Title
Philippine Development and Industrial Corporation vs. Court of Appeals, Equitable PCI Bank, Register of Deeds of Manila, and M.N. Amor B. Dait
Case
G.R. No. 231545
Decision Date
Apr 28, 2021
PDIC defaulted on loans secured by REMs; EPCIB foreclosed. PDIC alleged undue influence, but courts upheld REMs and foreclosure as valid, dismissing claims of intimidation.
contract
mortgage
foreclosure
A

Case Summary (G.R. No. 231545)

Factual Background — Credit Facilities, Mortgages and Repayment Agreement

In 1996 PDIC was granted by EPCIB two P100,000,000 credit lines (secured and clean) to fund construction of the Sta. Ana Villas project. PDIC executed an initial Real Estate Mortgage (REM) dated September 16, 1997 over TCT No. 230861 (mother title). After exhausting the clean line, PDIC requested release from the secured line but EPCIB deferred further advances and refused a requested P45,000,000, prompting PDIC to seek other, costlier financing. Past-due draws led to negotiations and, in June 2000, PDIC and EPCIB executed a Repayment Agreement under which PDIC acknowledged past due obligations and agreed to execute REMs over 29 condominium units and the Bulacan property as new collateral; EPCIB agreed to release the original REM over the mother title upon completion and registration of the new REMs.

Factual Background — Default, Foreclosure and Subsequent Actions

PDIC later defaulted under the Repayment Agreement. EPCIB demanded payment and, after failure to agree on dacion en pago, initiated extrajudicial foreclosure under the REMs. Notices were issued and the properties were sold at auction on April 21, 2003 to EPCIB as sole bidder; a Certificate of Sale was issued by Sheriff Dait. PDIC filed contemporaneous actions in different courts: a damages action in RTC Makati (dismissed for lack of jurisdiction), and, after foreclosure, a complaint in RTC Manila (Civil Case No. 03-106886) for annulment of mortgage and foreclosure sale, seeking TRO and preliminary injunction and alleging that the June 8, 2000 REMs were void as executed under intimidation, undue influence and duress arising from EPCIB’s refusal to return the mother title and refusal to release the secured credit line.

Trial Court Ruling and Interim Relief

RTC Manila issued an initial 72-hour TRO, later extended and eventually converted into a writ of preliminary injunction on July 7, 2003. After trial on the merits, the RTC rendered judgment on June 30, 2015 dismissing PDIC’s action, declaring the April 21, 2003 foreclosure sale regular and valid, and lifting the WPI. The RTC concluded PDIC failed to prove deception, machination or undue influence compelling execution of the REMs; it found PDIC had negotiated the Repayment Agreement and benefitted from its terms (deferment of legal action and restructuring of payment). The RTC applied Act No. 3135 to validate the extrajudicial foreclosure despite a sole bidder.

Court of Appeals Rulings on Injunctive Relief and Appeal

PDIC appealed to the Court of Appeals (CA) and moved for a TRO and preliminary injunction pending appeal. The CA denied the application for TRO/preliminary injunction in Resolutions dated August 5, 2016 and March 21, 2017 for failure to demonstrate a clear and unmistakable right and extreme urgency. On April 23, 2018 the CA affirmed the RTC’s judgment dismissing PDIC’s annulment action and upholding the REMs and foreclosure, and denied reconsideration on October 25, 2018.

Issues Presented to the Supreme Court

Two principal issues were raised: (1) whether the CA committed grave abuse of discretion amounting to lack or excess of jurisdiction in denying PDIC’s application for TRO and preliminary injunction to restrain EPCIB’s consolidation of title; and (2) whether the CA erred in sustaining the RTC’s finding that the REMs and the subsequent extrajudicial foreclosure sale are valid.

Petitioner’s Contentions

PDIC argued it had a clear legal right to retain title and possession of the subject properties pending final adjudication because the last peaceable and uncontested situation was PDIC’s ownership and possession. PDIC maintained the REMs were void for being executed against its will through undue influence and duress caused by EPCIB’s alleged bad-faith refusal to release secured proceeds and to return the mother title. PDIC asserted that if the REMs are void, the foreclosure and subsequent consolidation are null, and thus injunctive relief was warranted.

Respondent’s Contentions

EPCIB countered that the CA properly denied injunctive relief because PDIC lacked a clear and unmistakable legal right: both RTC and CA had already sustained the REMs’ validity. EPCIB asserted its foreclosure rights arose when PDIC defaulted and that PDIC failed to redeem within the redemption period. EPCIB also argued PDIC did not demonstrate irreparable damage; conversely, EPCIB would suffer irreparable injury if enjoined from consolidating title and enjoying its ownership rights.

Legal Standard for Preliminary Injunctions and Appellate Review

The Court reiterated Section 3, Rule 58 of the Rules of Court: a WPI may be granted when (a) applicant is entitled to relief consisting in restraining acts complained of; (b) continuance of the act would probably work injustice; or (c) acts threaten applicant’s rights and tend to render judgment ineffectual. Jurisprudence cited requires a showing of an actual and existing substantial right, material and substantial invasion, and urgent necessity to prevent serious damage. The grant or denial of interim injunctive relief is a matter of sound discretion where factual assessment is involved, and intervention by the Supreme Court is warranted only upon a showing of grave abuse of discretion. In Rule 45 petitions only questions of law may be raised; findings of fact supported by substantial evidence are binding.

Supreme Court’s Analysis on the Denial of Injunctive Relief

The Court found no grave abuse in the CA’s denial of PDIC’s TRO/WPI application. The Court emphasized that a REM immediately subjects the mortgaged property to fulfillment of the secured obligation regardless of possession, and that a purchaser at extrajudicial foreclosure is entitled to possession and may obtain consolidation of title after the redemption period. PDIC had never redeemed or attempted to redeem within the redemption period; filing of an annulment action does not interrupt redemption. PDIC’s claim that it enjoyed a last peaceable possession did not suffice to establish a clear legal right to injunctive protection because the mortgage and foreclosure rights vested in EPCIB upon default and sale. The Court rejected PDIC’s reliance on alleged conflicting findings in the RTC Makati case (CA-G.R. No. 95063), finding that decision irrelevant because the validity of the Repayment Agreement was not adjudicated there.

Supreme Court’s Analysis on the Validity of the Repayment Agreement and REMs

On the merits, the Court agreed with RTC and CA findings that the Repayment Agreement and the REMs contain the essential elements of valid contracts. The Repayment Agreement (expressly quoted) recognized PDIC’s indebtedness, provided for deferment of legal action, and required PDIC to execute registered REMs as collateral; EPCIB agreed to release the original REM upon registration of the new REMs. The Court held that restructuring of the debt and substitution of collateral was the evident purpose of the Repayment Agreement, which superseded earlier distinctions between the clean and secured credit lines. Negotiation of the agreement, PDIC’s acknowledgement of indebtedness, its bargaining, and the benefits it obtained (reprieve, cancellation of original mortgage) negated allegations of undue influence. The Court applied Civil

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