Title
Palm Tree Estates, Inc. vs. Philippine National Bank
Case
G.R. No. 159370
Decision Date
Oct 3, 2012
PTEI defaulted on a P320M loan secured by a mortgage; PNB foreclosed. PTEI sought injunction, but SC upheld PNB's right, citing lack of clear right and PTEI's breach.

Case Summary (G.R. No. 73642)

Key Dates and Documents

Principal loan agreement: January 29, 1997 (P320 million or US$ equivalent). Real estate mortgage over 48 parcels: executed February 21, 1997. Amendment to loan agreement and amendment to real estate mortgage (accommodation mortgagor BAGCCI): June 15, 1998. Revalidated/additional loan documents, pledge agreements, restructuring agreement and supplement to mortgage: August 10, 1999. Demand letters by PNB: September 20, 2000 and February 19, 2001. Petition for extrajudicial foreclosure filed by PNB: March 27, 2001. Complaint by PTEI and BAGCCI in RTC seeking multiple reliefs and injunctions: April 23, 2001. RTC order granting preliminary injunction: May 17, 2001 (reconsideration denied September 3, 2001). Court of Appeals decision granting PNB’s petition for certiorari and setting aside RTC orders: March 21, 2003 (resolution denying reconsideration August 4, 2003). Supreme Court disposition: petition for review denied (decision rendered October 3, 2012).

Factual Background — Loan, Mortgage and Amendments

PTEI obtained a seven‑year term loan from PNB (P320 million or USD equivalent) and secured it by a real estate mortgage over 48 parcels totaling about 353,916 sq.m. Subsequent transactions included an amendment (June 15, 1998) that extended the grace period, altered interest payment dates, and contemplated an additional loan up to P80 million. On the same date PTEI transferred title to portions of the mortgaged land to BAGCCI and executed an Amendment to the Real Estate Mortgage making BAGCCI an accommodation mortgagor while confirming that the mortgaged properties (including transferred portions) continued to secure PTEI’s obligations.

Additional Security, Revalidation and Restructuring

On August 10, 1999, PTEI and PNB executed documents revalidating the additional P80 million loan, with the additional loan secured by a pledge of 204,000 PTEI shares by accommodation pledgors Tan and Bausa. A Restructuring Agreement expanded collateral to include three parcels registered in the name of accommodation mortgagor Intong, and Intong executed a Supplement to Real Estate Mortgage to include those parcels as additional security.

Defaults, Demands and Extrajudicial Foreclosure

PNB issued demands for payment as of August 31, 2000 (outstanding ~P599.25M) and later denied a restructuring request on February 19, 2001, citing PTEI’s failure to fulfill conditions such as payment of insurance premiums, credit card advances, and realty tax arrearages. PNB filed a petition for extrajudicial foreclosure on March 27, 2001. PTEI sought additional time and then filed a complaint in the RTC on April 23, 2001 to enjoin foreclosure and to seek multiple substantive remedies.

Claims of PTEI and BAGCCI in RTC

PTEI and BAGCCI alleged, among other things: (1) a shortfall in disbursed loan proceeds (they claimed PNB released only P248,045,679.36 of the committed P320 million); (2) that PNB unilaterally converted the US‑dollar loan into pesos at an unreasonable rate and repriced interest to unconscionable rates; (3) that certain amendments, promissory notes, disclosure statements and the restructuring agreement were void for vitiated consent and lack of consideration; (4) that extrajudicial foreclosure was invalid for including properties not subject to mortgage, properties already transferred to BAGCCI, or obligations already paid; and (5) that some assets (machinery and equipment) were chattels not subject to real estate foreclosure.

PNB’s Defenses and Counterpoints

PNB denied the allegations, asserting it had disbursed more than the committed amount (claiming total disbursements of P356,722,152.46), that any delays were attributable to PTEI, and that conversions and repricing were made either at PTEI’s request or in accordance with prevailing rates and prior notices (letter‑advices). PNB maintained the additional P80 million loan had been granted and properly secured by pledged shares, and that there was no novation or substitution that extinguished PNB’s mortgage remedies. PNB also emphasized that PTEI’s corporate officers were presumed to have read and understood the loan documents they signed.

RTC Proceedings and Basis for Granting Preliminary Injunction

After memoranda and documentary submissions, the RTC granted a writ of preliminary injunction on May 17, 2001 to preserve the status quo and enjoin foreclosure pendente lite. The trial court found real controversies existed and relied on jurisprudence (Rava Development Corp. and Almeda v. Court of Appeals) to justify protection of alleged rights where foreclosure might render judicial relief nugatory. The RTC stressed PTEI’s claimed disputes regarding correctness of principal, interest repricing, and whether certain properties were properly subject to foreclosure, and conditioned issuance on a P1,500,000 injunction bond.

Court of Appeals Review by Certiorari

PNB filed a petition for certiorari in the Court of Appeals alleging grave abuse of discretion by the RTC in issuing the injunction. The Court of Appeals held PTEI and BAGCCI failed to show a clear and unmistakable right warranting injunctive relief and that PNB had the contractual right to extrajudicial foreclosure upon default. The CA granted PNB’s petition and set aside the RTC orders; its denial of reconsideration was reflected in an August 4, 2003 resolution.

Issues Presented to the Supreme Court

The Supreme Court reviewed whether the RTC acted with grave abuse of discretion in issuing the preliminary injunction; whether the Court of Appeals properly entertained PNB’s certiorari petition under Rule 65 despite omissions of annexes; and whether PTEI and BAGCCI established the requisites for injunctive relief—an indubitable right and the presence of irreparable injury.

Procedural Sufficiency, Rule 65 and Waiver

PNB’s Rule 65 petition, as filed in the Court of Appeals, included the RTC orders, PNB’s motions and memoranda, PNB’s answer with annexes, and the plaint but omitted annexes to the complaint. The Supreme Court affirmed the CA’s discretion to determine whether the petition was sufficient in form and substance under the second paragraph of Section 1, Rule 65 and Section 6, Rule 65 (which allows the court to require comments). The Court noted PTEI and BAGCCI failed to timely file a comment and their later filings were denied as untimely; they also failed to raise the formal sufficiency issue in their motion for reconsideration, invoking waiver under the omnibus motion rule. The Court found the documents attached to PNB’s petition provided a substantial picture sufficient for the CA to proceed.

Equitable Maxims and the Clean Hands Doctrine

The Supreme Court emphasized that preliminary injunction is an equitable remedy and that a claimant must come with clean hands. PTEI was already in default and admitted outstanding obligations; its repeated requests for deferrals and restructuring without payment were indicative of inability to pay. The Court concluded PTEI’s conduct d

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