Case Summary (G.R. No. 85215)
Petitioner
Selegna Management and Development Corporation; Spouses Edgardo and Zenaida Angeles.
Respondent
United Coconut Planters Bank.
Key Dates
• September 19, 1995: Initial P70 million credit facility granted.
• March 29, 1998: Promissory Note for P103,909,710.82 executed.
• May 30, 1998 onward: Monthly interest amortizations went unpaid.
• December 21, 1998; January 25, 1999; March 4, 1999: Demand letters and acceleration notices.
• May 31, 1999: First scheduled extrajudicial foreclosure.
• May 31, 1999–March 15, 2002: Series of TROs and preliminary injunctions in the RTC.
• July 18, 2003: Court of Appeals (CA) initially reversed the RTC.
• May 4, 2004: CA Amended Decision granting petitioners’ injunctive relief.
• October 12, 2004: CA denied reconsideration.
• May 3, 2006: Supreme Court decision.
Applicable Law
1987 Philippine Constitution; Rule 45, Rules of Court; Civil Code Arts. 1169, 1233, 1235; Act No. 3135 (Extrajudicial Foreclosure Act); Presidential Decree No. 385; General Banking Law (RA 8791).
Relevant Credit Facilities and Mortgages
Petitioners executed a Credit Agreement stipulating that failure to pay any principal, interest or other sum due would constitute an event of default, authorizing UCPB to accelerate the entire obligation and foreclose the real estate mortgages either judicially or extrajudicially under Act No. 3135.
Defaults, Demands, and Acceleration
Beginning May 30, 1998, petitioners failed to pay monthly interest amortizations. UCPB sent demand letters on December 21, 1998 (unpaid interest), January 25, 1999 (acceleration of P103,909,710.82 plus interest and penalties), and March 4, 1999 (final five-day demand). Petitioners made a partial P10,199,473.96 payment on May 20, 1999 without disputing the amounts but sought time to update interest or restructure. UCPB thereafter applied for extrajudicial foreclosure.
Extrajudicial Foreclosure Proceedings
UCPB posted foreclosure notices for May 31, 1999. Petitioners requested a 60-day extension, which the bank refused, leading petitioners to file a civil complaint seeking damages, annulment of interest and penalties, accounting, and injunctive relief.
RTC Injunctive Relief Proceedings
The Regional Trial Court of Makati issued and clarified several TROs and a preliminary injunction between May 1999 and December 2000, initially restraining foreclosure sales on technical grounds (erroneous auction venue, notice defects) and later on perceived lack of clarity in the foreclosure notice’s stated indebtedness. Judge Winlove M. Dumayas reinstated the injunction on March 15, 2002, subject to accounting on foreclosure proceeds.
Court of Appeals Proceedings
UCPB petitioned for certiorari before the CA arguing grave abuse of discretion by the RTC. A Special Fifteenth Division initially affirmed the injunction, finding petitioners had a right to a prior accounting and that their partial payment updated the obligation. On reconsideration, an Amended Decision reversed that ruling, holding (1) petitioners were in clear default; (2) pending accounting did not justify enjoining extrajudicial foreclosure; and (3) petitioners retained other remedies such as annulment of interest claims, damages, lis pendens annotation and redemption rights under the General Banking Law.
Issues for Resolution
- Whether petitioners were in default.
- Whether petitioners established grounds for a preliminary injunction against extrajudicial foreclosure.
Supreme Court’s Analysis on Default
The Court held that:
• The promissory note and Credit Agreement rendered the debt demandable and liquidated;
• Petitioners’ failure to pay monthly interest since May 30, 1998 constituted an event of default under Section 8.01, triggering the acceleration clause in Section 8.02;
• Petitioners’ partial payment did not extinguish or forestall the matured obligation, nor did it imply waiver of UCPB’s foreclosure rights absent express a
Case Syllabus (G.R. No. 85215)
Background of the Case
- On September 19, 1995, petitioners obtained a ₱70 million credit facility from UCPB, secured by real estate mortgages over parcels in Muntinlupa, Las Piñas, Antipolo, Quezon City, and condominium units in Makati.
- Petitioners executed promissory notes for each drawdown and paid interest via monthly amortizations.
- Their September 19, 1995 Credit Agreement stipulated that failure to pay any principal, interest, or sum due constitutes an event of default, enabling acceleration of all outstanding obligations.
Demand Letters and Acceleration of Obligation
- December 21, 1998 demand letter claimed unpaid interest amortizations of ₱14,959,525.10 due May 30, 1998, demanding payment within eight days.
- January 25, 1999 letter, sent via counsel, invoked the acceleration clause: the entire principal of ₱103,909,710.82 plus accrued interest and penalties (totaling ₱17,351,478.55 as of that date) was declared immediately due and payable, with a five-day payment period.
- A March 4, 1999 demand reiterated final settlement within five days.
Extrajudicial Foreclosure Proceedings
- Petitioners made a partial payment of ₱10,199,473.96 on May 20, 1999 but UCPB applied for extrajudicial foreclosure and posted notices for May 31, 1999.
- Petitioners’ request on May 18, 1999 for 60-day extension to update interest or restructure was denied on May 25, 1999.
- Facing foreclosure, petitioners filed Civil Case No. 99-1061 seeking damages, annulment of interest/penalties, accounting, and injunctive relief.
Trial Court Proceedings
- RTC Makati Branch 58 (Judge Salonga) denied ex parte TRO for lack of “great or irreparable injury.”
- On reconsideration, case raffled to Branch 148 (Judge Pimentel): granted 20-day TRO on May 31, 1999 for defective auction venue; subsequently found moot when UCPB re-posted notices.
- October 27, 1999: 20-day TRO granted again. November 26, 1999: preliminary injunction issued upon ₱3.5 million bond, holding foreclosure notices “in abeyance” pending clarification.
- December 29, 2000: Judge Pimentel granted UCPB’s motion for reconsideration, clarifying that injunction was limited to correcting notices misstating the obligation