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PALM TREE ESTATES v. PHILIPPINE NATIONAL BANK

FACTS:

The petition involves a loan agreement entered into by Palm Tree Estates, Inc. (PTEI) with the Philippine National Bank (PNB). PTEI executed a Real Estate Mortgage over several parcels of land and buildings as security for the loan. An Amendment to the Loan Agreement was later signed, extending the grace period for the principal repayment and granting an additional loan. In connection with this amendment, PTEI transferred ownership of certain properties to Belle Air Golf and Country Club, Inc. (BAGCCI), which executed an Amendment to Real Estate Mortgage with PNB. PTEI and PNB also executed several other documents, including a Loan Agreement revalidating the additional loan and a Restructuring Agreement. PNB later demanded payment of PTEI's outstanding obligations and denied PTEI's request for another restructuring. PNB then filed a Petition for extrajudicial foreclosure, prompting PTEI and BAGCCI to file a Complaint in the RTC of Lapu-Lapu City seeking to enjoin the foreclosure.

The case involves a complaint filed by PTEI and BAGCCI against PNB seeking the annulment of a petition for extrajudicial foreclosure, injunction, damages, and other reliefs. PTEI and BAGCCI claimed that PNB only released a total amount of P248,045,679.36 out of the P320 million term loan committed by PNB, resulting in a deficiency of P71,954,320.64. They further alleged that PNB unilaterally converted the US dollar denominated loan to a peso loan at an unreasonable conversion rate and re-priced the interests at exorbitant rates. PTEI and BAGCCI also argued that they were forced to execute an amendment to the loan agreement under threat of foreclosure and that certain documents should be declared void. They claimed that the extrajudicial foreclosure initiated by PNB was null and void and that the amendment to the real estate mortgage had been novated. PNB, on the other hand, refuted the allegations and claimed that it had already released an amount that exceeded the loan agreement. They argued that the conversion of the loan was upon the request of PTEI and justified the increase in interest rates. PNB also denied the allegations of lack of consent and novation. The RTC issued a writ of preliminary injunction to maintain the status quo ante litem pending resolution of the legal controversies.

The plaintiffs in this case argued that while they acknowledge the right of a creditor-mortgagee to proceed against the properties of a debtor-mortgagor to pay for unpaid secured obligations, it is important that any foreclosure proceedings only affect the properties subject to the mortgage contract. They claimed that including properties that are not subject to the mortgage contract or making said properties answer for obligations not secured by them would violate due process. The plaintiffs asserted that they have the right to be fully heard before being deprived of their rights over the mortgaged properties and that the defendant bank should also have the right to present its claims. They further argued that the disputed principal obligation, interests, and penalties should be resolved during the trial on the merits of the case before any foreclosure proceeding can proceed. In support of their arguments, they cited relevant Supreme Court rulings on the preservation of the status quo and the determination of the exact amount of the obligation before foreclosure can be invoked. The plaintiffs concluded that maintaining the status quo and issuing a writ of preliminary injunction would serve the interests of justice and equity.

ISSUES:

  1. Whether the Court of Appeals erred in giving due course to the Petition for Certiorari filed by PNB despite the alleged violation of Section 1, Rule 65 of the Rules of Court.

  2. Whether the Court of Appeals erred in setting aside the orders of the trial court without finding that it acted without or in excess of its jurisdiction.

  3. Whether the Court of Appeals erred in ruling that no clear and unmistakable right in favor of PTEI and BAGCCI was shown to exist.

  4. Whether PNB's failure to include the annexes in their complaint violated Section 1, Rule 65 of the Rules of Court.

  5. Whether PTEI and BAGCCI waived the issue of the formal sufficiency of PNB's petition by failing to file their comment on time and raise the issue in their motion for reconsideration.

  6. Whether or not the requisites for the grant of a writ of preliminary injunction are present.

  7. Whether or not PTEI and BAGCCI have shown a clear and unmistakable right which necessitates the issuance of a writ of preliminary injunction.

  8. Whether there is a clear legal right to warrant the issuance of a writ of preliminary injunction.

  9. Whether the trial court erred in opining that the matter of the questioned and disputed principal obligation, interests, and penalties should be threshed out during the trial before any foreclosure proceeding can proceed.

RULING:

  1. The petition has no merit. The Court of Appeals did not commit any error in giving due course to the Petition for Certiorari filed by PNB and in setting aside the orders of the trial court without finding that it acted without or in excess of its jurisdiction. Moreover, the Court of Appeals correctly ruled that PTEI and BAGCCI failed to show a clear and unmistakable right in their favor.

  2. The Court is not persuaded that PNB's failure to include the annexes in their complaint violated Section 1, Rule 65 of the Rules of Court. The determination of the completeness or sufficiency of the form of the petition, including the relevant and pertinent documents, is left to the discretion of the court. The Court of Appeals already determined that PNB's petition complied with the requirements, and there is no compelling reason to set aside that determination.

  3. PTEI and BAGCCI waived the issue by failing to file their comment on time and raise the issue in their motion for reconsideration. Their failure constituted a waiver pursuant to the omnibus motion rule.

  4. The court held that a writ of preliminary injunction is an extraordinary remedy that must be granted only when there are actual and existing substantial rights at stake. It can only be extended in cases of great injury where courts of law cannot provide adequate remedy in damages, in cases of extreme urgency, where the right is very clear, where considerations of relative inconvenience bear strongly in the complainant's favor, where there is a willful and unlawful invasion of the plaintiff's right against their protest and remonstrance, and where the effect of the injunction is to reestablish and maintain a preexisting continuing relation between the parties. If the requisites for the issuance of a preliminary injunction are absent, the writ must be struck down for having been rendered in grave abuse of discretion.

  5. The court ruled that PTEI and BAGCCI failed to show a clear and unmistakable right which would necessitate the issuance of a writ of preliminary injunction. The trial court's order granting the injunction was based solely on the bare allegations of the plaintiffs without specific evidence to support their claims. It was held that allegations in pleadings do not constitute facts unless they are in the nature of admissions or proven by competent evidence. Therefore, the trial court's order had no factual basis.

  6. No. The trial court's finding of the existence of a real controversy did not constitute a clear showing of a violation of the mortgagor's unmistakable right. In the absence of a clear legal right, the issuance of an injunctive writ would be a grave abuse of discretion. Injunction is not proper when the complainant's right is doubtful or disputed. Therefore, the trial court erred in granting the petitioners' application for a writ of injunction.

  7. Yes. The trial court misapplied Almeda v. Court of Appeals when it opined that the matter of the questioned and disputed principal obligation, interests, and penalties should be threshed out during the trial on the merits before any foreclosure proceedings can proceed. The case of Almeda involved a clear challenge to the unilateral increases in interest rates made by the creditor bank, accompanied by a tender of payment and consignation. In this case, the petitioners only raised the alleged unilateral increases in interest rates after the creditor bank had already exercised its right to extrajudicial foreclosure, without tendering payment or consignation. Therefore, Almeda is not applicable in this case.

PRINCIPLES:

  • A petition for certiorari should be accompanied by copies of all pleadings and documents relevant and pertinent to the judgment, order, or resolution subject thereof, as well as a sworn certification of non-forum shopping. (Section 1, Rule 65 of the Rules of Court)

  • The appellate court may set aside and reverse the orders of the trial court if it finds that there is no clear and unmistakable right in favor of the petitioner.

  • The determination of the completeness or sufficiency of the form of the petition, including the relevant and pertinent documents, is largely left to the discretion of the court taking cognizance of the petition (Section 6, Rule 65 of the Rules of Court).

  • Petitions for certiorari should comply with the requirements of Section 1, Rule 65 of the Rules of Court, and failure to comply may result in dismissal of the petition (Section 2, Rule 56 of the Rules of Court).

  • A complainant seeking injunctive relief must come with clean hands (maxim of equity). Wrongful conduct by the complainant precludes them from obtaining such relief.

  • A writ of preliminary injunction is a preservative remedy to protect a party's substantive rights or interests pending the final judgment in the principal action.

  • The power to issue injunctions should be exercised with circumspection, and it should only be extended in cases of great injury where courts of law cannot afford an adequate remedy.

  • A writ of preliminary injunction is an extraordinary remedy that must be granted only when there are actual and existing substantial rights at stake.

  • The requisites for the grant of a writ of preliminary injunction are the existence of the right to be protected and that the facts against which the injunction is to be directed are violative of said right.

  • An application for injunctive relief is construed strictly against the pleader.

  • Allegations in pleadings do not constitute facts unless they are in the nature of admissions or proven by competent evidence.

  • An application for injunctive relief is construed strictly against the pleader.

  • The possibility of irreparable damage without proof of an actual existing right is not a ground for a preliminary injunction to issue.

  • A writ of preliminary injunction is issued to prevent an extrajudicial foreclosure only upon a clear showing of a violation of the mortgagor's unmistakable right.

  • Injunction is not proper when the complainant's right is doubtful or disputed.

  • The misapplication of prior case law by the trial court can be a ground for reversal of its ruling.