Bank of the Philippine Islands v. Hontanosas
REITERATIONFacts
The Antecedents: Respondents Spouses Silverio and Zosima Borbon, Spouses Xerxes and Erlinda Facultad, and XM Facultad and Development Corporation (collectively, respondents) obtained a loan from petitioner Bank of the Philippine Islands (BPI). As security, they executed promissory notes, real estate and chattel mortgages, and a continuing surety agreement. The loan obligation reached P17,983,191.49, but they only paid P13 Million due to the 1997 economic turmoil. BPI required them to issue postdated checks to cover the outstanding balance under threat of foreclosure. Procedural History: Respondents filed a civil case seeking the declaration of nullity of the loan and mortgage documents, damages, and attorney's fees. They also applied for a Temporary Restraining Order (TRO) or writ of preliminary injunction to prevent BPI from foreclosing on the mortgaged properties. BPI filed an answer with affirmative defenses and counterclaim, and an opposition to the injunction, asserting its legal right to foreclose. BPI also filed a motion to dismiss on grounds of improper venue, lack of jurisdiction due to non-payment of proper legal fees, Zosima Borbon's death, lack of board resolution for XM Facultad, and failure to state a cause of action. The Regional Trial Court (RTC), Branch 16, Cebu City, denied BPI's motion to dismiss and granted the respondents' application for a preliminary injunction, requiring a P2,000,000.00 bond. The RTC later denied BPI's motion for reconsideration. BPI elevated the matter to the Court of Appeals (CA) via a petition for certiorari, questioning the RTC's denial of the motion to dismiss and the issuance of the preliminary injunction. The CA affirmed the RTC's orders, holding that the venue was proper, Zosima Borbon's death did not warrant dismissal, and the RTC did not commit grave abuse of discretion. BPI's motion for reconsideration was denied. The Petition: BPI filed a petition for review on certiorari with the Supreme Court, raising two main issues: (a) whether Civil Case No. CEB-26468 should be dismissed for non-payment of correct docket fees and improper venue; and (b) whether the issuance of the writ of preliminary injunction was in order.
Issue(s)
Whether Civil Case No. CEB-26468 should be dismissed for (a) non-payment of the correct amount of docket fee and improper venue, considering it was a personal action seeking nullification of loan and mortgage agreements. Whether the issuance of the writ of preliminary injunction against the petitioner, its agents and representatives, was in order, given the respondents' voluntary execution of mortgages and the availability of legal remedies for foreclosure.
Ruling
The Supreme Court PARTIALLY GRANTED the petition for review on certiorari. It MODIFIED the decision of the Court of Appeals by annulling and setting aside the writ of preliminary injunction issued by the Regional Trial Court, Branch 16, in Cebu City, finding it devoid of factual and legal bases. The Court ordered the RTC to proceed with dispatch in Civil Case No. CEB-26468 and directed the respondents to pay the costs of suit.
Ratio Decidendi
On the issue of venue and docket fees: The Supreme Court sustained the lower courts' holdings that Civil Case No. CEB-26468 was a personal action, not a real action. A real action, as defined by the Rules of Court, affects title to or possession of real property, and must be commenced where the property is situated. Personal actions, conversely, encompass those seeking recovery of personal property, enforcement of contracts, or damages for breach or injury, and their venue is generally where the plaintiff or defendant resides, at the plaintiff's election. The complaint in this case sought the nullification of loan and mortgage agreements due to alleged irregularities and compulsion, not the recovery of possession or title to the properties. Therefore, the action was personal, and venue was properly laid in Cebu City, the principal place of business of one of the plaintiffs. Consequently, the contention regarding docket fees based on the value of mortgaged properties was also dismissed. On the issuance of the writ of preliminary injunction: The Supreme Court found the issuance of the writ of preliminary injunction by the RTC to be plainly erroneous and unwarranted. A preliminary injunction is an extraordinary remedy that requires a clear showing of a right in esse to be protected and that the acts sought to be enjoined are violative of such right. The respondents had voluntarily executed mortgages to secure their loan obligation and were aware of the consequences of non-payment. Foreclosure is a legal remedy for the mortgagee. The respondents' claim that they were compelled to sign loan forms and mortgage agreements did not establish an irreparable injury that could justify the injunction. The fear of losing possession or facing criminal prosecution for issuing postdated checks does not constitute irreparable injury, as remedies like redemption and recovery of surplus proceeds exist, and criminal prosecutions are generally not subject to injunction unless specific exceptions are met. The respondents failed to demonstrate that their situation fell under any of the recognized exceptions to the general rule against enjoining criminal prosecutions. The RTC's issuance of the writ was deemed a grave abuse of discretion, as it disregarded established norms and guidelines for injunctive relief, acting capriciously and arbitrarily.
Main Doctrine
A preliminary 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. An action to annul a contract of loan and its accessory real estate mortgage is a personal action, not a real action.