Case Summary (G.R. No. 243999)
Factual Background
Petitioners alleged that they applied for a loan from Radiowealth to finance a tokwa business and were granted a loan stated as P2,811,456.00 payable in four years. They contend they received only P1,500,000.00 after a P100,000.00 processing fee and that interest in the amount of P1,311,456.00 was charged. The loan was secured by a real estate mortgage on their property covered by TCT No. 009-2010000083. Petitioners averred that they paid monthly amortizations of P58,572.00 beginning November 30, 2014, alleging that P27,322.00 or 87% of each monthly amortization went to interest, which they characterized as unconscionable and contrary to law. They further alleged that they were not furnished copies of a finance statement, the real estate mortgage, or the promissory note, and that they were not properly apprised of the processing fee. Beginning October 2015, petitioners claimed business losses and defaulted on payments.
Complaint and Prayer
On January 14, 2016 petitioners filed a Complaint for Nullification of Mortgage Documents, Promissory Note, and Damages against Radiowealth. They sought: annulment of the real estate mortgage, promissory notes and other loan documents as contrary to law or, in the alternative, reduction of interest to moral or legal rate; return of P100,000.00 as actual damages; and exemplary damages, attorney’s fees, and cost of suit.
Extrajudicial Foreclosure and TRO/WPI Proceedings
Radiowealth filed an Application for Extrajudicial Foreclosure on March 11, 2016, alleging an outstanding balance of P2,044,338.10 as of April 2015. Notice of Extrajudicial Foreclosure issued March 16, 2016 set a public auction for April 26, 2016. Petitioners applied to the RTC for a Temporary Restraining Order (TRO) and/or Writ of Preliminary Injunction (WPI) on April 11, 2016 to enjoin the foreclosure and sale. The RTC issued a TRO on April 14, 2016 but, after hearing, denied the application for WPI by Order dated May 3, 2016.
RTC Decision and Reconsideration
The RTC found that petitioners did not deny the indebtedness as evidenced by the promissory note and payments made. The RTC observed that petitioners initially did not question loan terms and only raised alleged unconscionable interest after they suffered business losses. It held that the unconscionable nature of the interest was a factual matter to be resolved at trial and that deciding it in a WPI proceeding would amount to prejudgment of the Main Case. Petitioners filed a Partial Motion for Reconsideration dated May 17, 2016, which the RTC denied on June 10, 2016 for the same reason.
Rule 65 Proceedings in the Court of Appeals
Petitioners filed a Rule 65 petition for certiorari with the CA, asserting that the RTC committed grave abuse of discretion in denying the WPI and the motion for reconsideration. The CA dismissed the petition in a Decision dated March 16, 2018, holding that (1) a court should avoid issuing a WPI that would effectively dispose of the main case; (2) Radiowealth’s right to foreclose was clear while petitioners failed to prove a right to shield their property from foreclosure; and (3) petitioners did not prove irreparable injury. The CA denied reconsideration in a Resolution dated December 14, 2018.
Issues Presented
The principal issue reviewed by the Supreme Court was whether the CA erred in ruling that the RTC did not commit grave abuse of discretion in denying petitioners’ application for a WPI.
Supreme Court Review and Standard of Review
The Supreme Court emphasized that review of a CA ruling on a Rule 65 petition is limited to questions of law and whether the CA correctly determined the absence of grave abuse of discretion in the RTC’s orders. The Court reiterated the general requisites for a preliminary injunction under Section 3, Rule 58, Rules of Court: (a) entitlement to the relief demanded that consists in restraining acts complained of; (b) that continuation of the acts would probably work injustice; or (c) that acts threaten to render judgment ineffectual. The Court cited Borlongan v. Banco de Oro for the twofold inquiry: a clear and unmistakable right to be protected and an urgent necessity to prevent serious damage.
Application of A.M. No. 99-10-05-0 and Related Jurisprudence
The Court set out the specific constraints of A.M. No. 99-10-05-0, as amended, which governs TRO/WPI against extrajudicial foreclosure. Under Rule 2 of that administrative matter, no TRO/WPI shall issue on an allegation that interest is unconscionable unless the debtor pays the mortgagee at least the legal rate of interest on the principal obligation as stated in the foreclosure application and updates that payment monthly while the case is pending. The Court noted the change in the legal rate from twelve percent per annum to six percent per annum pursuant to Bangko Sentral ng Pilipinas Circular No. 799, effective July 1, 2013, and therefore required a six percent per annum tender for applications filed in 2016. The Court referenced Icon Development Corp. v. National Life Insurance Company of the Philippines to stress strict compliance with these requirements, including the posting of bond where applicable.
Analysis of Petitioners’ Compliance and Rights to Protection
The Court found that petitioners failed to comply with Rule 2 of A.M. No. 99-10-05-0, as amended, because they did not show that they paid the legal interest required when they filed the application for TRO/WPI. The Court rejected petitioners’ contention that the RTC should have inquired into their willingness and capacity to pay the required interest, noting that willingness alone does not discharge the affirmative obligation to pay or deposit the required interest with the court or mortgagee. The Court reiterated that the applicant bears the burden to show a clear and unmistakable right to be protected and that absence of such right renders issuance of a WPI an act of grave abuse of discretion, citing Lerias v. Court of Appeals.
Clarification on Prel
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Case Syllabus (G.R. No. 243999)
Parties and Procedural Posture
- SPS. LITO AND LYDIA TUMON, PETITIONERS filed a Rule 45 Petition for Review on Certiorari assailing the Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 147138.
- RADIOWEALTH FINANCE COMPANY, INC., RESPONDENT commenced an extrajudicial foreclosure against the petitioners' mortgaged real property and filed the application for foreclosure before the RTC.
- The petition challenged the Court of Appeals' dismissal of a Rule 65 petition which had alleged grave abuse of discretion by the Regional Trial Court (RTC) of San Mateo, Rizal, Branch 76 in denying a writ of preliminary injunction.
- The Supreme Court reviewed only questions of law attendant to the CA decision in the Rule 45 Petition.
Key Factual Allegations
- Petitioners obtained a loan ostensibly in the amount of P2,811,456.00 from Radiowealth, but alleged that they received only P1,500,000.00 after a P100,000.00 processing fee and that P1,311,456.00 was charged as interest.
- Petitioners alleged monthly amortizations of P58,572.00 beginning November 30, 2014 and contended that P27,322.00 or 87% of each monthly amortization represented interest and that the interest charged was unconscionable and illegal.
- Petitioners averred that they were not furnished with a finance statement, the real estate mortgage, or the promissory note prior to or at the time of contracting, allegedly in violation of the Truth in Lending Act.
- Petitioners asserted business losses beginning October 2015, ceased paying amortizations, and paid eleven monthly amortizations totaling P644,292.00 before default.
- Radiowealth filed an Application for Extrajudicial Foreclosure on March 11, 2016 and issued a Notice of Extrajudicial Foreclosure setting public auction for April 26, 2016.
Relief Sought
- Petitioners sought annulment and nullification of the real estate mortgage, promissory notes, and other loan documents as void ab initio or, alternatively, reduction of interest to moral or legal rate.
- Petitioners sought actual damages of P100,000.00, exemplary damages of P50,000.00, attorney's fees, and costs of suit.
- In the interlocutory proceeding, petitioners sought a Temporary Restraining Order and/or Writ of Preliminary Injunction to enjoin the extrajudicial foreclosure and sale of the mortgaged property.
Lower Court Proceedings
- The RTC initially granted a TRO on April 14, 2016 and set hearing for the WPI application, but subsequently denied the WPI on May 3, 2016 on the ground that the validity of the interest was a matter for the Main Case.
- The RTC denied the petitioners' Partial Motion for Reconsideration on June 10, 2016 for prejudging the Main Case if the interest issue were decided in the injunction proceeding.
- Petitioners filed a Rule 65 certiorari petition with the Court of Appeals, which dismissed the petition on March 16, 2018 for lack of merit and denied recons