Case Digest: PHILIPPINE NATIONAL BANK v. FELINO M. TIMBOL et al.,

PHILIPPINE NATIONAL BANK v. FELINO M. TIMBOL et al.,

451 SCRA 163 (2005), THIRD DIVISION 

The Philippine National Bank International Finance Limited (PNB-IFL), a subsidiary of the Philippine National Bank (PNB), granted Karrich Holdings Limited based in Hongkong and owned by respondent Felino Timbol, Jr. (Timbol), a revolving credit line and/or for the opening of letters of credit with Trust Receipt Financing.

To secure the payment of obligation, Timbol executed three separate Real Estate Mortgages (REMs) and promissory notes for and on behalf of Karrich Holdings Ltd. The credit facilities were later renewed, revised and reduced.

As the borrowers defaulted in the payment, PNB sent a demand letter and warned the borrowers that PNB would be constrained to proceed with the foreclosure of the mortgages if they failed to pay. The borrowers then requested for additional time to pay their obligation. But such was denied by PNB and it moved for extrajudicial foreclosure of the mortgages.

More than 3 months shy of the one year period to redeem the foreclosed, Timbol filed before the Regional Trial Court (RTC) a complaint against PNB for Annulment of Real Estate Mortgage, Foreclosure of Mortgage, Auction Sale and for Accounting, Damages and Temporary Restraining Order and/or Injunction. The trial court granted the issuance of a writ of preliminary injunction. On appeal, the Court of Appeals dismissed the same.

ISSUE:

Whether or not the trial court erred in issuing a writ of preliminary injunction

HELD:

Rule 58, Sec. 3 of the 1997 Rules of Civil Procedure provides for the grounds for the issuance of preliminary injunction. To be entitled to a writ of preliminary injunction, an applicant must show that (1) he has a right in esse or a right to be protected, and (2) the act against which injunction is to be directed is a violation of such right. That is settled.
From a considered scrutiny of the records of the case, the main thesis of respondents in praying for the issuance of a writ of preliminary injunction is that “the foreclosure by the Notary Public is highly irregular, not valid and thus illegal” because “it was not in accordance with Administrative Order No. 3 of the Supreme Court dated 24 October 1984”, and the amount of their obligation was “deliberately bloated” to a “staggering” amount of P101,117,800.00, way above the granted credit facilities amounting to US$848,300.00.

Timbol et al.‟s claim of irregularity in the extrajudicial foreclosure proceedings was belied, however, by the testimonial and documentary evidence of PNB which correctly argued that Supreme Court Administrative Order No. 3 does not apply, the extrajudicial foreclosure having been conducted by a notary public to which mode of foreclosure respondents agreed in the REMs, hence, proper.

The issuance by the trial court, therefore, of the Order granting a writ of preliminary injunction in order, so it declared, to “better serve the cause of justice” considering Timbol et al.‘s claim that the foreclosure was irregular and PNB bloated their obligation, was attended with grave abuse of discretion.

It was, therefore, error for the appellate court to find no grave abuse of discretion in the issuance of the trial court‘s order and accordingly dismiss PNB‘s petition for certiorari.