G.R. No. 159370 - Palm Tree Estates, Inc. vs. Philippine National Bank

On January 29, 1997, Palm Tree Estates, Inc. (PTEI) entered into a seven‐year term loan agreement with Philippine National Bank (PNB) for P320 million (or its US dollar equivalent) to fund its projects in Lapu-Lapu City.
As security for the loan, PTEI executed a Real Estate Mortgage on February 21, 1997 over 48 parcels of land (totaling 353,916 sq.m.) including buildings and improvements.
On June 15, 1998, upon PTEI’s request, an Amendment to the Loan Agreement was signed by the parties to:

On the same day, an Amendment to the Real Estate Mortgage was executed as PTEI transferred ownership of 199,134 sq.m. to Belle Air Golf and Country Club, Inc. (BAGCCI), incorporating the transferred portion into the existing mortgage in favor of PNB.

A revalidation of the additional loan of P80 million via a new Loan Agreement;
A Contract of Pledge executed by accommodation pledgors (Matthew O. Tan and Rodolfo M. Bausa) pledging 204,000 shares of PTEI stock to secure the additional loan;
A Restructuring Agreement that expanded the mortgage security to include not only the original 48 parcels but also three additional parcels mortgaged by a third party (Aprodicio D. Intong);
A Supplement to the Real Estate Mortgage executed by Aprodicio D. Intong, reflecting the inclusion of the additional three parcels and their improvements.

In September 2000 and February 2001, PNB sent letters demanding payment of PTEI’s outstanding obligations, which had accumulated to significant amounts (with figures cited over P599 million and later P621 million).
PTEI defaulted in its payments despite prior restructuring requests and representations by its president, Kenichi Akimoto, including a request for a 30-day extension to settle its obligations.

On March 27, 2001, PNB filed a petition for extrajudicial foreclosure of the mortgaged properties due to PTEI’s default.
On April 23, 2001, PTEI and BAGCCI filed a complaint in the Regional Trial Court (RTC) of Lapu-Lapu City seeking:

Declaration of breach of contract, nullity of certain promissory notes and mortgage amendments;
An injunction (writ of preliminary injunction) to enjoin PNB from foreclosing on the properties; and
Additional relief including damages and accounting.

The RTC granted the application for issuing a writ of preliminary injunction on May 17, 2001, to preserve the status quo while the case was pending.
An Order denying PNB’s motion for reconsideration followed on September 3, 2001.

PNB, dissatisfied with the RTC’s issuance of the preliminary injunction, filed a Petition for Certiorari with the Court of Appeals alleging grave abuse of discretion by the trial court.
The Court of Appeals, in its Decision dated March 21, 2003 (later affirmed by a Resolution on August 4, 2003), reversed and set aside the trial court orders by finding:

PTEI and BAGCCI failed to demonstrate a clear and unmistakable legal right necessitating the injunction; and
PNB was entitled to proceed with extrajudicial foreclosure as provided under the contractual agreements.

PTEI and BAGCCI, contending that the procedural requirements (including the inclusion of annexed documents) were violated by PNB’s petition and that the injunction was improperly issued, elevated the matter for review.

Whether the issuance of the writ of preliminary injunction by the trial court was tainted by grave abuse of discretion.

Did the trial court exceed its jurisdiction or rely solely on mere allegations without sufficient factual support?
Was there a clear and unmistakable legal right that compelled the issuance of the injunction?

Whether PTEI and BAGCCI satisfied the stringent requirements for a preliminary injunction considering:

Their alleged right to be heard before foreclosure;
Their claim that the foreclosure would affect properties not properly mortgaged or subject to the contractual obligations.

Whether the Court of Appeals correctly evaluated the sufficiency of PNB’s petition submissions under Section 1, Rule 65 of the Rules of Court.

Did the omission of annexed documents by PTEI and BAGCCI, or by PNB in parts of its submission, affect the merits of the petition for certiorari?