G.R. No. 188768 ; January 7, 2013
TML GASKET INDUSTRIES, INC., Petitioner, vs. BPI FAMILY SAVINGS BANK, INC., Respondent.

FACTS

Petitioner TML Gasket Industries, Inc. obtained a loan secured by a real estate mortgage from Bank of Southeast Asia, Inc., which later merged with respondent BPI Family Savings Bank, Inc. The loan was evidenced by promissory notes containing a clause allowing the lender to unilaterally adjust interest rates based on specific economic conditions. TML defaulted on its payments. BPI consequently initiated extra-judicial foreclosure proceedings. To prevent the foreclosure sale, TML filed a complaint for declaratory relief and damages, with an application for a preliminary injunction. TML argued that BPI unilaterally and unconscionably increased the interest rate to 33% per annum, rendering the total obligation undetermined and unascertained. It contended that it could not be declared in default over an indeterminate amount and that foreclosure would cause grave and irreparable injury as its factory was located on the mortgaged property.
The Regional Trial Court initially granted the writ of preliminary injunction, enjoining the foreclosure. The Court of Appeals reversed this ruling, holding that the injunction was improperly issued. TML elevated the case to the Supreme Court via a petition for review on certiorari.

ISSUE

Whether the Court of Appeals erred in reversing the trial court’s orders and in lifting the writ of preliminary injunction that enjoined the extra-judicial foreclosure of the mortgaged properties.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals’ decision. The legal logic centers on the requisites for issuing a writ of preliminary injunction. For such a writ to issue, the applicant must prove a clear and unmistakable right to be protected and a showing that the invasion of that right is material and substantial. The Court found that TML failed to establish a clear legal right to restrain the foreclosure. The existence of the loan and the real estate mortgage securing it were undisputed. TML’s default in payment was also admitted, making the obligation due and demandable.
The Court ruled that a preliminary injunction is not a remedy to protect contingent or future rights, nor is it granted to restrain an act that does not violate a clear and present right. TML’s challenge to the interest rate adjustments and its claim for an accounting pertain to the merits of the main case for declaratory relief. These do not negate the fact of default on the principal obligation, which is the basis for the foreclosure. The right to foreclose arises upon default under the mortgage contract. Since default was established, BPI had a clear right to foreclose. The possibility of a redemption period after any foreclosure sale further negated the claim of irreparable injury. The Court clarified that its resolution pertained only to the propriety of the injunction, not the merits of the main case regarding interest rate validity.