Case Summary (G.R. No. 188768)
Factual Background
TML Gasket Industries, Inc. obtained a credit facility of P85,000,000 from Bank of Southeast Asia, Inc., and secured the loan by a real estate mortgage over commercial and industrial lots in Parañaque City covered by TCT Nos. 81278 and 81303. TML executed several promissory notes from September 1996 to July 31, 1997, each containing a clause declaring the borrower in default for failure to pay when due without need for notice. During the life of the loan, BSA changed its corporate name to DBS Bank Phils., which later merged into BPI Family Savings Bank, Inc. TML admitted that it stopped paying the obligation, and as of June 25, 2002 its indebtedness to BPI was PHP 71,877,930.56, exclusive of penalties and foreclosure expenses. The mortgage instrument expressly authorized the mortgagee to foreclose, judicially or extrajudicially, upon default. The promissory notes also contained a contractual clause permitting unilateral interest-rate adjustments by the lender upon certain economic or regulatory contingencies.
Complaint and Requests for Injunctive Relief
Facing an impending extrajudicial foreclosure sale, TML filed a complaint on November 21, 2002, for declaratory relief, accounting, nullity of the notice of extrajudicial sale, and damages, with a prayer for a temporary restraining order and/or writ of preliminary injunction. TML alleged that the bank unilaterally and unconscionably increased the interest rate from an alleged understood rate of sixteen percent per annum to thirty-three percent and assessed penalties of thirty-six percent on past due principal, thereby rendering the obligation indeterminate; that BPI refused to furnish an independent accounting; and that extrajudicial foreclosure would inflict grave and irreparable injury because the mortgaged premises housed TML's office and factory.
Trial Court Proceedings and Rulings
The trial court initially denied TML's application for a preliminary injunction in an order dated June 20, 2003, finding that TML was indebted and delinquent and that its right over the property was doubtful. On reconsideration, however, the trial court reversed course and granted a writ of preliminary injunction in the Orders dated August 22, 2003 and November 27, 2003, conditioned upon the posting of a bond in the amount of PHP 300,000. The trial court explained that, although default existed, the amount due had yet to be determined and that the short redemption period under the General Banking Act would make redemption practically impossible, such that TML might win the case but nevertheless lose its property.
The Parties' Contentions on Appeal
BPI contended that the interest rates and penalty charges were mutually and voluntarily agreed, that TML had defaulted and that extrajudicial foreclosure was expressly authorized by the promissory notes and mortgage, and that the trial court committed grave abuse of discretion in issuing the injunction. TML maintained that the bank's purported unilateral interest adjustments rendered the obligation uncertain, that BPI failed to account for the loan, and that the threatened extrajudicial sale would work irreparable injury unless enjoined.
Court of Appeals Decision
The Court of Appeals granted BPI's Rule 65 petition and found that the trial court committed grave abuse of discretion in issuing the preliminary injunction. The appellate court stressed that TML admitted nonpayment, that the promissory notes treated nonpayment as an event of default, and that the mortgage expressly permitted extrajudicial foreclosure at the mortgagee's discretion. The appellate court concluded that TML failed to demonstrate a clear existing right to be protected or an actual threatened violation of any such right, and it therefore reversed and set aside the trial court's injunction.
Supreme Court Ruling
This Court denied TML's petition for review on certiorari and affirmed the Court of Appeals' decision. The Court held that the requisites for a writ of preliminary injunction under Section 3, Rule 58 of the Rules of Court require a clear showing of an actual existing right to be protected and its actual or threatened violation, and that TML did not establish such a right. The Court observed that TML had incontestably admitted the existence of the loan, the mortgage, and its failure to pay, which entitled BPI to proceed with extrajudicial foreclosure pursuant to the parties' agreements. The Court further concluded that the trial court erred in granting the injunction on the grounds that the debt was unliquidated, that TML might suffer irreparable injury even if it prevailed on the merits, and that the redemption period under the General Banking Act made redemption practically impossible.
Legal Basis and Reasoning
The Court applied the settled rule that injunction is not designed to protect contingent or disputed rights and that the issuance of a preliminary injunction in the absence of a clear legal right constitutes grave abuse of discretion. The decision reiterated that a debt is liquidated when the amount is known or determinable from the promissory notes and related documents, citing Selegna Management and Development Corporation v. United Coconut Planters Bank for the proposition that failure to furnish a detailed statement of account does not render an obligation unliquidated. The Court also cited Equitable PCI-Bank, Inc. v. OJ-Mark Trading, Inc. for the standard governing injunctive relief. The Court emphasized that BPI's exercise of its contractual right to foreclose did not violate TML's property rights but rat
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Case Syllabus (G.R. No. 188768)
Parties and Procedural Posture
- TML Gasket Industries, Inc. was the petitioner before the Court seeking review on certiorari of a Court of Appeals decision reversing trial court orders.
- BPI Family Savings Bank, Inc. was the respondent and the mortgagee who initiated extra-judicial foreclosure of the mortgaged properties.
- The trial court, Regional Trial Court, Branch 194, Paranaque City, docketed Civil Case No. 02-0504, issued interlocutory orders granting and then reimposing a writ of preliminary injunction enjoining the foreclosure.
- The Court of Appeals in CA-G.R. SP No. 81932 reversed the trial court orders and lifted the writ of preliminary injunction, prompting this petition for review on certiorari.
Key Factual Allegations
- TML obtained a credit facility of P85,000,000 in September 1996 from Bank of Southeast Asia, Inc. as evidenced by promissory notes and a real estate mortgage.
- The mortgage covered commercial and industrial lots in Paranaque City registered as Transfer Certificate of Title Nos. 81278 and 81303.
- TML executed several promissory notes between September 1996 and July 31, 1997, containing a clause that the borrower was in default if it failed to pay when due, without need of notice.
- During the loan period, BSA became DBS Bank Phils. and later merged into BPI, which asserted default and proceeded with extra-judicial foreclosure.
- As of June 25, 2002, TML’s indebtedness to BPI was P71,877,930.56, exclusive of penalties and foreclosure expenses.
- A Notice of Extra-judicial Foreclosure Sale was issued by the Ex-Officio Sheriff on October 24, 2002, and TML filed suit on November 21, 2002, seeking declaratory relief, accounting, nullity of the notice, damages, and injunctive relief.
Loan Documents and Clauses
- The promissory notes included a default provision that the borrower was considered in default when it failed to pay the principal, interest, or other charges when due.
- The loan documents contained an interest-adjustment clause permitting the lender to adjust interest rates upon specified macroeconomic or regulatory contingencies, with notice to the borrower.
- The real estate mortgage provided that upon mortgagor default the mortgagee had the right to immediately foreclose and that foreclosure could be judicial or extrajudicial at the mortgagee’s discretion.
- TML alleged that the lender originally represented an understanding of a 16% per annum interest rate but that BPI unilaterally imposed a 33% rate and ultimately applied a 36% penalty on past due amounts.
Trial Court Orders
- On June 20, 2003, the trial court initially denied TML’s application for a preliminary injunction, finding that TML was indebted and delinquent and that its right to the property was doubtful.
- On reconsideration, the trial court reversed course and granted the writ of preliminary injuncti