Selegna Management and Development Corporation vs. United Coconut Planters Bank

A writ of preliminary injunction will not issue to enjoin an extrajudicial foreclosure absent a clear showing of a violation of the mortgagor's unmistakable right, as unsubstantiated allegations of denial of due process and prematurity of the loan—stemming from an unliquidated obligation or partial payment—do not defeat the mortgagee's right to foreclose.

Petitioners Selegna Management and Development Corporation and Spouses Angeles obtained a credit facility from respondent United Coconut Planters Bank (UCPB), initially for P70 million and later increased to over P103 million, secured by real estate mortgages over several properties. The credit agreement and promissory notes required monthly interest payments and stipulated that failure to pay any interest or sum due constituted an event of default, allowing UCPB to accelerate the obligation and foreclose the mortgages extrajudicially. Petitioners failed to pay monthly interest amortizations starting May 30, 1998. UCPB issued demands for the unpaid interest and, invoking the acceleration clause, declared the entire principal obligation immediately due and payable in January 1999. After petitioners made a partial payment of P10 million and requested a restructuring—which UCPB denied—UCPB applied for extrajudicial foreclosure.

• Credit Facility and Security: On September 19, 1995, petitioners were granted a P70 million credit facility by UCPB, secured by real estate mortgages over properties in Muntinlupa, Las Piñas, Antipolo, Quezon, and Makati. The credit agreement required monthly interest payments and stipulated that failure to pay any availment or interest constituted an event of default, authorizing UCPB to accelerate the obligation.
• Increase in Facility and Default: The credit facility was later increased. Petitioners executed a Promissory Note for P103,909,710.82 maturing on March 26, 1999, with 21.75% annual interest payable monthly. Petitioners failed to pay monthly interest amortizations starting May 30, 1998.
• Demand and Acceleration: UCPB demanded payment of unpaid interest on December 21, 1998. On January 25, 1999, UCPB invoked the acceleration clause, declaring the entire principal of P103,909,710.82 immediately due and payable by January 29, 1999. A final demand was sent on March 4, 1999.
• Partial Payment and Foreclosure: Petitioners made a partial payment of P10,199,473.96 for accrued interests and requested 60 days to update or restructure. UCPB denied the request, stating the account had been referred to external counsel and demanding a definite settlement offer. UCPB then applied for extrajudicial foreclosure.
• Injunction Proceedings: Upon receiving the Notice of Extrajudicial Foreclosure Sale, petitioners filed a complaint with the RTC to enjoin the sale. The trial court initially granted a TRO and then a writ of preliminary injunction due to confusing foreclosure notices that stated the total indebtedness (P131,854,773.98) as the amount for each property. The trial court later lifted the indefinite injunction. After multiple judge changes, Judge Dumayas reinstated the injunction and ordered an accounting. The CA ultimately reversed this via an Amended Decision, prompting the present petition.

• Denial of Due Process: Petitioners argued that they were denied due process because they had a right to a detailed accounting before being declared in default; without it, the obligation was unliquidated.
• Prematurity of Foreclosure: Petitioners maintained that their partial payment of P10 million averted the maturity of the obligation, rendering the extrajudicial foreclosure premature.
• Misapplication of Precedent: Petitioners contended that the CA erred in invoking China Banking Corporation v. CA and Zulueta v. Reyes, as these were not applicable or completely identical to the instant case.
• Grave Abuse of Discretion: Petitioners asserted that the CA failed to establish that RTC Judge Dumayas acted with grave abuse of discretion in reinstating the injunction.

• Right to Foreclose: Respondent countered that questions regarding the running balance of the obligation did not justify restraining the foreclosure, as petitioners were clearly in default.
• Accounting Furnished: Respondent maintained that it had furnished petitioners with detailed monthly statements of account.
• Adequate Protection: Respondent argued that petitioners were not without legal recourse or protection, citing their pending action for annulment and accounting, the right to annotate a lis pendens, the right of redemption under the General Banking Law, and the right to recover any surplus from the sale.

• Default: Whether petitioners are in default, considering their allegation that the obligation is unliquidated due to the lack of a detailed accounting.
• Injunction: Whether there is a basis for preliminarily enjoining the extrajudicial foreclosure.
• Partial Payment: Whether petitioners' partial payment of P10 million averted the maturity of the loan.

• Default: Petitioners were in default. They failed to pay monthly interest amortizations since May 30, 1998, which constituted an event of default under the credit agreement. This failure justified UCPB's invocation of the acceleration clause, making the entire obligation immediately due and payable. The debt was liquidated, as the principal, interest rate, and penalties were determinable from the promissory note and credit agreement; failure to furnish a detailed statement of account does not ipso facto render an obligation unliquidated.
• Injunction: No basis existed to preliminarily enjoin the extrajudicial foreclosure. The issuance of an injunctive writ requires a clear legal right to be protected. Because petitioners failed to substantiate their claims of due process violation and prematurity of the loan, their right to enjoin the foreclosure was doubtful. Moreover, petitioners are adequately protected by their right of redemption and right to recover any surplus from the sale.
• Partial Payment: The partial payment of P10 million did not avert the maturity of the loan. A late partial payment cannot extinguish the obligation or forestall an expired maturity date. Creditors who receive partial payment are not deemed to have abandoned their prior demand for full payment absent clear circumstances indicating an intention to consider the performance complete and renounce their claim; UCPB's filing of the foreclosure application after receiving partial payment negated any such implication.

• Mora solvendi (Debtor's default) — Defined as a delay in the fulfillment of an obligation imputable to the debtor. Requisites: (1) the obligation is demandable and liquidated; (2) the debtor delays performance; (3) the creditor judicially or extrajudicially requires performance. Applied to hold petitioners in default for failing to pay monthly interest, which triggered the acceleration clause.
• Preliminary Injunction — A provisional remedy to protect rights during the pendency of the principal action. Requisites: (1) prima facie right to final relief; (2) material and substantial invasion of the right; (3) urgent and paramount necessity for the writ to prevent serious damage. Not proper when the right is doubtful or disputed. Applied to deny the injunction, as petitioners had no clear right to enjoin foreclosure given their undisputed default.
• Liquidated Debt — A debt is liquidated when the amount is known or determinable by inspection of the terms and conditions of the promissory notes and related documentation. Failure to furnish a detailed statement of account does not ipso facto result in an unliquidated obligation. Applied to reject petitioners' claim that the lack of accounting made the obligation unliquidated.
• Acceptance of Partial Payment — Creditors receiving partial payment are not ipso facto deemed to have abandoned their prior demand for full payment. To imply acceptance of partial payment as complete performance, the acceptance must indicate an intention to consider the performance complete and renounce the claim arising from the defect (Art. 1235, Civil Code). Applied to hold that UCPB's acceptance of partial interest payment did not waive its right to foreclose.

• "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."
• "A debt is liquidated when the amount is known or is determinable by inspection of the terms and conditions of the relevant promissory notes and related documentation. Failure to furnish a debtor a detailed statement of account does not ipso facto result in an unliquidated obligation."
• "When creditors receive partial payment, they are not ipso facto deemed to have abandoned their prior demand for full payment. x x x [T]o imply that creditors accept partial payment as complete performance of their obligation, their acceptance must be made under circumstances that indicate their intention to consider the performance complete and to renounce their claim arising from the defect."

• Spouses Estares v. CA, 459 SCRA 604 (2005) — Followed. Held that nonpayment of a loan secured by a mortgage properly subjects the property to foreclosure sale; a pending question regarding the due amount does not justify enjoining the foreclosure.
• Zulueta v. Reyes, 126 Phil. 625 (1967) — Followed. Foreclosure should not be restrained by the unnecessary question of accounting where there is no genuine controversy as to the amounts due and demandable.
• Manila International Airport Authority v. CA, 445 Phil. 369 (2003) — Cited. Courts must exercise extreme caution in issuing a writ of preliminary injunction, as it is the strong arm of equity that should never be extended unless to cases of great injury.
• Sulit v. CA, 335 Phil. 914 (1997) — Cited. If the mortgagee retains more proceeds than entitled to, the validity of the sale is unaffected, but the mortgagor has a cause of action to recover the surplus.

• Article 1159, Civil Code — Obligations arising from contracts have the force of law between the contracting parties. Applied to enforce the acceleration clause and event of default stipulated in the credit agreement.
• Article 1169, Civil Code — Those obliged to deliver or to do something incur delay from the time the obligee judicially or extrajudicially demands fulfillment. Applied to establish mora solvendi.
• Article 1233, Civil Code — A debt is not paid unless the thing in which the obligation consists has been completely delivered. Applied to rule that partial payment did not extinguish the obligation.
• Article 1235, Civil Code — When the obligee accepts the performance, knowing its incompleteness or irregularity, and without expressing any protest or objection, the obligation is deemed fully complied with. Applied to hold that UCPB's acceptance of partial payment did not imply complete performance or waiver of the right to foreclose.
• Article 1248, Civil Code — Creditors cannot be compelled to accept partial payments. Cited to note that while creditors cannot be compelled to accept partial payment, they are not prohibited from accepting it.
• Section 47, Republic Act No. 8791 (General Banking Law of 2000) — Mortgagors whose real property has been sold for the full or partial payment of their obligation have the right to redeem the property within one year after the sale. Cited to show petitioners have adequate protection despite the foreclosure.

Consuelo Ynares-Santiago, Ma. Alicia Austria-Martinez, Romeo J. Callejo, Sr., Minita V. Chico-Nazario