Case Summary (G.R. No. 164437)
SBI’s Restructuring Proposals and CBC’s Letters
In March 2000, SBI requested reduction of interest and penalties, partial release of titles, and dacion en pago of the New Cubao Central property. CBC’s letters of April 17 and May 19, 2000, asserted that the loan had been restructured effective March 1, 1999, detailed prevailing interest and penalty rates, and suggested that SBI’s best recourse was to sell the mortgaged properties itself. A demand letter of September 18, 2000, required full settlement within ten days or face legal collection.
Filing of Complaint and RTC Injunction
RTC Grant of Writ of Preliminary Injunction
On October 5, 2000, SBI and MFII filed a complaint to compel performance and for damages, praying for preliminary injunction against CBC’s foreclosure threats. The RTC, finding prima facie that SBI’s rights over collateral were substantial and that the alleged interest increases were unfair, issued a writ restraining CBC from enforcing its demand letters, conditioned on posting a ₱2 million bond.
Court of Appeals Review
CA Finds Grave Abuse of Discretion in Injunction
CBC’s petition for certiorari to the CA argued that the RTC had no jurisdiction and misapplied the requisites for injunction. In its April 16, 2007 Decision, the CA held that the RTC did not make factual or legal findings to establish a clear right or irreparable injury. It set aside all RTC orders granting and maintaining the injunction, and dissolved the writ. A September 18, 2007 CA resolution denied reconsideration.
Issue Before the Supreme Court
Proper Grant of Writ of Preliminary Injunction?
Whether the RTC acted within its discretion in granting a preliminary injunction to prevent foreclosure, given SBI’s alleged usurious interest charges and its default on promissory notes.
Legal Standards for Preliminary Injunction
Requisites Under Rule 58 and Jurisprudence
A preliminary injunction requires a clear and unmistakable right, a substantial invasion of that right, and urgency to prevent irreparable injury. The writ preserves the status quo pending final resolution, and is an extraordinary remedy granted only when legal damages cannot adequately redress the injury.
Supreme Court’s Analysis on Rights and Default
Usury Does Not Bar Foreclosure; Right Was Disputable
The Court applied Civil Code Article 1229 to note that even if interest stipulations are unconscionable, the lender’s right to recover principal and foreclose remains. SBI’s entitlement to challenge the fairness of interest would be resolved at trial, not by preliminary injunction. SBI and MFII had defaulted on ten promissory notes matured in 2004, which unequivocally authorized foreclosure. Their ongoing requests to restructure without payment underscored their inability to satisfy obli
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Procedural History
- Petitioners SBI and MFII filed Civil Case No. 68105 (RTC Pasig, Branch 264) to compel performance, for damages, and for preliminary injunction/TRO to enjoin CBC from enforcing demand letters and foreclosing mortgages.
- Trial court (Order Dec. 14, 2000) granted preliminary injunction; bond of ₱2 million required.
- CBC’s motions for reconsideration (Dec. 10, 2001) and to dissolve injunction (Nov. 10, 2003) were denied by the trial court.
- CBC petitioned the Court of Appeals (CA-G.R. SP No. 81968) via certiorari, assailing the RTC orders.
- CA Decision (Apr. 16, 2007) found grave abuse of discretion, set aside RTC orders, and dissolved the injunction.
- CA denied petitioners’ motion for reconsideration (Reso. Sept. 18, 2007).
- SBI and MFII elevated the case to the Supreme Court under Rule 45.
Facts of the Case
- Between Sept. 4, 1992 and Mar. 27, 1996, CBC extended loans to SBI totaling ₱139,999,234.34 (exclusive of interests and charges).
- MFII secured these loans by executing surety agreements and real estate mortgages over land in Loyola Grand Villas (Quezon City) and New Cubao Central (Cainta, Rizal).
- SBI proposed sharing sale proceeds of mortgaged properties on a 50-50 basis and partial releases of titles without updating interests.
- In a Mar. 20, 2000 letter, SBI requested loan restructuring, reduced interest and penalties, and dacion en pago of New Cubao Central property.
- CBC’s Apr. 17, 2000 reply: restructuring was completed on Mar. 1, 1999 (₱218,540,646); advised updating obligations to avoid penalties; dacion en pago subject to Senior Management approval; suggested SBI sell properties.
- CBC’s May 19, 2000 letter reaffirmed restructuring (effective Mar. 1, 1999, ℗231,716,646) and interest-repricing rules; dacion en pago still under approval.
- On Sept. 18, 2000, CBC demanded payment of ₱218,540,646 within ten days or refer