Case Summary (G.R. No. 165662)
Key Dates
Credit Agreement: September 19, 1995.
Promissory Note (increased facility): March 29, 1998 (maturity March 26, 1999).
Demand letters: December 21, 1998; January 25, 1999; March 4, 1999.
Partial payment by petitioners: March 25, 1999 (P10,199,473.96).
Notice of extrajudicial foreclosure received: May 18, 1999 (scheduled sale May 31, 1999).
Trial court orders and writs: TROs and preliminary injunctions issued and modified between May–December 1999; RTC orders of December 29, 2000 and March 15, 2002.
Court of Appeals Amended Decision (reversing RTC’s March 15, 2002 order): May 4, 2004; Reconsideration denied October 12, 2004. Supreme Court petition for review decided May 3, 2006.
Applicable Law and Authorities
Governing Constitution: 1987 Philippine Constitution.
Statutes and rules cited: Civil Code (Arts. 1169, 1233, 1235, 1248, 1159), Act No. 3135 (extrajudicial foreclosure), Presidential Decree No. 385, General Banking Law of 2000 (RA No. 8791) sec. 47, and Rule 45 of the Rules of Court (petition for review).
Precedents and authorities cited in the decision: Estares v. CA; Zulueta v. Reyes; China Banking Corporation v. CA; Abaca Corporation v. Garcia; Pacific Mills, Inc. v. CA; Sulit v. CA; Ortigas & Co. v. Ruiz; Manila Int’l Airport Authority v. CA; and various Civil Code and remedial law authorities quoted in the opinion.
Factual Background
Petitioners obtained a credit facility from UCPB and executed real estate mortgages over multiple properties and promissory notes requiring monthly interest amortizations. The parties’ Credit Agreement expressly defined failure to pay any installment or interest as an event of default and contained an acceleration clause permitting UCPB to declare all outstanding availments immediately due and payable. Petitioners allegedly failed to pay monthly interest beginning May 30, 1998. UCPB issued successive demands; petitioners made a partial payment in March 1999 and requested additional time or restructuring, which the bank refused. UCPB applied for extrajudicial foreclosure and posted notices; petitioners filed suit seeking damages, annulment of interest, accounting, and injunctive relief to restrain the extrajudicial foreclosure.
Procedural History
Petitioners sought immediate TRO and preliminary injunction in RTC; initial ex parte TRO was denied for lack of irreparable injury; subsequent TROs and a preliminary injunction were issued by different RTC judges at various times and then modified or clarified. After recusal and reassignment, proceedings produced an RTC order (March 15, 2002) reinstating the preliminary injunction and ordering accounting of foreclosure proceeds. UCPB petitioned the CA for certiorari; the CA initially affirmed the RTC but, upon reconsideration by a Special Division, reversed and set aside the RTC order. Petitioners filed a Rule 45 petition for review to the Supreme Court challenging the CA’s Amended Decision and its denial of reconsideration.
Issues Presented
The Supreme Court framed the controlling issues as: (1) whether petitioners were in default, thereby justifying extrajudicial foreclosure by UCPB; and (2) whether there was a sufficient basis to issue a preliminary injunction enjoining the extrajudicial foreclosure. Related subsidiary issues raised by petitioners included alleged denial of due process by the CA, improper reliance on inapplicable jurisprudence, and whether the CA erred in finding grave abuse of discretion by the RTC judge — all of which the Court treated as attendant to the two main questions.
Court’s Analysis — Existence of Default and Right to Foreclose
The Court reiterated settled principles: foreclosure is proper when debtors are in default; the parties’ contract terms are dispositive where the contract defines events of default and authorizes foreclosure. The Credit Agreement and promissory notes here expressly made failure to pay interest an event of default and contained an acceleration clause. The Court identified the three requisites of mora solvendi (default): (1) the obligation is demandable and liquidated; (2) debtor delays performance; and (3) creditor judicially or extrajudicially demands performance. The Court found the requisites satisfied: petitioners’ obligation (principal P103,909,710.82 with 21.75% annual interest and contractual penalty provisions) was contractually determinable; petitioners failed to pay monthly interest since May 30, 1998; and UCPB made repeated demands and invoked acceleration (fixing January 29, 1999 as the deadline). The Court held that acceleration rendered the whole obligation immediately due and payable and that mortgage provisions authorized extrajudicial foreclosure under Act No. 3135.
Court’s Analysis — Liquidation of the Debt and Accounting Argument
Petitioners argued that absence of a detailed accounting rendered the debt unliquidated and made foreclosure premature; they also claimed their March 25, 1999 partial payment averted maturity. The Court rejected both contentions. It explained that a debt is liquidated where the amount is known or determinable from the promissory note and related agreements; failure to furnish a detailed statement of account does not ipso facto make the obligation unliquidated. The promissory note and Credit Agreement specified principal, interest rate, penalties for delay, and payment application rules; petitioners did not contest those contractual numbers when making partial payment, and their communications merely sought time or restructuring. The Court emphasized that acceptance of partial payment does not, without clear indication of the creditor’s intention to consider the obligation fully satisfied, extinguish the remainder of the debt — citing Civil Code Art. 1235 and authorities. UCPB’s subsequent application for extrajudicial foreclosure after accepting partial payment demonstrated it did not waive its right to foreclose.
Court’s Analysis — Partial Payment Does Not Halt Maturity
The Court explicitly held that the late partial payment did not extinguish or delay the matured obligation. A partial and late payment cannot forestall a maturity date already accelerated by the creditor. To imply waiver of the acceleration or to treat partial payment as full satisfaction would require clear evidence of the creditor’s intention to consider performance complete; no such evidence existed. Accordingly, petitioners’ claim that the loan’s maturity was averted by their partial payment failed.
Court’s Analysis — Standard for Preliminary Injunction and Its Application
The Court reiterated the high threshold for granting a writ of preliminary injunction: the plaintiff must show at least a prima facie right to final relief, that invasion of the right is material and substantial, and that urgent necessity exists to prevent serious d
...continue readingCase Syllabus (G.R. No. 165662)
Nature of the Case and Relief Sought
- Petition for Review under Rule 45 of the Rules of Court challenging the Court of Appeals Amended Decision dated May 4, 2004 and Resolution dated October 12, 2004 in CA‑GR SP No. 70966.
- Relief sought: reversal of the CA Amended Decision and Resolution that denied injunctive protection against extrajudicial foreclosure; underlying case sought damages, annulment of interest and penalty increase, accounting, and temporary restraining order / preliminary injunction (Civil Case No. 99‑1061, RTC Makati).
- Central operative relief at the trial and appellate levels: issuance (or continuation) of a writ of preliminary injunction restraining extrajudicial foreclosure of mortgaged properties.
Parties and Procedural Posture
- Petitioners: Selegna Management and Development Corporation; Spouses Edgardo and Zenaida Angeles.
- Respondent: United Coconut Planters Bank (UCPB).
- Trial court history: initial denial of ex parte TRO by Judge Josefina G. Salonga; re‑raffle to Branch 148 (Judge Oscar B. Pimentel) granting successive TROs and a preliminary injunction (subject to time/clarification); later clarification/reconsideration orders; subsequent re‑raffling to Branch 58 (Judge Escolastico U. Cruz) whose proceedings were nullified by the Supreme Court; reassigned to Judge Winlove M. Dumayas who reinstated the November 26, 1999 preliminary injunction subject to accounting (Order dated March 15, 2002).
- Appellate proceedings: UCPB petitioned the Court of Appeals for certiorari to nullify the RTC March 15, 2002 order; initial Special Fifteenth Division affirmed the RTC (Justice Rebecca de Guia‑Salvador authored the original affirmance; later a Special Division of Five granted reconsideration and issued an Amended Decision reversing the RTC); petitioners sought reconsideration in the CA which was denied; petitioners elevated the case to the Supreme Court by Rule 45 petition.
- Final disposition in the Supreme Court: Petition denied; assailed Amended Decision and Resolution of the CA affirmed; costs against petitioners.
Material Facts (Loans, Security, and Credit Terms)
- On September 19, 1995 petitioners were granted a P70,000,000 credit facility by UCPB secured by real estate mortgages covering parcels in Muntinlupa, Las Piñas, Antipolo, Quezon and several condominium units in Makati.
- Petitioners executed promissory notes in favor of UCPB with interest payable by monthly amortizations. The parties’ Credit Agreement (September 19, 1995) stipulated that failure to pay any availment, interest or any sum due constitutes an event of default and allowed the bank to declare all outstanding availments and accrued interest immediately due and payable.
- Petitioners obtained an increased credit facility and executed a Promissory Note for P103,909,710.82, maturing on March 26, 1999 (promissory note executed March 29, 1998), at an agreed interest rate of 21.75% per annum, with monthly interest amortizations.
- UCPB sent a demand letter dated December 21, 1998 stating petitioners failed to pay interest amortizations amounting to P14,959,525.10 due May 30, 1998; a subsequent demand/acceleration notice dated January 25, 1999 declared the principal P103,909,710.82 (with interest, penalty and other charges as of January 25, 1999 amounting to P17,351,478.55) immediately due and payable and demanded payment within five (5) days.
- Another demand was sent March 4, 1999 giving five (5) days to settle the past due obligation; petitioners thereafter made a partial payment amounting to P10,199,473.96 as partial payment of accrued interests.
- UCPB applied for extrajudicial foreclosure. Notice of Extrajudicial Foreclosure Sale was received by petitioners on May 18, 1999; petitioners requested a 60‑day period to update accrued interest and to restructure/takeout; UCPB denied the request by letter dated May 25, 1999 and otherwise referred the account to external counsel and demanded full settlement.
Sequence of Trial Court Orders and Interim Relief
- Judge Josefina G. Salonga denied the urgent ex parte motion for TRO on the ground that no great or irreparable injury would be inflicted if parties were first heard.
- Branch 148 (Judge Oscar B. Pimentel):
- Granted a 20‑day TRO on May 31, 1999 regarding the scheduled foreclosure of Antipolo properties, citing a problem (inexistent auction venue) in the Notice of Foreclosure Sale.
- After UCPB’s manifestation that it would withdraw and re‑post notices, Judge Pimentel denied the TRO as moot in an Order dated September 6, 1999.
- Later issued an Order on October 27, 1999 granting a 20‑day TRO; on November 26, 1999, granted a writ of preliminary injunction restraining foreclosure subject to a P3,500,000 preliminary injunction bond (stated the injunction was to hold the notice of foreclosure sale in abeyance until clarification of the notices and figures such as P131,854,773.98).
- Writ of Preliminary Injunction issued November 29, 1999.
- On December 29, 2000, Judge Pimentel granted/responded to a motion for reconsideration and clarified that the court did not intend to restrain defendants indefinitely; characterized the Writ as an extension of the 20‑day TRO and stated the court’s intent had been to require modification of foreclosure notices (claimed error in Writ length).
- Subsequent events:
- UCPB proceeded with some foreclosure sales after Pimentel’s clarification.
- Petitioners filed Omnibus Motion for Reconsideration and Specification of Application of proceeds (claimed P92 million realized from foreclosure sales).
- Judge Pimentel inhibited; case re‑raffled to Branch 58 (Judge Escolastico U. Cruz) whose proceedings were later nullified by the Supreme Court (En Banc Resolution dated September 18, 2001 — Dr. Alday v. Judge Cruz, Jr.); Judge Cruz was dismissed from service.
- Case re‑raffled to Judge Winlove M. Dumayas who on March 15, 2002 granted petitioners’ Omnibus Motion for Reconsideration and Specification of Foreclosure Proceeds, reinstating the November 26, 1999 preliminary injunction subject to accounting by UCPB within fifteen (15) days on proceeds realized from foreclosed properties located in Antipolo, Makati, Muntinlupa and Las Piñas.
Court of Appeals Proceedings and Rulings
- UCPB filed a petition for certiorari before the Court of Appeals seeking nullification of the RTC March 15, 2002 Order.
- Special Fifteenth Division (initial ruling by Justice Rebecca de Guia‑Salvador): affirmed the RTC judgment granting injunctive relief, finding petitioners had a clear right to an injunction because UCPB had kept petitioners in the dark as to how and why their principal obligation had ballooned to almost P132 million; UCPB’s refusal to give a detailed accounting prevented determination of maturity and precluded foreclosure; petitioners’ payment of P10 million updated the obligation and averted maturity.
- A Special Division of Five (Amended Decision authored by Justice Jose Catral Mendoza): granted UCPB’s motion for reconsideration and reversed the earlier CA decision; held foreclosure proceedings should not be enjoined given petitioners’ failure to meet their obligations upon maturity; held pending accounting did not warrant an injunction; noted petitioners had other remedies, including action for annulment of interest, damages and accounting, and annotation of lis pendens.
- Separa