G.R. No. 179441 - St. James College of Paranaque vs. Equitable PCI Bank

Petitioners: Jaime Torres (deceased, later substituted by James Kenley M. Torres) and Myrna Torres, who owned and operated St. James College of ParaAaque, a sole proprietorship educational institution.
Respondent: Equitable PCI Bank (EPCIB), the surviving entity after the merger of the Philippine Commercial and International Bank (PCIB) with Equitable Bank.
The college was secured by a real estate mortgage (REM) over a parcel of land in ParaAaque, as evidenced by Transfer Certificate of Title (TCT) No. 74598.

In or about 1995, PCIB granted the Torres spouses a credit line facility of up to PhP 25,000,000, secured by the REM over the college’s property.
The real estate mortgage covered an area of 19,225 square meters, ensuring the credit facility with a tangible asset.
The credit line underwent several renewals, with the latest being in 2001, even as petitioners defaulted on their payments.
As of September 2001, the consolidated unpaid loan obligation had reached PhP 18,300,000.

Facing default on the loan, petitioners proposed initially to settle their obligation through equal quarterly installments over five years.
Subsequently, petitioners proposed to convert the outstanding balance into a long-term loan payable in 10 equal annual installments.
On January 9, 2003, EPCIB replied with a restructuring package that included:

Booking the past due loan amount into current status;
Charging interest at a fixed annual rate of 13.375%;
Offering two modes of repayment: either a monthly installment or equal annual amortizations of PhP 6,100,000 payable every May.

Jaime Torres expressly indicated his consent by affixing his conforme signature with the words “on annual amortization.”

Petitioners failed to pay the stipulated annual amortization of PhP 6,100,000 due in May 2003.
EPCIB issued a demand letter on June 6, 2003, and petitioners tendered a partial payment on June 23, 2003 amounting to PhP 2,521,609.62, breaking down as:

Subsequent correspondence by EPCIB emphasized that accepting partial payments did not alter the original obligation, as clearly stated on the official receipt and reiterated in follow-up demand letters and communications.
Petitioners, meanwhile, argued that EPCIB’s acceptance of partial payments and related communications had, by implication, modified (or novated) the payment terms.

On November 27, 2003, EPCIB filed its Petition for Sale before the RTC in ParaAaque City to extra-judicially foreclose the secured property.
On December 8, 2003, petitioners filed a complaint for Declaratory Relief, Injunction, and Damages (SCA No. 2569) seeking a temporary restraining order (TRO) and/or writ of preliminary injunction to forestall the foreclosure sale.
The RTC issued a TRO on January 9, 2004, halting the scheduled foreclosure sale and later, on March 10, 2004, granted a writ of preliminary injunction subject to the posting of a PhP 1,000,000 injunction bond.
EPCIB’s motion for reconsideration was eventually denied by the RTC, prompting the matter to be elevated on certiorari to the Court of Appeals (CA).

On January 17, 2007, the CA reversed the RTC’s orders, finding grave abuse of discretion in issuing the preliminary injunction.
The CA held that petitioners failed to prove the elements necessary for the issuance of the injunctive writ, particularly a clear and unmistakable right in esse.
Petitioners then filed a Motion for Reconsideration (denied later on August 28, 2007) and ultimately, the issue was appealed for review.
Meanwhile, a TRO was issued by the Court of Appeals (Resolution dated December 12, 2007) pending petitioners’ posting of a PhP 1,000,000 surety bond.

Whether a novation had occurred by the acceptance of partial payments and petitioners’ asserted modifications to the loan repayment terms.
Whether EPCIB’s conduct (through its letters and official receipts) indicated an implied agreement to modify the contractual obligations.

Whether petitioners established the clear, actual, and positive right (right in esse) to be protected that would warrant the issuance of a preliminary injunction against the foreclosure sale.
Whether the requisites for a writ of preliminary injunction—such as imminent irreparable injury and inadequacy of any alternative remedy—were present.

Whether the CA misapplied or misinterpreted relevant decisions, namely Toyota Motor Philippines Corporation Workers’ Association v. Court of Appeals and Estares v. Court of Appeals, in assessing the injunction application.
Whether such misapplication affected the determination on the existence of novation and the requirements for injunctive relief.

Whether the potential consequences of the foreclosure sale—such as harm to the operation of the educational institution, employment of staff, and displacement of students—provided sufficient legal grounds for an injunction, as argued by petitioners.