Case Summary (G.R. No. 100514)
Factual background
Respondents obtained a loan from petitioner and executed promissory notes, real estate mortgages on several parcels, a continuing surety agreement, and a chattel mortgage on a Mitsubishi Pajero as security. Their outstanding obligation was asserted to be P17,983,191.49, of which they had paid about P13,000,000, their difficulty attributed to the 1997 Asian economic crisis. Respondents alleged they were compelled to sign pre-printed bank documents and that contractual terms (including checks and charges) were unlawful, prompting them to seek judicial relief.
Procedural history at trial court
On May 22, 2001 respondents filed Civil Case No. CEB-26468 in the RTC, seeking annulment/nullity of the promissory notes, mortgages, continuing surety agreement, and related reliefs, plus damages and attorneys’ fees; they also sought a temporary restraining order (TRO) or preliminary injunction to prevent foreclosure. BPI filed an answer with affirmative defenses and a counterclaim and moved to dismiss on multiple grounds (including improper venue, non-payment of correct docket fees, lack of legal personality of a deceased plaintiff, absence of indispensable parties, lack of corporate authorization, and failure to state a cause of action). The RTC denied the motion to dismiss and granted the requested preliminary injunction conditioned on a P2,000,000 bond, enjoining BPI from commencing foreclosure, taking possession of the chattel, and using the contested postdated checks for criminal complaints. The RTC denied reconsideration.
Court of Appeals disposition
BPI petitioned the CA for certiorari. On appeal the CA affirmed the RTC orders. The CA found that (1) the allegation of non-payment of proper docket fees was not substantiated and, even if true, relief could be afforded in the interest of justice; (2) Civil Case No. CEB-26468 was a personal action and venue in Cebu City was proper because XM Facultad & Development Corporation had its principal office there; (3) the death of Zosima Borbon did not mandate dismissal because the action could continue in the original party’s name; and (4) the RTC did not commit grave abuse in issuing the preliminary injunction.
Issues on appeal to the Supreme Court
The appeal presented two principal issues: (1) whether Civil Case No. CEB-26468 should be dismissed for non-payment of the correct docket fee and for improper venue; and (2) whether the issuance of the writ of preliminary injunction against BPI and its agents was proper.
Supreme Court ruling — characterization of the action and venue
The Supreme Court held that the action to annul or declare null the loan contracts, the accessory real estate mortgage, and related instruments was a personal (transitory) action, not a real (local) action. The Court applied Rule 4: a real action affects title to or possession of real property and must be filed where the property lies; all other actions are personal and may be filed where the plaintiff or any principal plaintiff resides or where the defendant resides or may be found. The complaint sought nullification of contractual instruments on grounds of vitiation and illegality; it did not allege that title or possession of the mortgaged properties had passed to BPI. Precedents (including Chua v. Topros and Hernandez v. Rural Bank of Lucena) were invoked to distinguish actions to annul mortgages from actions seeking recovery or foreclosure of real property. Because one of the principal plaintiffs (XM Facultad & Development Corporation) had its principal office in Cebu City, venue was proper there and the petition to dismiss for improper venue was denied. Consequently, the argument that docket fees should have been computed on the assessed value of the mortgaged real properties (as if a real action) was rejected for lack of legal and factual basis.
Supreme Court ruling — preliminary injunction: standards and application
The Court held that respondents were not entitled to the preliminary injunction. It reiterated the established equitable and procedural standards governing preliminary injunctions under Section 3, Rule 58: the applicant must show (a) a prima facie right to the relief sought that is to be protected by restraining or requiring acts; (b) that continuation or commission of the acts would probably work injustice to the applicant; and (c) that there is urgent and paramount necessity to prevent serious damage. The preliminary injunction is an extraordinary, preventive remedy that preserves the status quo pending adjudication; it should not determine merits or decide controverted facts.
Applying these standards, the Court found the RTC’s issuance of the writ to be plainly erroneous. Respondents had admitted the existence of mortgages and nonpayment of the full obligation; foreclosure is the lawful remedy of a mortgagee. The injunction sought effectively to prevent BPI from exercising its contractual and legal remedies to foreclose — acts which were not shown to contravene a prima facie right of respondents. The evidentiary showing necessary to obtain a preliminary injunction need only be prima facie, but it must still establish an existing basis of facts affording a present right directly threatened by the act sought to be enjoined; respondents failed to make such showing.
Administrative Circular No. 07-99 and criminal prosecution injunction
BPI contended the RTC’s injunction violated Administrative Circular No. 07-99 and sought administrative sanction against the trial judge. The Supreme Court found AC No. 07-99 inapplicable because the case did not involve government infrastructure projects or Bureau of Customs seizure and forfeiture proceedings, which were the subject of that circular. Regarding the RTC’s injunction enjoining BPI from filing criminal complaints under BP No. 22 for alleged violations connected with postdated checks, the Court reiterated the general rule that courts will not enjoin criminal prosecutions by writs of injunction, with enumerated, narrow exceptions (e.g., protection of constitutional rights, double jeopardy, prosecution under invalid law, clear
...continue readingCase Syllabus (G.R. No. 100514)
Nature of Case and Ultimate Disposition
- Petition for review on certiorari from a decision of the Court of Appeals (CA) affirming orders of the Regional Trial Court (RTC), Branch 16, Cebu City.
- RTC issued an order dated July 5, 2001 (and denied reconsideration August 22, 2001) granting a writ of preliminary injunction in Civil Case No. CEB-26468; CA affirmed on July 9, 2002.
- Supreme Court partially grants the petition: annuls and sets aside the writ of preliminary injunction issued by the RTC; orders the RTC to proceed with dispatch in Civil Case No. CEB-26468; directs respondents to pay costs of suit.
- Decision penned by Justice Bersamin; concurrence by Chief Justice Sereno, and Justices Leonardo-De Castro, Villarama, Jr., and Reyes.
Parties and Caption
- Petitioner: Bank of the Philippine Islands (BPI).
- Respondents: Hon. Judge Agapito L. Hontanosas, Jr. (RTC, Branch 16, Cebu City); Silverio Borbon; Spouses Xerxes and Erlinda Facultad; XM Facultad & Development Corporation.
- Case citation: 737 Phil. 38; G.R. No. 157163; decision promulgated June 25, 2014.
Factual Background / Antecedents
- On May 22, 2001, respondents (Spouses Silverio and Zosima Borbon, Spouses Xerxes and Erlinda Facultad, and XM Facultad & Development Corporation) filed Civil Case No. CEB-26468.
- Reliefs sought by respondents: declaration of nullity of promissory notes, real estate and chattel mortgages, and continuing surety agreement executed in favor of the petitioner; damages and attorney’s fees.
- Respondents also sought a temporary restraining order (TRO) or writ of preliminary injunction to prevent petitioner from foreclosing on the mortgages.
- Complaint alleged: respondents obtained a loan from petitioner, executed promissory notes jointly and severally, and constituted real estate mortgages and a chattel mortgage (Mitsubishi Pajero) and signed a continuing surety agreement; postdated checks were required by petitioner under threat of foreclosure.
- Amount alleged: respondents’ obligation had reached P17,983,191.49; respondents had paid approximately P13,000,000 due to adverse effects from the 1997 Asian economic turmoil.
- Respondents claimed contracts were signed on blank pre-printed forms, were contracts of adhesion, contained unjust stipulations, and contained allegedly illegal and exorbitant interest and charges; they sought annulment of the instruments and injunctive relief to stave off foreclosure and possible criminal complaints for postdated checks.
Procedural History in Trial Court (RTC)
- June 6, 2001: Petitioner filed answer with affirmative defenses and counterclaim; opposition to injunction; motion to dismiss raising multiple preliminary defenses including improper venue, non-payment of correct docket fees, death of Zosima Borbon and absence of estate as indispensable party, lack of corporate board resolution for XM Facultad & Dev’t Corp., and failure to state a cause of action.
- July 5, 2001: RTC denied petitioner’s motion to dismiss and granted respondents’ application for preliminary injunction upon respondents’ posting of a P2,000,000 bond; writ enjoined petitioner and its agents from commencing foreclosure and sale of the mortgaged properties, from taking possession of the Mitsubishi Pajero, and from using the questioned postdated checks as evidence to file criminal complaints under Batas Pambansa Blg. 22 while the case was pending.
- RTC denied petitioner’s motion for reconsideration by order dated August 22, 2001.
Ruling of the Court of Appeals
- Petitioner filed certiorari in the CA questioning denial of motion to dismiss and grant of preliminary injunction.
- CA, in decision dated July 9, 2002, affirmed the RTC orders of July 5 and August 22, 2001 and remanded the record to the court a quo.
- CA reasoning included:
- Petitioner’s avowal that proper docket fees were not paid was unsubstantiated; even if incorrect fees were paid, strict application could be mitigated in interest of justice.
- Civil Case No. CEB-26468 was a personal action; filing in Cebu City was proper because XM Facultad & Development Corporation had its principal office there.
- Death of Zosima Borbon made Silverio Borbon successor to her estate; dismissal was not required as action could continue in name of original party.
- RTC did not commit grave abuse of discretion in issuing the writ of preliminary injunction, having applied pertinent law and jurisprudence.
- CA denied petitioner’s motion for reconsideration by resolution of February 12, 2003.
Issues Presented to the Supreme Court
- Whether Civil Case No. CEB-26468 should be dismissed for:
- (a) non-payment of the correct amount of docket fee; and
- (b) improper venue.
- Whether the issuance of the writ of preliminary injunction against the petitioner, its agents, and representatives was proper.
Contentions of the Petitioner (as presented)
- The writ of preliminary injunction constituted a violation of Administrative Circular (AC) No. 07-99 (June 25, 1999), exposing the respondent judge to administrative sanction.
- Injunction could not issue to enjoin prosecution of criminal offenses because such prosecution is imbued with public interest.
- As mortgagee, petitioner could not be prohibited from exercising its legal right to foreclose the mortgages; foreclosure is a proper legal remedy.
Legal Standards Applied by the Supreme Court
- Nature and