Equitable PCI Bank, Inc. v. OJ-Mark Trading, Inc.
REITERATIONFacts
The Antecedents: Respondent-spouses Oscar and Evangeline Martinez secured loans from petitioner Equitable PCI Bank in the total amount of P4,048,800.00, guaranteed by a Real Estate Mortgage (REM) over a condominium unit at San Miguel Court, Valle Verde 5, Pasig City, registered under Condominium Certificate of Title No. PT-21363 owned by respondent OJ-Mark Trading, Inc., with Oscar Martinez signing both as principal debtor and corporate president. The spouses defaulted, with outstanding balance reaching P4,918,160.03 as of October 31, 2002. On May 15, 2002, they proposed settling via dacion en pago by assigning a commercial lot of equivalent value, requesting interest recomputation and penalty condonation; bank officers met with Oscar Martinez, but he failed to submit required documents like titles and tax declarations for evaluation. Consequently, the bank initiated extrajudicial foreclosure via ex parte petition before the RTC Pasig Executive Judge. Respondents alleged the foreclosure was hasty, claiming defects in REM execution (illegal notarization, incompleteness), bad faith by not formally rejecting the dacion proposal, obligation extinction via sufficient-value offer, and family home occupancy by spouses and four children since 1997; they highlighted post-renovation property value increase (from 180.75 sq.m. with 3 bedrooms to 350 sq.m. with 6) as bank's motive, partial payment of P100,000 in October 2002 during negotiations, and offered Blue Mountains Subdivision lots in Antipolo (LRA-approved but untitled). Procedural History: On January 23, 2003, respondents filed Civil Case No. 69294 for TRO, Injunction, and Annulment of Foreclosure Sale before RTC Pasig; court issued 20-day TRO on January 27, 2003. After summary hearing with evidence from both sides, RTC Judge Mariano M. Singzon, Jr. granted preliminary injunction on February 17, 2003, denying reconsideration on April 21, 2003. Petitioner filed certiorari (CA-G.R. SP No. 77703); CA upheld RTC via October 29, 2004 Decision, finding respondents' proprietary right over unit and factual issues warranting injunction. The Petition: Petitioner sought Rule 45 review, arguing no grave abuse by RTC as respondents admitted delinquency without clear right to enjoin foreclosure of corporate property; spouses lack proprietary interest as unit owned by OJ-Mark, separate entity; dacion proposal invalid (lots not owned by respondents, untitled, inchoate right); foreclosure rejects offer; no bad faith as respondents failed documents; family home claim inconsistent with REM and inapplicable per Art. 155(3) Family Code. Respondents countered factual issues improper under Rule 45, RTC properly heard evidence supporting injunction, bank's bad faith in foreclosing amid sincere dacion talks (evidenced by P100k payment acceptance, scheduled appraisal), family home exemption for excess area, and irreparable injury to family.
Issue(s)
Whether respondents demonstrated a clear legal right entitling them to a writ of preliminary injunction to enjoin extrajudicial foreclosure of the mortgaged condominium unit pending trial on REM annulment; and whether the dacion en pago proposal and alleged bad faith of the petitioner bar the foreclosure.
Ruling
The petition is GRANTED. The CA Decision dated October 29, 2004 in CA-G.R. SP No. 77703 is REVERSED and SET ASIDE. Respondents' application for writ of preliminary injunction is DENIED.
Ratio Decidendi
On the Propriety of Preliminary Injunction and Dacion en Pago Proposal and Bad Faith: Section 3, Rule 58 requires proof of (a) entitlement to relief restraining complained acts, (b) probable injustice from continuance during litigation, or (c) violation rendering judgment ineffectual; however, injunction demands clear actual existing right and material threatened violation, not mere contingency or future claims. Respondents failed this, admitting default without payment, yielding petitioner's foreclosure right upon non-payment per mortgage terms; mere irreparable injury allegations insufficient sans right, as held in Duvaz v. Export Bank and Almeida v. CA, where contingent dacion rights do not justify injunction pre-main case proof. RTC/CA abused discretion granting writ lightly, contravening strict construction against pleaders (Marquez v. Presiding Judge); no prima facie superior proprietary right shown over corporate property despite 'family corporation' claim, piercing veil unproven. Family home exemption under Art. 155(3) Family Code inapplicable as it allows sale for pre/post-constitution mortgages; inconsistent with REM stipulations. Post-foreclosure remedies like one-year redemption (Gen. Banking Law Sec. 47) and surplus recovery (Sulit v. CA) preclude 'grave injustice' claim. Unaccepted dacion proposals do not novate mortgage or suspend foreclosure, requiring consent, certain object, cause as sale equivalent (Tecnogas v. PNB); respondents' offer flawed—lots not owned/titled, inchoate via developer's debt, documents unsubmitted—filing foreclosure formally rejects. Negotiations/partial payments do not estop creditor absent agreement; bank's appraisal halt/appraisal non-push-through not bad faith given non-compliance. Foreclosure proper consequence of default (Producers Bank v. CA; Equitable PCI v. Fernandez), unsubstantiated prematurity/due process claims unavailing (Borromeo v. CA; Selegna v. UCPB).
Main Doctrine
A preliminary injunction under Section 3, Rule 58 of the Rules of Court requires a clear showing of an actual existing right to be protected and a material violation thereof, without which its issuance constitutes grave abuse of discretion. Mere allegations of irreparable injury or pending settlement proposals, such as dacion en pago, do not suffice, as such proposals do not extinguish the principal obligation or novate the mortgage contract absent creditor acceptance and meeting of minds on essential elements of consent, object, and cause. Upon mortgagor default, the mortgagee holds an unmistakable right to extrajudicial foreclosure as stipulated in the contract, and unsubstantiated claims of bad faith, prematurity, or family home exemption do not defeat this right, especially where the property is corporate-owned. Even if deemed a family home, Article 155(3) of the Family Code permits forced sale for mortgage debts constituted thereon. Post-foreclosure, mortgagors retain redemption rights under Section 47 of the General Banking Law and surplus recovery, mitigating claims of grave injustice.