Bank of the Philippine Islands vs. Hontanosas

A preliminary injunction is a preventive remedy that should not issue except upon a clear showing that the applicant possesses a right in esse to be protected, and that the acts sought to be enjoined are violative of such right; it should not determine the merits of a case or decide controverted facts. Furthermore, an action to annul a contract of loan and its accessory real estate mortgage is a personal action, not a real action affecting title to or possession of property, and thus venue is properly laid where the plaintiff or defendant resides, not necessarily where the mortgaged property is located.

Respondents Spouses Silverio and Zosima Borbon, Spouses Xerxes and Erlinda Facultad, and XM Facultad and Development Corporation obtained a loan from petitioner Bank of the Philippine Islands and executed promissory notes, real estate mortgages on several parcels of land, a chattel mortgage on a Mitsubishi Pajero, and a continuing surety agreement. Due to the 1997 Asian economic crisis, respondents were only able to pay P13 Million of their P17,983,191.49 obligation. BPI demanded postdated checks and threatened foreclosure of the mortgages. Respondents claimed they were compelled to sign blank pre-printed forms constituting contracts of adhesion with exorbitant interest rates, and subsequently sought judicial intervention to prevent foreclosure and criminal prosecution for alleged violations of Batas Pambansa Blg. 22.

• Respondents obtained a loan from petitioner Bank of the Philippine Islands and executed promissory notes binding themselves jointly and severally to pay the sum borrowed.
• As security, respondents constituted real estate mortgages on several parcels of land, a chattel mortgage on a Mitsubishi Pajero, and executed a continuing surety agreement.
• Respondents' obligation reached P17,983,191.49, but they were only able to pay P13 Million due to being adversely affected by the 1997 Asian economic turmoil.
• Petitioner required respondents to issue postdated checks to cover the loan under threat of foreclosing on the mortgages.
• Respondents alleged they were made to sign blank pre-printed forms of promissory notes, mortgages, and surety agreements, violating the principle of mutuality of contracts and constituting contracts of adhesion with provisions tilted in favor of the bank.
• Respondents claimed the total obligation was void due to illegal impositions of exorbitant interest and excessive charges where interest was converted into principal.
• Respondents filed a complaint seeking nullification of the loan documents and mortgages, and applied for a temporary restraining order or writ of preliminary injunction to prevent foreclosure of the mortgaged properties, taking possession of the Mitsubishi Pajero, and the use of postdated checks as evidence in criminal complaints for violation of Batas Pambansa Blg. 22.

• Civil Case No. CEB-26468 should be dismissed for non-payment of the correct amount of docket fees and improper venue, contending that the action was a real action that should be commenced where the mortgaged properties were situated, and that docket fees should be based on the value of the real property.
• Zosima Borbon lacked legal personality to sue because she was deceased at the time of filing, and the Estate of Zosima Borbon was an indispensable party that should have been included.
• XM Facultad and Development Corporation lacked authority to sue because there was no board resolution authorizing the filing of the case.
• The complaint failed to state a cause of action.
• The issuance of the writ of preliminary injunction constituted a violation of Administrative Circular No. 07-99 and subjected the respondent Judge to administrative sanction.
• Injunction could not issue to enjoin the prosecution of criminal offenses for violation of Batas Pambansa Blg. 22 because such prosecution was imbued with public interest.
• As the mortgagee, petitioner could not be prohibited from exercising its legal right to foreclose the mortgages because foreclosure was its proper remedy under the law.
• Respondents failed to establish a clear right to be protected and the requisite irreparable injury necessary for the issuance of an injunctive writ.

• The action for annulment of the contract of loan and its accessory real estate mortgage was a personal action, not a real action, because it did not seek recovery of possession or title to the properties but rather sought to nullify the contracts for being executed against their will and vitiated by irregularities; thus, venue was properly laid in Cebu City where XM Facultad and Development Corporation had its principal office.
• The allegation of non-payment of proper docket fees was unsubstantiated, and even if the correct docket fee was not paid, strict application of the rule could be mitigated in the interest of justice.
• Zosima Borbon's death rendered her surviving spouse Silverio Borbon the successor to her estate, and it was permissible under the rules to continue the action in the name of the original party despite the valid transfer of interest pending litigation.
• The nullity of the loan and mortgage agreements entitled them to injunctive relief to prevent foreclosure and criminal prosecution, which would cause injustice and irreparable injury and render ineffectual any judgment of the trial court.

• Procedural Issues:
  • Whether Civil Case No. CEB-26468 should be dismissed for non-payment of the correct amount of docket fees.
  • Whether venue was improperly laid in Cebu City.
  • Whether the complaint should be dismissed due to the death of plaintiff Zosima Borbon or the lack of board resolution for XM Facultad.
• Substantive Issues:
  • Whether the Regional Trial Court committed grave abuse of discretion in granting the writ of preliminary injunction to enjoin foreclosure of mortgages and criminal prosecution.

• Procedural:
  • The Court sustained the lower courts' holdings that Civil Case No. CEB-26468 was a personal action, not a real action, because the respondents sought the nullification of contracts and enforcement of rights, not the recovery of possession or title to the mortgaged properties; therefore, venue was properly laid in Cebu City where respondent XM Facultad and Development Corporation, a principal plaintiff, had its address pursuant to Section 2, Rule 4 of the Rules of Court.
  • The contention regarding non-payment of docket fees based on real property values was rejected for lack of factual and legal bases, as the action being personal, the docket fees were properly computed based on the nature of the action as filed.
  • The death of Zosima Borbon did not require dismissal of the complaint because her surviving spouse Silverio Borbon became the successor to her estate, and under the rules, the action could continue in the name of the original party despite the transfer of interest pending litigation.
• Substantive:
  • The Court held that the issuance of the writ of preliminary injunction was plainly erroneous and unwarranted because respondents failed to establish the two requisite conditions: (1) the existence of a right in esse to be protected prima facie, and (2) that the acts sought to be enjoined were violative of that right.
  • Respondents had admittedly constituted the mortgages to secure their loan obligation and were fully aware that foreclosure was the legal remedy available to the mortgagee upon default; they did not dispute their failure to fully pay the obligation.
  • The fear of loss of possession and ownership of mortgaged properties, or facing criminal prosecution, did not constitute irreparable injury as defined in Philippine National Bank v. Castalloy Technology Corporation, because such injury is not susceptible of mathematical computation and must be of such constant recurrence that no fair redress can be had in court; moreover, respondents retained rights of redemption and to surplus proceeds in case of foreclosure.
  • The injunction against criminal prosecution for violation of Batas Pambansa Blg. 22 was unwarranted because respondents failed to show that the case fell under any of the recognized exceptions to the general rule that courts will not issue injunctions to restrain criminal prosecution.
  • The Court annulled and set aside the writ of preliminary injunction for being devoid of factual and legal bases, finding that the RTC committed grave abuse of discretion by disregarding well-established norms governing the issuance of injunctive writs.

• Real Action vs. Personal Action — A real action is one that affects title to or possession of real property, or an interest therein, and must be commenced where the property is situated; a personal action includes those brought for the enforcement of a contract, recovery of damages, or annulment of a contract of loan and its accessory real estate mortgage where ownership was never transferred to the mortgagee. The Court applied this distinction to hold that an action for nullification of mortgage contracts is a personal action because it does not seek recovery of possession or title.
• Exclusio Unius Est Inclusio Alterius — The express mention of one thing excludes all others. The Court applied this canon of statutory construction to determine that since Section 2(a), Rule 4 of the Rules of Court specifically mentions "foreclosure of mortgage" as a real action, the omission of "cancellation of mortgage" indicates that the latter falls under personal actions.
• Requirements for Preliminary Injunction — To be entitled to a writ of preliminary injunction, the applicant must show: (a) the right to be protected exists prima facie; (b) the act sought to be enjoined is violative of that right; and (c) there is an urgent and paramount necessity for the writ to prevent serious damage. The Court emphasized that an injunction will not issue to protect a right not in esse or merely contingent.
• Irreparable Injury — An injury is considered irreparable if it is of such constant and frequent recurrence that no fair or reasonable redress can be had therefor in a court of law, or where there is no standard by which their amount can be measured with reasonable accuracy (not susceptible of mathematical computation). The mere threat of foreclosure and criminal prosecution does not constitute irreparable injury where legal remedies such as redemption and recovery of surplus proceeds are available.
• Injunction Against Criminal Prosecution — As a general rule, courts will not issue writs of injunction to restrain criminal prosecution, except in extreme cases such as when necessary to protect constitutional rights, for orderly administration of justice, when there is a prejudicial question sub judice, when the prosecution is under an invalid law, when double jeopardy is apparent, when the court has no jurisdiction, or when there is clearly no prima facie case.

• "Injunction should not issue except upon a clear showing that the applicant has a right in esse to be protected, and that the acts sought to be enjoined are violative of such right."
• "A preliminary injunction should not determine the merits of a case, or decide controverted facts, for, being a preventive remedy, it only seeks to prevent threatened wrong, further injury, and irreparable harm or injustice until the rights of the parties can be settled."
• "Exclusio unios est inclusio alterius. The latter thus falls under the catch-all provision on personal actions..."
• "An injury is considered irreparable if it is of such constant and frequent recurrence that no fair or reasonable redress can be had therefor in a court of law, or where there is no standard by which their amount can be measured with reasonable accuracy, that is, it is not susceptible of mathematical computation."
• "Every court should remember that an injunction should not be granted lightly or precipitately because it is a limitation upon the freedom of the defendant's action."
• "Grave abuse of discretion means either that the judicial or quasi-judicial power was exercised in an arbitrary or despotic manner by reason of passion or personal hostility, or that the respondent judge, tribunal or board evaded a positive duty, or virtually refused to perform the duty enjoined or to act in contemplation of law..."

• Chua v. Total Office Products and Services (Topros), Inc., G.R. No. 152808, September 30, 2005 — Cited as controlling precedent establishing that an action to annul a contract of loan and its accessory real estate mortgage is a personal action, not a real action, where ownership of the property was never transferred to the mortgagee.
• Hernandez v. Rural Bank of Lucena, Inc. — Cited for the principle that cancellation of a real estate mortgage falls under personal actions because Section 2(a), Rule 4 of the Rules of Court mentions only foreclosure of mortgage, not cancellation.
• City Government of Butuan v. Consolidated Broadcasting System (CBS), Inc., G.R. No. 157315, December 1, 2010 — Cited for the definition and nature of preliminary injunction as the "strong arm of equity" and the requirements for its issuance.
• Philippine National Bank v. Castalloy Technology Corporation, G.R. No. 178367, March 19, 2012 — Cited for the definition of irreparable injury necessary to justify the issuance of a writ of preliminary injunction.
• Equitable PCI Bank, Inc. v. OJ-Mark Trading, Inc., G.R. No. 165950, August 11, 2010 — Cited to establish that mortgagors have rights of redemption and to surplus proceeds in extrajudicial foreclosure, negating the claim of irreparable injury.
• Saulog v. Court of Appeals, G.R. No. 11969, September 18, 1996 — Cited for the principle that the applicant for preliminary injunction must have a sufficient interest or right to be protected, and that the existence of the right need not be conclusively established but must be shown prima facie.

• Rule 4, Sections 1 and 2 of the Rules of Court — Provisions on venue of real and personal actions; Section 1 defines real actions as those affecting title to or possession of real property, while Section 2 provides that personal actions may be commenced where the plaintiff or defendant resides.
• Rule 16, Section 1 of the Rules of Court — Grounds for motion to dismiss, specifically paragraphs (c) improper venue, (d) plaintiff lacks legal capacity to sue, and (j) indispensable party not joined.
• Rule 58, Section 3 of the Rules of Court — Grounds for issuance of preliminary injunction, requiring that the applicant be entitled to the relief demanded and that the commission or continuance of the act would probably work injustice.
• Batas Pambansa Blg. 22 — The Bouncing Checks Law; the Court discussed the general rule against enjoining criminal prosecutions under this law.
• Presidential Decree No. 1818 — Prohibits courts from issuing restraining orders or preliminary injunctions against infrastructure projects of the government; mentioned in the context of Administrative Circular No. 07-99 but held inapplicable to the present case.
• Administrative Circular No. 07-99 — Guidelines for judges in issuing TROs and writs of preliminary injunction; held inapplicable because the case did not involve infrastructure projects or Bureau of Customs seizure proceedings.