A writ of preliminary injunction may be issued only upon a clear showing of the actual existence of a right to be protected and the actual or threatened violation of that right. This is illustrated in this case of YKS, a realty development company.
The case involved two separate loans granted to YKS by two banks, EBC and PCIB which later merged and became known as EPCIB.
The first loan was granted by EBC in 1997 in the form of a credit line initially in the amount of P4 million and later increased to P53 million. Said line was secured by a real estate mortgage of two registered properties in the name of YKS situated in Tacloban City and the personal surety-ship of its corporate officers assuming corporate liability up to the amount of P85 million.
By June 29, 1998 EBC had already released the total amount of P10.4 million from the said credit line of P53 million covered by three Promissory Notes. Since no payment has been made despite demand on March 12, 2001, EBC already instituted extrajudicial foreclosure proceedings on May 23, 2001 for the sale of the mortgage properties to satisfy the indebtedness of P10.4 million excluding interest, penalties and other charges. The sale was set by the Sheriff on June 29, 2001.
The second dollar denominated loan was granted by PCIB on August 14, 1997 in the amount of $2.5 million. It was supposed to be released in pesos at the conversion rate of P26 to a dollar amounting to P65 million, secured by real estate mortgages of the 12 parcels of registered lands in the name of YKS also situated in Tacloban City. On December 24, 1998, the sum of P103.2 million was released by PCIB and credited to the account of YKS but the promissory note signed by YKS dated December 24, 1998 was for the amount of P140.9 million supposed to be for working capital and payable at one time on December 17, 2004.
On January 23, 2001, PCIB already sent a letter to YKS demanding payment of its total obligation pegged at P162.3 million exclusive of interest, penalties and other charges with a warning that failure to pay would result in the filing of appropriate action. Despite YKS protestation regarding the principal amount of the loan and that it was not yet due and payable, PCIB still proceeded to initiate foreclosure proceedings on the mortgaged properties of YKS on May 23, 2001. The sheriff likewise set the sale of the properties on June 29, 2001.
Thus on June 19, 2001, YKS filed before the Regional Trial Court (RTC) for Declaratory Relief, Annulment of Application for Foreclosure and Notice of Foreclosure sale with an application for temporary restraining order (TRO) and a writ of preliminary injunction. After hearing the parties the RTC granted the TRO on June 27, 2001. Then on December 1, 2001, it also issued a writ of preliminary injunction. This RTC ruling was affirmed by the Court of Appeals (CA) on June 27, 2005. Were the RTC and CA correct?
Yes. The issuance of a writ of preliminary injunction as an ancillary or preventive remedy rests on the sound discretion of the court. It may not be nullified except when the court commits grave abuse of discretion in its issuance. In this case the RTC as found by the CA committed no grave abuse of discretion.
In the exercise of its discretion, the trial court found all the requisites for the issuance of the injunctive relief to be attendant. First YKS had a clear and unmistakable right over the mortgaged properties. Evidently as owner of the properties, YKS is entitled to the possession and protection thereof when threat of foreclosure was apparent even before the respective rights of the parties are determined and the issues threshed out in the main action are resolved. Second, there clearly exists an urgent and paramount necessity to prevent serious injury on the part of YKS.
As regards the first loan granted by EBC the RTC aptly concluded that it was not equitable and just to foreclose and sell the two properties that were mortgaged to the bank for the credit line availments of only P10.4 million out of a total credit line of P53 million. As for the PCIB loan, the same was not yet due and demandable since it was stipulated in the promissory note that the obligation will be satisfied via a one-time payment on December 17, 2004. Besides there is variance in the amount being demanded by PCIB. The PN speaks of P140.9 million while only P103.2 million was released and credited to YKS and the demand letter speaks of P162.3 million. These discrepancies cannot simply be ignored.
To allow the foreclosure before determination of these issues would place YKS in an oppressively unjust situation where it would be tied up in litigation for recovery of its properties should the RTC later conclude that it is entitled to the reliefs prayed for in the main action. The sole object of a preliminary injunction is to maintain the status quo until the merits of the case can be heard (Equitable PCI Bank Inc. vs. Apurtillo etc. and YKS, G.R. 168746, November 5, 2009).
Note: Books containing compilation of my articles on Labor Law and Criminal Law (Vols. I and II) are now available. Call tel. 7249445.
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