Case Summary (G.R. No. 243999)
Key Dates
• September 2014 – Petitioners apply for a P2,811,456 loan for their tokwa business
• November 30, 2014 – First monthly amortization of P58,572 begins
• October 2015 – Petitioners default after business losses
• January 14, 2016 – Complaint for nullification of mortgage documents and damages filed in RTC
• March 11, 2016 – Radiowealth files extrajudicial foreclosure application
• April 11, 2016 – Petitioners apply for TRO/WPI to enjoin the foreclosure sale
• May 3, 2016 – RTC denies WPI; June 10, 2016 denies reconsideration
• March 16, 2018 – CA issues Decision dismissing Rule 65 petition
• December 14, 2018 – CA denies motion for reconsideration
• March 18, 2021 – Supreme Court issues final Decision
Applicable Law
• 1987 Philippine Constitution – Due process guarantees
• Rules of Court, Rule 58, Section 3 – Grounds for preliminary injunction
• A.M. No. 99-10-05-0 (Feb. 20, 2007), as amended by OCA Circular No. 25-07 (Mar. 5, 2007) – Special rules on TRO/WPI in extrajudicial mortgage foreclosure
• BSP Circular No. 799 (June 21, 2013) – Legal interest rate set at 6% p.a.
Facts of the Main Case
Petitioners contracted a four-year loan of P2,811,456, but only received P1,500,000 after Radiowealth deducted a P100,000 processing fee and front-loaded P1,311,456 as interest. The loan was secured by their residential property. Monthly amortizations of P58,572 began in November 2014, of which 87% allegedly covered interest. Petitioners, unaware of the true cost due to lack of disclosure under the Truth in Lending Act, defaulted in October 2015. Radiowealth’s representatives threatened foreclosure. A promised loan restructuring never materialized; petitioners contend they were coerced into signing a Deed of Sale under pacto de retro.
Procedural Posture
In January 2016 petitioners sued for nullification of mortgage documents, recovery of fees, and damages. Radiowealth proceeded with extrajudicial foreclosure, scheduling a public auction. Petitioners secured a TRO but the RTC denied their WPI application and denied reconsideration. Their Rule 65 petition in the CA was dismissed. They elevated the matter via Rule 45 to the Supreme Court.
Issue
Did the Court of Appeals commit reversible error in ruling that the RTC did not commit grave abuse of discretion in denying the writ of preliminary injunction?
Ruling of the RTC
The RTC held petitioners did not deny their indebtedness, presented no evidence of overpayment, and could not establish unconscionability of interest without prejudging the main case. It found Radiowealth’s right to foreclose clear and denied the WPI.
Ruling of the Court of Appeals
The CA dismissed the Rule 65 petition, concluding that:
- A WPI must not dispose of the main case;
- Petitioners failed to show a clear right to shield the property from foreclosure;
- No irreparable injury was demonstrated.
Supreme Court’s Analysis on Grave Abuse of Discretion
Review is confined to questions of law in a Rule 45 petition. The Court affirmed that neither the CA nor the RTC committed grave abuse of discretion in denying the WPI.
Requirements for a Writ of Preliminary Injunction in Mortgage Foreclosure
Under Rule 58, Sec. 3, a WPI issues if the applicant shows (a) a clear right to relief, (b) likelihood of irreparable injury, and (c) acts threatening that right. A.M. No. 99-10-05-0 adds that no TRO/WPI on the ground of unconscionable interest may issue unless the debtor:
- Alleges unconscionable interest;
- Supports that allegation with prima facie evidence; and
- Pays at least the legal interest rate (6% p.a.) on the principal obligation, updated monthly, from the filing of the appl
Case Syllabus (G.R. No. 243999)
Procedural History
- Petitioners filed a Complaint for Nullification of Mortgage Documents, Promissory Note, and Damages with the RTC of San Mateo, Rizal (Branch 76) on January 14, 2016, seeking nullification or reduction of interest, return of processing fees, and damages.
- Radiowealth Finance Company, Inc. filed an Application for Extrajudicial Foreclosure of Real Estate Mortgage before the same RTC on March 11, 2016; notice of public auction was set for April 26, 2016.
- Petitioners secured a Temporary Restraining Order (TRO) on April 14, 2016, but their subsequent application for a Writ of Preliminary Injunction (WPI) was denied by RTC order of May 3, 2016; a Partial Motion for Reconsideration was likewise denied on June 10, 2016.
- Petitioners elevated the matter to the Court of Appeals via a Rule 65 petition, alleging grave abuse of discretion; the CA dismissed the petition in its Decision of March 16, 2018 and denied reconsideration in its Resolution of December 14, 2018.
- Petitioners filed a Rule 45 Petition for Review on Certiorari before the Supreme Court assailing the CA’s rulings on the ground of misapplication of A.M. No. 99-10-05-O.
Facts of the Case
- In or before September 2014, petitioners applied for a four-year loan of ₱2,811,456.00 to finance their tokwa business; they received only ₱1,500,000.00 after a ₱100,000.00 processing fee and ₱1,311,456.00 in interest charges.
- The loan was secured by a real estate mortgage on petitioners’ property under TCT No. 009-2010000083; monthly amortizations of ₱58,572.00 began on November 30, 2014, with 87% of each payment alleged to be interest.
- Petitioners claimed that Radiowealth failed to provide them with a finance statement, the real estate mortgage, and the promissory note, in violation of the Truth in Lending Act, causing ignorance of the true cost of the loan.
- During the fourth quarter of 2015, due to business losses, petitioners defaulted on their amortizations after having paid eleven amounts totaling ₱644,292.00.
- Late in 2015, Radiowealth representatives allegedly threatened to foreclose and take over petitioners’ home if they missed two consecutive payments.
- In December 2015, petitioners requested a loan restructuring; they were instead