Palm Tree Estates, Inc. and Belle Air Golf and Country Club, Inc. vs. PNB

A writ of preliminary injunction will not issue to enjoin the extrajudicial foreclosure of a mortgage where the mortgagor is in default and relies merely on bare allegations of improper inclusion of properties or unilateral interest rate increases, without tendering payment or consigning the amount due.

Palm Tree Estates, Inc. (PTEI) obtained a P320 million term loan from Philippine National Bank (PNB), secured by a real estate mortgage over 48 parcels of land. The loan was subsequently amended to extend the grace period and grant an additional P80 million, with Belle Air Golf and Country Club, Inc. (BAGCCI) acting as accommodation mortgagor for properties transferred to it by PTEI. Following further restructuring and the execution of a supplemental mortgage and pledge agreement, PTEI defaulted on its obligations, prompting PNB to demand payment and, upon denial of another restructuring request, initiate extrajudicial foreclosure proceedings.

• Loan Agreement: On January 29, 1997, PTEI entered into a P320 million term loan with PNB, secured by a Real Estate Mortgage executed on February 21, 1997 over 48 parcels of land.
• First Amendment: On June 15, 1998, the loan was amended to extend the grace period for principal repayment and grant an additional P80 million loan. On the same day, an Amendment to Real Estate Mortgage was executed, with BAGCCI acting as accommodation mortgagor for properties transferred to it by PTEI, stipulating that the mortgage lien would be carried over to the new titles.
• Restructuring: On August 10, 1999, PTEI and PNB executed four documents: (1) a Loan Agreement revalidating the P80 million additional loan; (2) a Contract of Pledge over 204,000 PTEI shares by accommodation pledgors; (3) a Restructuring Agreement; and (4) a Supplement to Real Estate Mortgage adding three parcels of land from an accommodation mortgagor.
• Default and Demand: PTEI defaulted on its obligations. PNB demanded payment of P599,251,583.18 on September 20, 2000. On February 19, 2001, PNB denied PTEI's request for further restructuring due to its failure to settle unpaid insurance premiums, past due credit card advances, and realty tax arrearages.
• Foreclosure and Injunction: PNB filed a petition for extrajudicial foreclosure on March 27, 2001. PTEI requested an additional 30 days to settle its accrued obligations. On April 23, 2001, PTEI and BAGCCI filed a complaint seeking to enjoin the foreclosure, alleging that PNB released only P248 million of the P320 million loan, unilaterally converted the dollar loan to pesos at an unreasonable rate, and unilaterally increased interest rates. PTEI also claimed that the amendment to the real estate mortgage was novated by the subsequent pledge agreement and that unmortgaged properties were included in the foreclosure petition.

• Procedural Defect in Certiorari: PTEI and BAGCCI argued that PNB's Petition for Certiorari before the Court of Appeals violated Section 1, Rule 65 of the Rules of Court by deliberately omitting supporting material documents attached to the complaint, such as the petition for foreclosure, real estate mortgage, loan agreements, and promissory notes.
• Absence of Grave Abuse of Discretion: Petitioners contended that the Court of Appeals erred in reversing the RTC orders without making a finding that the trial court acted without or in excess of its jurisdiction.
• Existence of a Clear Right: Petitioners asserted that a clear and unmistakable right existed to warrant the injunction, arguing that the foreclosure improperly included properties not subject to the mortgage and obligations not secured by the properties, and that PNB unilaterally increased interest rates.

• No Indubitable Right: PNB countered that PTEI and BAGCCI failed to establish an indubitable right that was violated by the bank and ought to be protected by an injunctive writ.
• No Irreparable Injury: Respondent argued that petitioners failed to show that the absence of an injunctive writ would cause them irreparable injury.
• Contractual Right to Foreclose: PNB maintained that it possessed the right to extrajudicially foreclose under the loan agreements upon the debtors' default, rendering the issuance of a preliminary injunction improper.

• Sufficiency of Petition for Certiorari: Whether PNB's Petition for Certiorari before the Court of Appeals should have been dismissed for failure to attach all supporting documents under Section 1, Rule 65 of the Rules of Court.
• Propriety of Preliminary Injunction: Whether the trial court gravely abused its discretion in issuing the writ of preliminary injunction, given the mortgagor's default and the nature of the claims against the foreclosure.

• Sufficiency of Petition for Certiorari: The Court of Appeals correctly determined the petition's sufficiency. The documents attached to PNB's petition were adequate to support its arguments and provide a substantial picture of the case. Furthermore, the issue of formal insufficiency was deemed waived because PTEI and BAGCCI failed to file their comment on time—leading the CA to expunge it—and failed to raise the objection in their motion for reconsideration before the CA, pursuant to the omnibus motion rule.
• Propriety of Preliminary Injunction: The issuance of the writ constituted grave abuse of discretion. Petitioners lacked a clear and unmistakable right because they were in default of their obligation. The clean hands doctrine applies; a party in breach of its contractual obligations cannot seek equitable relief through injunction. The trial court relied merely on the bare allegations of PTEI and BAGCCI without citing specific evidence that unmortgaged properties were included or that the obligations were incorrect. Foreclosure is a necessary consequence of nonpayment, and unsubstantiated allegations of unilateral interest rate increases—without any tender of payment or consignation—are insufficient to defeat the mortgagee's unmistakable right to extrajudicial foreclosure. The trial court also misapplied Almeda, which involved debtors who questioned interest rate increases from the start, tendered payment, and consigned the amount due, none of which occurred in this case.

• Clean Hands Doctrine in Injunction — One who seeks equity must do equity and come with clean hands; a complainant's wrongful conduct respecting the matter for which injunctive relief is sought precludes obtaining such relief. Applied to bar PTEI from obtaining an injunction because it was already in breach of its contractual obligations by defaulting on its loan payments and requesting repeated restructuring without actually paying.
• Requisites for Preliminary Injunction — Two requisites must be present for a writ of preliminary injunction to issue: (1) the existence of the right to be protected, and (2) the facts against which the injunction is directed are violative of said right. The writ is an extraordinary event granted only in the face of actual and existing substantial rights, not contingent or future rights. Applied to strike down the injunction because PTEI and BAGCCI's alleged right was doubtful, disputed, and unsupported by evidence other than bare allegations.
• Omnibus Motion Rule — A motion attacking a pleading, order, judgment, or proceeding shall include all objections then available, and all objections not so included shall be deemed waived. Applied to hold that PTEI and BAGCCI waived their objection to the formal insufficiency of PNB's certiorari petition by failing to raise it in their motion for reconsideration before the Court of Appeals.

• "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. Unsubstantiated allegations of denial of due process and prematurity of a loan are not sufficient to defeat the mortgagee’s unmistakable right to an extrajudicial foreclosure."
• "In the absence of a clear legal right, the issuance of the injunctive writ constitutes grave abuse of discretion. Injunction is not designed to protect contingent or future rights. It is not proper when the complainant’s right is doubtful or disputed."

• Equitable PCI Bank, Inc. v. OJ-Mark Trading, Inc. — Followed. Where parties stipulate in their agreements that the mortgagee is authorized to foreclose in case of default, the mortgagee has a clear right to foreclosure, making the issuance of a writ of preliminary injunction improper.
• Almeda v. Court of Appeals — Distinguished. In Almeda, the debtors questioned interest rate increases from the start, tendered payment, and consigned the amount calculated at the originally stipulated rate. In this case, PTEI assailed the increases only after foreclosure was initiated and made no tender of payment or consignation.
• Barbieto v. Court of Appeals — Followed. Enumerated the general principles and requisites for issuing a writ of preliminary injunction.
• University of the Philippines v. Hon. Catungal, Jr. — Followed. The trial court must state its own findings of fact and cite the particular law to justify the grant of preliminary injunction, rather than relying solely on the parties' allegations.
• Selegna Management and Development Corporation v. United Coconut Planters Bank — Followed. Injunction is not proper when the complainant’s right is doubtful or disputed.

• Section 1, Rule 65, Rules of Court — Governs Petitions for Certiorari and requires the attachment of a certified true copy of the judgment, order, or resolution subject thereof, copies of all pleadings and documents relevant and pertinent thereto, and a sworn certification of non-forum shopping. Applied in determining that the Court of Appeals correctly found PNB's petition sufficient in form and substance, as the attached documents provided a substantial picture of the case.
• Section 6, Rule 65, Rules of Court — Provides that if the petition is sufficient in form and substance, the court shall issue an order requiring the respondent to comment. Applied to show that the CA's issuance of a comment order signified its determination of the petition's sufficiency.
• Section 8, Rule 15, Rules of Court — Prescribes the omnibus motion rule, requiring that a motion attacking a pleading, order, judgment, or proceeding include all objections then available, otherwise deemed waived. Applied to hold that petitioners waived their objection to the formal sufficiency of PNB's petition by omitting it in their motion for reconsideration before the CA.

Maria Lourdes P. A. Sereno (CJ, Chairperson), Antonio T. Carpio, Martin S. Villarama, Jr., Bienvenido L. Reyes