVA and FRABAL then appealed to the Supreme Court.

ISSUE

Whether the Court of Appeals erred in reversing its own decision and in upholding the RTC’s orders that denied the motion to dismiss and reinstated the writ of preliminary injunction.

RULING

The Supreme Court denied the petition. On the motion to dismiss, it held that a court cannot go beyond the allegations in the complaint when resolving such a motion. WHEELS’s amended complaint sufficiently alleged causes of action for violation of the right of first refusal and unreasonable rental increases, which, if hypothetically admitted, would entitle WHEELS to relief. The validity of these causes would be determined during trial, not at the motion to dismiss stage. Regarding the preliminary injunction, the Court found it was properly issued to preserve the status quo, as the complaint was filed while the original lease contract was still in force. The RTC conducted a hearing on the injunction application, and RAVA and FRABAL, despite notice, failed to appear or submit opposition, thus they were not deprived of due process. The injunction was necessary to prevent irreparable injury pending a full hearing on the merits.